'Just In Time' Manufacturing Tested By Japan Crisis Japan's earthquake, tsunami and nuclear disaster have become one of the biggest tests ever for "just in time" manufacturing. That's the practice of having parts delivered just when they're needed instead of carrying large, costly inventories at assembly plants. Since the disasters, parts have been hard to come by.
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'Just In Time' Manufacturing Tested By Japan Crisis

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'Just In Time' Manufacturing Tested By Japan Crisis

'Just In Time' Manufacturing Tested By Japan Crisis

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STEVE INSKEEP, Host:

NPR's business news looks at snags in the auto supply chain.

(SOUNDBITE OF MUSIC)

INSKEEP: NPR's John Ydstie reports on how manufacturers are responding.

JOHN YDSTIE: Andrew Palmer is a senior vice president for the Nissan Motor Company. He was on the 27th floor of the company's building near Tokyo when the quake struck. That afternoon was spent making sure workers were safe. The next day was spent assessing the challenges the company faced: damaged factories, blocked roads, a lack of electrical power for trains and a shortage of fuel for cars and trucks. That meant workers couldn't get to their jobs and parts couldn't be delivered to factories. And some of Nissan's suppliers faced more daunting obstacles.

ANDREW PALMER: Some badly damaged in the earthquake, much closer to the epicenter. And as I mentioned, some of our suppliers are in the exclusion zone around the nuclear plant, so we're not able to get people in, obviously.

YDSTIE: Nissan's supply chain, that complex web of parts producers and shippers, had ruptured. The good news, says Palmer is that damage to Nissan's factories was limited and 90 percent of its workers can now get to their jobs. He expects all but one of the company's plants to be up and running by the end of the week. But getting the right parts to the right places remains a huge challenge.

PALMER: A crisis like this reminds one how complex putting together an automobile is. It's an incredible logistics exercise and obviously you're putting, well, you're pulling together thousands of parts into a single car.

YDSTIE: Right now manufacturers are scrambling to get the components they need. Andrew Palmer says for Nissan that means first, helping its suppliers in the region get up and running. Second, the company is scouring its overseas facilities for parts.

PALMER: Of course, there is a third case, which we haven't had to resort to yet, which is temporary resourcing.

YDSTIE: And there's another strategy: building the car you can with the parts you have on hand. But, that's means some customers might not be able to get the trim level or feature they want.

PALMER: Bit like taking a car off the lot rather than building it to order, which is still a large part of our production anyway.

YDSTIE: The risk for Japanese carmakers is that consumers will find an American or European manufacturer who can give them the features they want. And that may mean companies in Japan will have to take drastic action to compete.

NAOYUKI YOSHINO: In the short run it may accelerate many companies move from Japan to outside of Japan.

YDSTIE: That's Naoyuki Yoshino, director of the government of Japan's Financial Resource Center and a professor at Keio University in Toyota. He says physical damage to supply chains may not be the only catalyst for moving. The strong Yen is also making it hard for Japanese companies to compete.

YOSHINO: And even the small and the medium size companies wants to move, so that is a very serious problem for Japanese economy.

YDSTIE: Andrew Palmer says Nissan isn't planning a move. But he says there are lessons it will learn from this disaster. Foremost, a reminder of the importance of having common parts for cars built in different regions.

PALMER: A car that's made let's say in the U.S., has parts which are inter- changeable with cars made in Japan. I think this crisis has reinforced that need.

YDSTIE: John Ydstie, NPR News, Tokyo.

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