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Effects of Japanese Earthquake Impact on UK Manufacturing

As predicted at the time of the earthquake, the disruption to Japanese industry is now starting to have a knock-on effect on UK manufacturing.  The most high-profile example so far has been Honda’s announcement yesterday that they are halving production at their Swindon plant because of a shortage of components.

Supply chain problems are a very common form of disruption to businesses: in a study published in 2005, Hendricks and Singhal found over 800 examples of major US corporations suffering this type of disruption over an 11-year period.  Moreover, the impact is very significant; in the 2005 study firms that had experienced a disruption under-performed the market by over 40% over 3 years.

This all serves to highlight the importance of considering the supply chain when conducting Business Continuity planning.  Key considerations for critical supplies include:

  • Single-source or use multiple suppliers;
  • How resilient are your supplier(s); and
  • Where can alternative supplies be obtained from in an emergency?