In 2011, automakers in Japan faced months of production setbacks due to a massive earthquake. When it happened again in April 2016, Toyota was better prepared and is already bouncing back. The company is still losing money because of the quake, but losses aren’t as bad as they were in 2011. Take a look at what Toyota learned from the first quake and what disaster plans it put in place to keep production happening this time around.
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Situation: Toyota Wanted to Be Better Prepared for Disasters
After the 2011 earthquake in Japan, Toyota knew it had to be better prepared to handle a disaster the next time it happened. The automaker assessed several areas of its business and supply chain to look for ways to improve processes.
In 2013, Toyota conducted a survey of its suppliers in Japan to pinpoint problem areas that could cause production delays in the event of a disaster. Then the automaker implemented a new database called Rescue. This database stores information about Toyota’s suppliers and parts. When one supplier goes down, the database allows Toyota to reallocate production and avoid major bottlenecks. After the 2016 earthquake, the database was a lifesaver.
Approach: Toyota Quickly Responds to Production Delays
When the earthquakes happened in April 2016, Toyota initially stopped almost all production in affected areas of Japan, but the company was back up and running in under two weeks. Some factories were only shut down for five days. That’s a huge improvement over the 2011 earthquakes, when Toyota took more than six months to resume normal operations after the quake.
As auto research analyst Takaki Nakanishi explains, “I think 3-11 helped everything … [Toyota has] a new supply chain management system built in.” The automaker also spent money on reinforcing some of its existing factories, diversifying its parts manufacturing and business operations, and training employees and suppliers to act more quickly during a disaster.
Toyota suppliers quickly recovered molds from factories and ordered substitute parts to prevent major delays in its production line after the earthquake in 2016. One Toyota supplier even contracted a competitor to produce new parts until normal operations could be reestablished.
Impact and Advantage
The damage that resulted from the April 2016 earthquake in Japan was less severe than the March 2011 disaster, but Toyota dealt with similar issues both times. In both cases, factories were damaged and some suppliers were cut off. Fortunately, the company’s disaster recovery plans enabled operations to continue to run despite the earthquake.
Other automakers have also learned from Toyota’s quick action. It’s important for a global business to prepare for disaster because no area is immune. Earthquakes, tornadoes, hurricanes, tsunamis, and other natural disasters can cripple any operation in a matter of hours.
When one section of a supply chain stops working, the entire operation suffers. A disaster plan enables businesses to work around problems quickly and avoid major supply chain delays. Toyota offers an impressive example of how to prepare and enact a disaster plan.[/show to]
