Guest Blogger: Global Economy Affected by Natural Disasters

On 3/11/2011, my younger son, Zane, and I were enjoying a beautiful early spring afternoon in Japan during our spring break. After strolling around the city of Kumamoto, we went back to my sister’s home where we were staying. As soon as my sister heard us come in the front door, she asked if we had heard the news about the earthquake that had just happened in the northern Japan.

 “Oh no, a tsunami is taking over the Sendai airport!” she screamed.  

My son and I rushed to the TV. We couldn’t believe what we were seeing live. There were people being washed away while still in their houses and cars. Houses and cars were on fire. Fishing villages were completely under water. Feeling helpless, we were afraid and shed many tears as we watched the natural disaster unfold.

How about my friend in Tokyo? Tokyo and Ibaragi, where the Narita International Airport is located, were the major cities directly affected by the earthquake. We saw people evacuating from buildings and rushing to the closest evacuation sites.

Is she safe? Where is she? I dialed her cell phone and home phone numbers, but received “out-of-order” messages. The telecommunication was out. It seemed that the whole nation was paralyzed and devastated. All the planes were rerouted to other airports rather than Narita, Haneda and others in the northern region.

How would our returning flight from Narita to the US in three days take place if the airport was temporarily closed? By watching the sad images on TV, we learned that the infrastructure damage was too severe in the north and east of Japan to recover and resume.

Water and power supplies, roads, and telecommunication were cut off at some point (and are still limited in certain areas). I soon remembered that many electronic components companies who supplied automotive components to our company were located in the area.

Some materials that were ready for departure could not be moved because air or ocean transportation was not operating. With this huge impact, I could only imagine that thousands of business properties and manufacturing sites would most likely be hopelessly damaged.

I wondered, will we soon see the parts supply shortage in the US, too? Manufacturing locations and warehouses wouldn’t be able to function right away. The parts inventory would be exhausted very soon. Will it be in two weeks or three weeks?

For two months after I returned to the US, my work days were consumed by evaluating and trying to restore the global supply chain as quickly as possible. More than 20,000 innocent people’s lives were lost in the Japan earthquake and tsunami. 4000 more people are still missing.

The disaster also tested the vulnerability of the global economy affected by the major disaster and left us with many questions on how we can best prepare for unexpected catastrophes. One isolated country’s disaster can have huge impact on the global economy. Recently, we’ve seen where hurricanes, tornados, floods, wildfires, and ice storms have affected the local or global economy.

How can future managers establish effective risk management to prepare and find the best investment options and alternative ways to maintain operations without interruptions?

© 2011 by Noriko Chapman

About Noriko Chapman:

Noriko Chapman, who is a native of Japan, is an international traveler and a role model to millions of women looking to overcome extreme obstacles in life. She is a production control supervisor for DENSO Manufacturing (TN).  A mother of two, she has over 16 years of experience in the automobile industry and is a cancer survivor. She is also a Lincoln Memorial University MBA student. Noriko led a successful campaign to assist the Tennessee Rehabilitation Center (TRC), which works with disabled adults to secure employment, with securing its government funding of $72 K.  Her new book, Second Chance, was inspired by the TRC. For more information, you can visit her on Facebook.com.

 

 
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30 thoughts on “Guest Blogger: Global Economy Affected by Natural Disasters

  1. Dear Ms. Chapman,
    It is a pleasure to have you as our guest blogger. This is a powerful example of disruptive change. I was touched by your story and inspired to think about this topic.
    “There are two sides to supply chain risk management; risk assessment and mitigation, and responding to unanticipated supply chain disruptions.” Despite the best laid out pans disaster is never expected. However, a well laid out plan will help a community, an organization get back into a normal routine faster. Any company, community, school, any place where there are one or more people should have a risk management plan. We can consider risk management plans like we do our Wills. We consider a Will as a tool to use when we die, not IF we die. Therefore companies should weigh the costs and implement a plan because now that supply chains are longer, due to globalization, the damage and expense of a catastrophe is far more reaching than ever before.
    A local aquarium that acquires fish from the Pacific experienced quite a disruption during the Tsunami, they never did recover.
    May I say that you take a terrific picture!

    Essential Characteristics of a Supply Chain Risk Management Strategy
    http://www.kinaxis.com/whitepapers/Supply-Chain-Risk-Management-Strategy.cfm

    • Hi Heidi,
      Thank you very much for posting the very first comment!
      How much preparation is enough to react to those disasters for saving our own lives or running business without interruptions? Never enough, unfortunately. I know a few global suppliers not affected by the Japan earthquake are currently struggling with the flooding at their manufacturing facilities in Thailand. How quickly can they transfer the production to other locations? I agree with you that a well laid out plan can help restore operations faster. This topic became an immediate concern for many managers, company executives and global leaders. I’d like to observe and learn from their decision making.

  2. How can future managers establish effective risk management to prepare and find the best investment options and alternative ways to maintain operations without interruptions?

    Thank you Ms. Chapman for the article from the perspective of someone that was over in Japan when the tragedy occurred. It also reminds us that although we are back to everyday life, many there are not.

    If in the situation as Japan, I have no idea how one could prepare for something of that magnitude. However, if a company relied on other locations for supplies, they must have a plan B in case disaster does strike. In order to prepare, it is imperative that a company have a business strategy. According to Gamble and Thompson, “management must have deliberate plans for addressing such issues as: changing economic and market conditions, distribution channels, development of alliances and joint ventures” (Gamble and Thomspon, 2011). By being aware of alternative suppliers, different distribution channels, and up to date on market conditions, one can adjust quicker if a misfortune fell.

    Gamble, J. E., & Thompson, A. A. (2011). Essentials of strategic management: The quest for competitive advantage. New York, NY: McGraw-Hill/Irwin.

    • Hi Angela,
      Answers are hard to find, but I know that many lessons were learned and have been reviewed closely in Japan. It’s often discussed that the Tokyo Disneyland demonstrated good lessons during the crisis. People were immediately directed for evacuation and felt protected by calm, well-trained Disneyland employees because of their frequent drills and well prepared emergency plans. This is something we can learn from. Thank you for your comment.

  3. Thank you, Ms, Chapman for this article. Being on the outside of the disaster that struck Japan, it is “eye opening” to hear of an account from someone who was in the country at the time. It is hard to image what was going through the minds of the people in the country.
    It is impossible to predict a disaster, such as, the one in Japan. Having a plan for a disaster doesn’t always mean that everything will be managed, because it is impossible to tell what will be affected in the industry, since there are many factors to consider. This is why it is important to work closely with business alliances to develop the best plans (Gamble and Thompson, 2011). This way, they can at least attempt to try and make the necessary precautions.

    Gamble, J. E., & Thompson, A. A. (2011). Essentials of strategic management: The quest for competitive advantage. New York, NY: McGraw-Hill/Irwin.

    • You are correct Mr. Corder. When you have business alliances, you are not alone when disaster stikes. Oftentimes businesses can work together to fill in the gaps that a disaster or unexpected situation can create. During the war in Iraq, some people that owned small businesses were also military reservists. When they were called to duty they were faced with having to close down their businesses. These people depended on other businesses that were in the same industry to “cover” for them. One story I heard about is a local orthodontist that was called to duty to go and work on prisoners in Iraq. He had to find 5 orthodontists in the East Tennessee area that were willing to come in to his practice and work one day a week for him or he would have lost his business, which was no easy feat to pull off. They were asked to do this for him for over three months at a stretch while they still operated their own practices.

  4. Ms. Chapman,

    Thank you so much for being our guest blogger this week. Your post has a very strong message to convey in more ways than one. I think most of us, oftentimes, take for granted how blessed we are. Disasters occur all too often, whether it is a natural or economic disaster, or a plot of terrorism. It is saddening to think about it, but companies do have to plan for means of continuing normal business through such times.

    Most of the disasters are unpredictable, therefore harder to prepare for. However, a business can begin preparing by using scenarios to develop policies and procedures for the events if they occur. Strategic alliances could also be the building blocks for good risk management. Companies should not, as the old saying goes, “put all their eggs in one basket.” Gamble and Thompson state, “Strategic alliances are collaborative arrangements where two or more companies join forces to achieve mutually beneficial strategic outcomes” (p. 117). Companies need to know how they can utilize their resources around them and build collaborative and strategic partnerships with others to do so.

    Gamble, J. E., & Thompson, A. A. (2011). Essentials of strategic management: The quest for competitive advantage. New York, NY: McGraw-Hill/Irwin.

  5. Ms. Chapman,

    We all thank you and appreciate you being here with us this week as a guest blogger. Reading your pist above brings a whole new perspective to me not only about the earthquake that took place in Japan but any other natural disaster that has occurred or will occur. Thompson and Gamble (2011) state “strategic alliances allow companies to correct particular resource gaps or deficiencies by partnering with other enterprises having the missing know how and capabilities” (p. 117). It would be ideal for situations like natural disasters if other producers could simply just increase their output to meet the immediate demands, but we do not live in a perfect world. Often times organizations are already running at maximum capacity. That being said, if organizations have strategic alliances specifically for when things like this happen it probably would help; however, I do understand that is less than ideal. The truth is that we do have a global economy so when natural disasters strike shortages are likely to take place in some form. The best that we can do is for everyone to pull together and offer support and help in fast and efficient manner.

    • Hi Paul,
      I love your comment and agree that “the best that we can do is for everyone to pull together and offer support and help in fast and efficient manner.” At the beginning, the automotive production was assumed not to recover fully till late Nov or Dec. It was actually back to normal in Sep. I was inspired by stories that many employees volunteered to spend days to restore their manufacturing facilities and offices after the infrastructure was improved. Generous donations and support from countries around the globe were enormous. I was one of many who felt we were not alone when learning on TV that the USS Reagan already headed to help tsunami victims in Japan on the day. I’m still saddened by many people who lost their lives and their families missing the loved ones. We’ve also witnessed that many good things are happening.

  6. Thank you for taking the time to be our guest blogger. I really enjoyed reading your post.
    In an effort to establish effective risk management, companies that wish to expand need to think and act globally. According to Gamble and Thompson, Jr. (2011) “A think global, act global strategic theme prompts company managers to integrate and coordinate the company’s strategic moves worldwide and to expand into most if not all nations where there is significant buyer demand. It puts considerable strategic emphasis on building a global brand name and aggressively pursuing opportunities to transfer ideas, new products, and capabilities from one country to another.” If a company decides to expand globally, that company should consider more than one location. By doing this, they will still be able to maintain operations in other parts of the world if a disaster strikes in one of their locations. They can focus on rebuilding their site that was struck by disaster, while at the same time, maintains operations in other parts of the world.

    Gamble, J. E., & Thompson, A. A. (2011). Essentials of strategic management: The quest for competitive advantage. New York, NY: McGraw-Hill/Irwin.

    • Hi Jessica,
      Yes, I agree with your comment. Companies can prepare contingency plans with alternative locations, suppliers, materials, routes, transportation methods, different specifications or equipment, and many other possible options to research and plan ahead just in case of crisis.

  7. Thank you for your post. In the article “Learning to Live with Complexity,” Sargut and McGrath state that minimizing risk is crucial for anyone managing a system. They suggest the best way to do this is to “limit or even eliminate the need for accurate predictions.” In other words, the best investments are geared towards minimizing the importance of predictions. The more managers are involved in guessing the direction of a product line for example, or hoping that a design will be well received, the greater risk there is of being wrong. They state an example of Boeing’s very successful 777 aircraft series, where the company engaged eight major airlines in the development process and evolved the model designs according to customer input. Boeing is a great example of a company effectively reducing and managing risk.

    Sargut, G., & McGrath, R. (2011). Learning To Live with Complexity. Harvard Business Review, 89(9), 68-76. Retrieved from EBSCOhost.

    • Hi Champ,
      The Boeing 777 is an interesting example! I agree that flexibilities and ability to accommodate changes or complexity in organizations can provide the competitive advantages for survival. Thank you for your comment.

  8. I found this blog to be both insightful and beneficial in addressing the overall impact distribution on an organization supply chain can have. I am currently working in the robotics industry and supply chain distribution is often an issue. Due to the uniqueness of our products we normally have one vendor for certain parts used in the assembly of our robots. This has had major implication on our ability to properly project production completion dates. For instances we recently were made aware that our one and only vendor would be discounting a part that is vital to the functionality of our units. Therefore is imperative for organizations to properly identified risk in the supply chain and develop continuance plans that will mitigate such risk.

    References:
    Effective risk oversight begins with triage. (2009, May 15). Retrieved from http://www.businessweek.com/managing/content/may2009/ca20090515_262397.htm

    • Nathan,
      I agree with you that imperative for organizations to properly identified risk in the supply chain and develop continuance plans that will mitigate such risk. Unfortunately too few do. I know after the recession hit my company lost several key suppliers of specialty components for our finished products, and that for some components we are still searching for a reliable vendor. If only a plan would have been in place for such issues the negative impact of the lack of components would have been avoided.

  9. The topic of crisis management instantly brought me back to my days as a soldier conducting missions. Before each mission we would always have an extremely detailed operations plan and numerous rehearsals and then a 5 point contingency plan detailing the specific actions for a certain circumstance and how to execute the plan from that point on. The reality was that these contingency plans were extremely brief and in an actual contingency the after action review statements were always ” I wish we spent more time on the contingency plan”. This became paramount for a paradigm shift in the time allotted for contingency planning.This applies to business also, as stated by Sheri Veil “When an organization becomes overconfident
    in its processes, it expects success and opens itself to crisis that could be avoided if the organization was more attentive to potential failure rather than present success”. Many organizations haven’t dealt with crisis and when it happens many do not recover. It is a leadership challenge to focus on the “what if’s” instead of the “how to’s” because most leaders are naturally interested in the “here and now”. Thank you for your blog topic.

    • Veil, S. R. (2011). Mindful Learning in Crisis Management. Journal of Business Communication, 48(2), 116-147. doi:10.1177/0021943610382294

      • Hi Phil and Miguel,
        I appreciate both for sharing your insight. Your suggestions related to your military experience are so true and valuable to learn from. Thank you for the comments.

  10. During my time in the military, I remember being sick and tired of the weekly and never ending disaster drills we were subjected to. I guess, disaster preparation can seem annoying and monotonous, yet it will pay in dividends when a real disaster occurs.
    Leaders and managers have the very difficult job of developing the vision to anticipate calamities and prepare accordingly. Learning from past experiences I believe is a very useful approach. Leaders who study and learn from others’ mistakes are ahead of the game. Once the possible complications are foreseen, constant and repetitive training is required to ensure the Pavlovian effect of conditioning.
    Similarly, the financial preparations to upbeat operational stoppage takes much homework and fund storage. Customers will expect their products regardless of what is going on around the world. If your competitors are better equipped to overcome obstacles or disasters, they will inherit your market and leave the unprepared in the dust.

  11. Ms. Chapman ,
    Thank you for being our guest blogger this week and providing a firsthand testimony of the tragedy that hit Japan. I currently work as an engineer in the recreational boat industry for Brunswick Corporation, and at the manufacturing level we have experienced issues with supply chain distribution. Unlike several of our competitors who relied on engine and electronic components from Japan, we were not as severely impacted by the disaster. On the other hand the economic debacle of 2008 is still causing problems with acquiring certain specialty components. Many of the domestic supplies of marine products soon went out of business at the beginning of the recession, which caused a void for certain accessories and hardware that is normally found on boats. After this incident we are using more multiple suppliers for certain key products, however this is an after effect solution to the problem.
    The key to supply chain distribution and most all elements of business is planning through building strategies based on different possible scenarios of events. This technique is often referred to as Scenario Planning. Scenario planning is a disciplined methodology for imagining possible futures and or events in which organizational decisions are applied then how the outcome of those decisions may be played out (Schoemaker, 1995). By using Scenario Planning an organization can have a plan in places for the majority of predictable and unpredictable events. Unfortunately only very few companies practice in-depth Scenario planning as a tool to build strategies for suitability. Too often they become complacent on analyzing past data and current situations not the what-ifs that may occur. According to Gamble and Thompson, “management must have deliberate plans for addressing such issues as: changing economic and market conditions, distribution channels, development of alliances and joint ventures” (Gamble and Thomspon, 2011). Scenario Planning is a great way that management can create and prepare for such issues.

    Chermack, T. J., & Payne, T. D. (2006). Process Level Scenario Planning. AllBusiness.com. Retrieved October 21, 2011, from http://www.allbusiness.com/company-activities-management/management/13439585-1.html

    Gamble, J. E., & Thompson, A. A. (2011). Essentials of strategic management. New York, NY: McGraw-Hill / Irwin.

    Mercury marine not affected by supply shortages from Japan. (2011, April 5). Trade Only Today. Retrieved October 20, 2011, from http://www.tradeonlytoday.com/home/510808-mercury-not-affected-by-supply-shortages-from-japan

    Morahan, C. (2011, April 13). OPINION: How Japan will affect our supplies. Trade Only Today. Retrieved October 20, 2011, from http://www.tradeonlytoday.com/home/511023-opinion-how-japan-will-affect-our-supplies

    Schoemaker, P. J. H. (1995, Winter). Scenario Planning: A Tool fo Strategic Thinking. Sloan Management Review, 36(2), 25-40. Retrieved October 21, 2011, from http://www.favaneves.org/arquivos/scenarioplanning.pdf

  12. Risk is something that is inherent in today’s business climate.  The amount of risk that is taken, and mitigation of that risk, in business is an important factor in development of the company’s overall business strategy.  Following the terrible hail storm which Knoxville suffered  this past April we found how unprepared my family was for prolonged power outages and just how susceptible to natural disasters this area of the country, which rarely sees anything of that magnitude, really was.  I’m not insinuating the little hail storm here was anywhere near that of the earthquake and following devastation that was seen in Japan – I’m simply making a point.  In the preparedness and survivalist community there are people who make it their life’s work to be prepared for any and all contingencies.  However, one of the first things they will tell you is that you can not be prepared for everything.  This holds true in business as well.  You can plan and stockpile those things that might help you survive, but in the end it will be something you didn’t plan for that will cause the biggest problems.  Forming a strategy for business should take into account as many of the things you can plan for as it can, as well as attempting to plan for those things you can’t foresee.

    Gamble, J. E., & Thompson, A. A. (2011). Essentials of strategic management: The quest for competitive advantage. New York, NY: McGraw-Hill/Irwin.

    • Hi Michael,
      I truly understand your point. The hail damage was beyond my understanding. Having an insurance adjuster estimate or replacing the roof and siding of my house was quite stressful. At that point, the house damage was not our first priority, but saving our own lives was. All I could do was for my family to evacuate to the basement where I usually kept an emergency kit and bottles of water. We cannot prepare for all but can prioritize things we should do in case of crisis. Thank you very much for sharing your thought.

  13. You speak with so many points, so much essence, although I become aware that you have expressly hit the nail on the head. Well done! I will straightly grab your rss feed to stay abreast of every updates. Real work and much success in your business efforts!

  14. During my time in the military, I remember being sick and tired of the weekly and never ending disaster drills we were subjected to. I guess, disaster preparation can seem annoying and monotonous, yet it will pay in dividends when a real disaster occurs.
    Leaders and managers have the very difficult job of developing the vision to anticipate calamities and prepare accordingly. Applying past experiences I believe is the best approach. Leaders who study and learn from others’ mistakes are ahead of the game. Once the possible complications are foreseen, constant and repetitive training is required to ensure the Pavlovian effect of conditioning.
    Similarly, the financial preparations to upbeat operational stoppage takes much homework and fund storage. Customers will expect their products regardless of what is going on around the world. If your competitors are better equipped to overcome obstacles, they will inherit your market and leave the unprepared in the dust. Corporations that foresee market fluctuations and plan accordingly often times consider conquering new frontiers to diversify their risks. “A company spreads business risk by operating in a number of different foreign countries rather than depending entirely on operations in its domestic market” (Gamble & Thomson, p.137).

    Gamble, J. E., & Thompson, A. A. (2011). Essentials of strategic management: The quest for competitive advantage. New York, NY: McGraw-Hill/Irwin.

  15. KEEP 194 WORDS INITIAL 12/6/11(original post 10/19/11)Dear Ms. Chapman,
    It is a pleasure to have you blogging with us. This is a powerful example of disruptive change. I was touched by your story and inspired to think about this topic.
    “There are two sides to supply chain risk management; risk assessment and mitigation, and responding to unanticipated supply chain disruptions.” Despite the best laid out pans disaster is never expected. However, a well laid out plan will help a community, an organization get back into a normal routine faster. Any company, community, school, any place where there are one or more people should have a risk management plan. We can consider risk management plans like we do our Wills. We consider a Will as a tool to use when we die, not IF we die. Therefore companies should weigh the costs and implement a plan because now that supply chains are longer, due to globalization, the damage and expense of a catastrophe is far more reaching than ever before.
    A local aquarium that acquires fish from the Pacific experienced quite a disruption during the Tsunami, they never did recover.
    Essential Characteristics of a Supply Chain Risk Management Strategy
    http://www.kinaxis.com/whitepapers/Supply-Chain-Risk-Management-Strategy.cfm

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