Japanese Disaster Is Stressing Global Supply Chain

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Japanese Disaster Is Stressing Global Supply Chain

Posted on Mar 21, 2011

Tony Prophet, a senior vice president for operations at Hewlett-Packard, was awakened at 3:30 a.m. in California and was told that an earthquake and tsunami had struck Japan. Soon after, Mr. Prophet had set up a virtual "situation room," so managers in Japan, Taiwan and America could instantly share information.

At Hewlett-Packard, which builds computers in Tokyo, the disaster response has been described as "doing triage."

Mr. Prophet oversees all hardware purchasing for H.P.'s $65-billion-a-year global supply chain, which feeds its huge manufacturing engine. The company's factories churn out two personal computers a second, two printers a second and one data-center computer every 15 seconds.

While other H.P. staff members checked on the company's workers in Japan - none of whom were injured in the disaster - Mr. Prophet and his team scrambled to define the impact on the company's suppliers in Japan and, if necessary, to draft backup plans. "It's too early to tell, and we're not going to pretend to predict the outcome," Mr. Prophet said in an interview on Thursday. "It's like being in an emergency room, doing triage."

The emergency-room image speaks volumes. Modern global supply chains, experts say, mirror complex biological systems like the human body in many ways. They can be remarkably resilient and self-healing, yet at times quite vulnerable to some specific, seemingly small weakness - as if a tiny tear in a crucial artery were to cause someone to suffer heart failure.

Day in and day out, the global flow of goods routinely adapts to all kinds of glitches and setbacks. A supply breakdown in one factory in one country, for example, is quickly replaced by added shipments from suppliers elsewhere in the network. Sometimes, the problems span whole regions and require emergency action for days or weeks. When a volcano erupted in Iceland last spring, spewing ash across northern Europe and grounding air travel, supply-chain wizards were put to a test, juggling production and shipments worldwide to keep supplies flowing.

But the disaster in Japan, experts say, presents a first-of-its-kind challenge, even if much remains uncertain.