The outbreak of the novel coronavirus has disrupted the global manufacturing supply chain. The public and private sectors together should strive to promote the diversifying of suppliers that are not dependent on specific countries.
Most seriously affected has been the automobile industry. As parts could not be supplied from China, where the virus first spread, Japanese automakers' domestic factories have been forced, one after another, to temporarily suspend operations since February.
This arose because, as competition has intensified, extensive cost reductions have resulted in parts imports from China increasing to as much as 30% of all parts imports.
Personal computers were also in short supply at one point due to a delay in parts procurement. The handover of homes was delayed in some cases when imports of equipment such as toilets and bathtubs stagnated.
All of these cases can be said to highlight the fragility of supply chains that rely on China.
In some cases, a single missing component can lead to a shutdown in production. It is important for companies to check their procurement networks again and identify important parts. Including the securing of alternative supply sources, it is desirable to create a supply network that is resistant to risks.
Faced with the trade friction between the United States and China, companies have already started shifting their factories from China to other places, such as the member states of the Association of Southeast Asian Nations. It will be effective to accelerate this trend.
By using information technology to grasp the production situations of overseas clients, it is said that companies will be able to respond flexibly in an emergency. It is hoped that such efforts will be strengthened.
Returning production bases to Japan is an option for lowering risks. As a measure against the coronavirus, the government has established a subsidy system for companies that transfer to Japan their product or material manufacturing bases.
Amid the globalization of the economy, however, expanding domestic production without much consideration cannot be deemed realistic.
The government needs to carefully determine which production facilities should be retained in Japan and specify the priority areas that should return to the country.
The European Union, looking to reduce its dependence on China, adopts a strategy of encouraging companies to return to the EU the production bases in enterprises where demand is expected to increase, such as batteries for electric vehicles and pharmaceuticals.
In Japan, major challenges remain in securing medical supplies, such as masks and protective clothing. The domestic production system for materials that are indispensable in an emergency should be expanded.
Sony Corp. and Nissan Motor Co. are among the companies that have supported the production of face shields and ventilators. Sharp Corp. has entered the production of masks. To prepare for a crisis, it is hoped that companies will consider whether they can further expand production collaboration across industry boundaries.
The government should promote the establishment of a framework for international cooperation to provide emergency goods to each country.
-- The original Japanese article appeared in The Yomiuri Shimbun on June 16, 2020.
Read more from The Japan News at https://japannews.yomiuri.co.jp/
