Stress Test for the Global Supply Chain
New York Times, Business Section, Sunday, March 20, 2011
TONY PROPHET, a senior vice president for operations at
, 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
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
. Japan is the world’s third-largest economy, and a vital supplier of parts and equipment for
major industries like computers, electronics and automobiles. The worst of the damage was northeast of
Tokyo, near the quake’s epicenter, though Japan’s manufacturing heartland is farther south. But greater
problems will emerge if rolling electrical blackouts and transportation disruptions across the country
continue for long.
Throughout Japan, many plants are closed at least for days, with restart dates uncertain. Already, there are