As if a million things weren't already going wrong in this nation that I've called home the last twenty years, there is one more pesky thing that resembles an achilles heel.
For the last thirty years or so, university business courses in America and Europe have covered a hallmark of Japanese business practice known as the low inventory principle. The Japanese perfected this technique of keeping inventories to a bare minimum. The idea behind this is that large inventories are costly and inefficient. The goal is to gear production closely to current demand, and the result will be streamlined production and distribution costs with a rapid response to market conditions.
This bedrock business principle extends to suppliers' networks as well. Intermediary suppliers keep their inventories low as they piggyback their production to the sellers of finished products.
This is known as the "Just In Time," manufacturing and distribution practice here in Japan. What worked so well for Japanese manufacturing in post war Japan is now turning into a nightmare scenario for the big automobile manufacturers.
I had some confidential discussions this Wednesday evening with employees of a supplier to several automobile manufacturers in Japan. I was surprised to hear that all of Japan's automobile manufacturers have halted their production lines. The number one culprit in this is the destruction or heavy damage to several key manufacturing areas along the Miyagi Prefecture (Sendai City) coast line. The crucial item needed to manufacture automobiles is the Integrated Circuit or I.C. Nissan, Mazda, Honda, Toyota, Mitsubishi, as well as several foreign car makers are all dependent on integrated circuits that were manufactured in the tsunami stricken areas.
The three engineers I discussed this turn of events used the word "dire" to describe the situation. After our business English class, they hurried out of the room to attend late night meetings to address the integrated circuit problem. They seemed to have no idea what the next step will be. I've never seen, normally easy going, confident people with worry on their faces like this. It was unsettling.
*For confidentiality reasons I can't reveal the company referred to here. I signed one of those pesky confidentiality agreements last year, and it's still very much active. I published this diary to give Dailykos a more in depth look at the situation that the foreign media hasn't quite got the grasp of. Halted assembly lines by the major Japanese car makers is to quote our Vice President Joe Biden, "A very big f'ing deal."