Published Date:
28-Mar-2011
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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.

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 some ripple effects worldwide: for example, a General Motors truck plant in Louisiana announced on Thursday that it was shutting down temporarily for lack of Japanese-made parts. More made-in-Japan supply-chain travails are expected.

“This is going to be a huge test of global supply chains, but I don’t think it will be a mortal blow,” says Kevin O’Marah, an analyst at Gartner-AMR Research. “I think that over all we’ll see how resilient and quick-learning these networks have become.”

THE good news for the world’s manufacturing economy is that the sectors where Japan plays a vital role are fairly mature, global industries. Consider computing and electronics. For major components, like semiconductors, production is now spread across several countries. By contrast, in the early 1990s, virtually all 486-microprocessors — the engines of the most powerful personal computers of the time — were made at a single Intel factory near Jerusalem.

Japan’s importance in the semiconductor industry as a whole has receded in recent years, as more production has shifted to South Korea, Taiwan and even China. Japan accounts for less than 21 percent of total semiconductor production, down from 28 percent in 2001, according to IHS iSuppli, a research firm.