THE MAGAZINE

Planning for Disaster

By Laura Spadanuta

Additionally, Renesas is raising the standard that factories in Japan have to be built to. Renesas had secured its Naka factory as was mandated in Japan to survive an 8.0 magnitude earthquake, according to Japanese Meteorological Agency (JMA) standards. But the March 2011 quake was a 9.0. The company is now going to meet the upper edge of the JMA standards instead. (Of course, there was also a tsunami and nuclear disaster afterwards. The solution for that level of disaster is likely to entail going to an alternative location.)

Sebt says that Renesas is also now being sensitive to its responsibility as a supplier itself in someone else’s supply chain. “We’re now going to our customers and saying, ‘Look, these products that you’re buying, in case of a disaster, this is our risk mitigation plan,’” says Sebt.

Sourcing

Renesas exemplifies many good practices, such as in its attention to securing alternative sources for raw materials and component parts. But sometimes a company has only one option—a sole-source supplier. A sole-source supplier is defined as one that is truly the only company that can provide a certain product.

Many companies have a two-supplier requirement for most parts but that rule is sometimes not adhered to because only one company can do the job. In that case, what matters is that the sole-source supplier itself has two separate locations where it can make the parts, Harrison says. That way, if there is a natural or man-made disaster that halts production at one facility, there is a backup.

By contrast, a single-source supplier is when a company is using one source for a product but there are other sources available for that product. In those cases, Harrison recommends qualifying an alternative source well in advance of something happening. “And you need to have a plan for switching,” she notes.

In addition to understanding which suppliers are critical and planning for alternatives, businesses need to consider likely scenarios and timetables. For example, if a tsunami hit a supplier, would the impact be immediate or does the supplier or the company have a month’s inventory? “You need to pay attention to ones where you have immediate problems, and look at what your risk plan is,” explains Harrison.

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