Japanese companies back on track after earthquake

CHICAGO — On March 11, 2011, the most powerful earthquake to ever hit Japan, recorded as 9.0 on the Richter Scale, and a devastating tsunami caused a nuclear catastrophe, loss of lives and displaced thousands of people. A possible disruption in manufacturing and exporting products overseas was also an effect of these events.

Immediately after the earthquake and tsunami, Rinnai America found out that it was unable to source certain components essential to the production of its tankless water heater and direct vent furnace units.

“Any action plan would not accommodate this level of events,” said Brad Sweet, vice president of marketing at Rinnai. “Being very transparent with customers was key. We wanted to make sure that we were giving correct information to everyone. We were able to avoid panic buys, people purchasing large quantities of products. The team in Japan made efforts to sustain the supply chain amongst this tragedy.”

Even though Rinnai’s manufacturing facilities, located in central Japan, were undamaged by the earthquake, one component had been manufactured in an area that was damaged, and there were concerns that this particular component would be difficult to replace.

Rinnai had enough product available to fulfill orders through early April, but until the supply chain was secured, there was the possibility that intermittent shutdowns of production could occur once the inventory was depleted.

According to Sweet, the company decided to change its distribution system due to concern that select customers might hoard Rinnai units in anticipation of a product shortage, thus, all direct shipments from Japan were routed through Rinnai’s distribution centers instead of directly to third-party distributors.

“This allowed us to fulfill orders as they came in and to directly communicate with any customers that ordered above-normal quantities of product,” said Sweet. “Our parent company in Japan identified alternate suppliers that could provide components similar to those that were unavailable, and engineers redesigned product elements to accommodate the new parts.”

A team was also sent into one of the most damaged areas of the country to retrieve the manufacturing elements of the specific component that would be the most difficult to replace. Once retrieved, they were set up in an alternate location, and production of the component resumed. The company was now on track to secure the supply chain and did so shortly thereafter.

Rinnai also continued to divert shipments to Rinnai distribution centers until further notice to ensure timely service. Steps to take By late April, the company successfully secured its supply chain.

From this experience, the company believes the following steps are important to take when facing such devastating events:

• While it’s necessary to address the most time-sensitive issues immediately, when possible, wait for all the information to come in before deciding on a course of action.

• Once a clear picture of the situation is possible, act quickly and decisively to secure the supply chain.

• Have a list of alternate suppliers ready ahead of time to expedite the process of identifying back-up vendors.

• Engineers should be on standby to redesign product components to work with new parts, if needed.

• As soon as possible, communicate with customers and employees to inform them about the situation and address their concerns.

• Hold weekly meetings with employees to keep them updated regarding any developments.

• Be transparent with customers and employees and only relay confirmed facts.

• Provide defined talking points about the situation to every employee that may be asked about it, customer service, sales reps, etc. This will ensure the company is communicating the same message to all audiences.

“It’s important to communicate facts in a timely manner to avoid speculation and panic,” said Sweet. “If specific details are still unknown, it’s okay to say so. Customers will appreciate your honesty and will be more understanding of changes that must be made to accommodate the situation.”

Rinnai also donated more than $1.5 million in cash and product to the earthquake relief efforts. The company pledged $600,000 in financial aid, and $1 million in Rinnai appliances.

Offering assistance

Isuzu Commercial Truck of America Inc. halted production at its Fujisawa plant after the events, and resumed production on April 5. The plant manufactures N-Series trucks, diesel engines and components for the North American market, as well as commercial vehicles and parts for markets worldwide.

“All production stopped to address the needs of the Japanese people during this tragedy,” said Kaz Noto, president of Isuzu Commercial Truck of America Inc. “The loss of life and destruction to the people of Northern Japan was most devastating, and a number of Isuzu engineering people were dispatched to the disaster area urgently to fix the damaged trucks and industrial engines in order to restore or maintain lifelines.

“Production ceased for several weeks,” added Noto. “Our ramp-up was gradual after production was started again. In total production bound for the U.S. slipped about 45 days from the original schedule. Our main production facility in Fujisawa is producing product at traditional levels, but there are still some complications to work around due to electrical power shortages.”

Since the plant was shut-down after the quake and tsunami, once the bigger issues of care for those most affected by quake was being addressed, all of the equipment in the plant needed to be tested before production started again.

“We at Isuzu are very proud that production resumed three weeks after the earthquake and we were able to keep supplying service parts to dealers and customers. Due to the fact we had good dealer and port stock here in the U.S. at the time of the disaster, we feel we were in a better position than most. Based on the magnitude of the disaster, we feel Isuzu has been very successful in recovering from this earthquake and tsunami.”

Regarding having an action plan in place for such a disaster like this, Noto said that no company could plan for such a tragedy, but the company learned from the experience.

“I am sure no one could plan for such a tragedy, but just like any challenge you learn from them and make necessary changes,” said Noto. “With that said, the supply of service parts was consistent and our customers never suffered a shortage of parts for their vehicles. That says a lot about the plans we did have in place.”

Isuzu also made a monitory donation to the earthquake relief effort. Some companies were lucky and did not experience any disruption in operations or production.

Bill Rau, senior vice president and general manager, Mitsubishi Electric Cooling & Heating, said, that Mitsubishi Electric was deeply concerned about the welfare of Mitsubishi Electric employees in Japan, and there was understandably a time of uncertainty about the state of the company’s factories and the impact the disaster would have on production.

“From the first moment possible, we began taking actions to overcome any product line disruptions,” said Rau. “Fortunately, none of our factories are located in the hardest-hit areas, and our factory staff worked exceptionally hard from the outset to limit the impact the disaster would have on U.S. production. Because of the progress made in our factories, we can say that, with very limited exceptions, we experienced little to no disruption in normal operations. Additionally, our plants in Japan were never out of production, and throughout the course of the summer we have been able to resume regular product shipments.

“We were able to rebound from this disaster quickly, and our Japan-based employees are working to verify our supply arrangements going forward so that we are as prepared as we can be for whatever the future may bring,” added Rau. “We continue to count our blessings that, as a corporate community, Mitsubishi Electric came out relatively unharmed both in terms of employee welfare and product availability. Although we are confident that the exponential growth potential of the ductless market in the U.S. will be able to proceed with limited interruptions, we continue to keep the people of Japan foremost in our thoughts.”

For Noritz, the earthquake did not cause delays for product shipments because it happened on the north east side of Japan, whereas the Noritz factory is located about 400 miles away on the southwest side of Japan, said Jay Hassel, vice president of sales and marketing for Noritz America.

"There were no immediate impacts at all on our end in terms of our ability to ship product,” said Hassel. “Clearly this event was unfortunate. We remain cautious by keeping sustainable stocks in the U.S. warehouse."

The Noritz Group donated a total of $150,000 to help relief and recovery efforts in Japanese communities affected by the earthquake and tsunami that struck the northern region of the country. As part of its corporate donation, Noritz launched a number of charity initiatives designed to broaden its support for the disaster relief fund.

"The earthquake in Japan has reminded us just how small and interconnected our world has become," said Hassel. "Some Noritz associates had family members in the earthquake zone while others of us just happened to watch the devastation on television.

"But all of us are fortunate to be in a position to offer assistance to the displaced survivors who must begin rebuilding their lives and their communities," said Hassel.