Friday, March 11, 2011

Supply Chain Disruptions Post the Japanese Earthquake and the Tsunami

The devastation in Japan post the 8.9 earthquake and subsequent tsunami is severe (although it seems, for the most part, that Hawaii and the western part of the US have been spared).

Companies with operations in Japan met post the earthquake to assess the damage. According to The New York Times, In the immediate aftermath, most companies evacuated and closed plants. Some injuries and some damage to factories have been reported, but the unknown for many operations could be the effect on supply chain operations and on the ability to receive parts and ship finished goods.

Cargo shippers reported that major Japanese ports were closed, though the shutdowns may be precautionary. The country’s major seaports, most of them south of Tokyo, play a crucial role in Japan’s export-driven economy. Japanese exports — chiefly automobiles, machinery and manufactured goods — rose by almost 25 percent in 2010, the first increase in three years, and a lengthy shutdown could create costly delays up and down the global supply chain. Several airports, including Tokyo’s Narita, had been closed.

Recently, Dr. Patrick Qiang and I revised our paper, "A Bi-Criteria Measure to Assess Supply Chain Network Performance for Critical Needs Under Capacity and Demand Disruptions ," which we had submitted to a special issue of a transportation journal on Network Vulnerability. The paper provides a model for supply chain disruptions in which capacities on various links from production to storage and transportation are affected due to disruptions (all of which is happening now post the disaster in Japan). The objective is to minimize the total network costs, which are generalized costs that may include the monetary, risk, time, and social costs.

In this paper, we consider two different cases of disruption scenarios. In the first case, we assume that the impacts of the disruptions are not as severe and, although there are capacity reductions, the demands for products can still be met. In the second case, the demands cannot all be satisfied. For these two cases, we propose two individual performance measures. We then construct a bi-criteria measure to assess the supply chain network performance for critical needs (products that are needed in disasters, specifically).

I started this blog over two years ago for several reasons, and am now experiencing a case of deja vu. One of the reasons was that my co-author Dr. Patrick Qiang and I had finished our Fragile Networks book and with so many disasters occurring in the world, I thought it important to have relevant research disseminated and discussed. Plus, students and colleagues had been providing gentle pressure that I start a blog and it would serve as a good forum for commentary. Also, my daughter was at the Bement School in 9th grade then, and her class was about to embark on a trip to the Dominican Republic to assist in an orphanage there and I thought it would be interesting to share some of their experiences after their return. Who would know that less than a year afterwards a major earthquake would hit Haiti, which shares an island with the Dominican Republic. Moreover, she will soon be off on another community service trip.

Also, Dr. Qiang and I, based on a tutorial that I gave on the subject of Fragile Networks at the ALIO-INFORMS conference in Buenos Aires, Argentina, wrote a summary of some of the highlights in our book, and the article is now in press in the International Transactions in Operational Research. Our work has been applied to assess infrastructure vulnerability, especially in the context of critical infrastructure, including transportation, in various countries.