* * * * * * * * * T E R R I E 'S T A K E * * * * * * *<br>A weekly roundup of news & information from Terrie Lloyd.<br>(<a href="http://www.terrie.com">http://www.terrie.com</a>)<br><br>General Edition Sunday, April 03, 2011, Issue No. 608<br>
<br>+++ INDEX<br><br>- What's New -- Problems with Manufacturer Monopolies<br>- News -- Which Charities are Safe to Support?<br>- Candidate Roundup/Vacancies<br>- Upcoming Events<br>- Corrections/Feedback<br>- News Credits<br>
<br>SUBSCRIBE to, UNSUBSCRIBE from Terrie's Take at:<br><a href="http://mailman.japaninc.com/mailman/listinfo/terrie">http://mailman.japaninc.com/mailman/listinfo/terrie</a><br><br>BACK ISSUES<br><a href="http://www.japaninc.com/terries_take">http://www.japaninc.com/terries_take</a>, or,<br>
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<br>----------- PBXL is BUSINESS COMMUNICATIONS ------------<br><br>+++ WHAT'S NEW<br><br>One of the things that has made Japan a ferocious <br>competitor has been the ability of its largest companies <br>to continually improve systems, eliminate inventory, and to<br>
integrate manufacturing operations with their hundreds of <br>suppliers. Toyota, Nissan, Sony and the many other brands <br>that account for much of the nation's exports are leaders <br>in this form of lean manufacturing and have used the model <br>
to dent the impact of neighboring China's much cheaper <br>workforce and flood of investment.<br><br>But as the practice of Just-in-Time (JIT) and Kaizen has <br>evolved over the last 10-15 years, it has been inevitable <br>
that from a diverse environment of many suppliers competing<br>for the business of the majors, smaller companies have <br>gradually disappeared and only the strongest of the <br>second-tier firms have remained. In some cases, despite the<br>
obvious threat to JIT viability, only one supplier has <br>survived. <br><br>Toyota learned the dangers of having a single supplier when<br>in 1997 there was a major fire at the plant of a brake <br>valve vendor, Aishin Seiki. For a while it looked like <br>
Toyota might have to shut down its auto production, and <br>this was only narrowly averted by Toyota finding ways <br>internally to resolve the shortages. This event has become <br>a business case study in JIT short-comings, and one would <br>
think that Japanese firms have learned not to repeat such <br>experiences. But as the Tohoko-Kanto earthquake and tsunami<br>of March 11th have proved, over-reliance on single <br>suppliers still appears to be a problem.<br>
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------------------------------------------------------------<br><br>[...Article continues]<br><br>Of the 3,000 or so parts that go into the average car, <br>about 230 of them are in short supply or simply not <br>available at all following the earthquake. We have heard on<br>
the grapevine that problems at key electronics suppliers <br>like Alps Electric, are holding up not just auto<br>production but also home electronics and other equipment<br>as well. We understand that 6 of Alps' 7 major factories were <br>
in the affected areas and most of them were damaged, with <br>some being knocked out for months.<br><br>If you've been reading the papers, then you'll already know<br>that the top three makers of zinc and zinc coated steel <br>
panels for auto production have been hard hit. Supplies are<br>down by a massive 70%, as around 40% of the market is <br>supplied by a single factory in Hachinohe, Amori, owned by <br>Mitsui Mining. Some of that factory is still under water. <br>
You can add to this picture the shortage of finished <br>copper, ethylene, all kinds of solvents, and other <br>industrial products which are essential in the manufacture <br>of final consumer products.<br><br>An especially poignant story is that of Xirallic, a special <br>
paint pigment that gives cars a shiny metallic finish and <br>which has helped significantly drive sales of upmarket <br>vehicles that bring most of automakers' profits these days.<br>Xirallic is produced by a German firm called Merck (not the<br>
pharma company) in only one factory in the world -- at <br>Onahama, a short 40km drive from the stricken Fukushima <br>power plant... Uh, oh... Because this factory has been <br>knocked out for at least another 6-8 weeks, many thousands <br>
of auto orders at Chrysler, Toyota, GM, Ford, Honda, and <br>others have been delayed or cancelled. Now Merck must be <br>hoping the government doesn't extend that 30km evacuation <br>zone around the Daiichi power plant to 80km, as the US <br>
government has been advising them to do!<br><br>The problem of over-concentration doesn't just exist in <br>autos. Take for example the cleaning agent hydrogen <br>peroxide. About 75% of the supply of the substance comes <br>
from Japan and this also impacts paper bleaching and <br>electronics manufacturing globally. The two major suppliers<br>of hydrogen peroxide are Mitsubishi Gas Chemical, which <br>produces about 50% and whose Kashima plant was knocked out <br>
of operation, and Adeka which has had to reduce operations <br>at its Fuji Plant because of the electricity blackouts. <br>This is one reason why there is a shortage of printing <br>paper right now -- quite apart from the loss of six Nippon Paper <br>
plants and a Maruzen Petrochemical factory that makes most <br>of the nation's printing ink...<br><br>Another challenge is the supply of electronics. Take IC <br>wafers and NAND memory for example. Japan accounts for 60%<br>
of the world's supply of wafers and Toshiba supplies about <br>40% of the world's NAND chips, which go into pretty much <br>every home entertainment device, including the Apple iPod2.<br>Although the Toshiba plant is in Yokkaichi, hundreds of <br>
kilometers to the south of the earthquake zone, the <br>momentary power outage when Fukushima Daiichi went off line<br>damaged sensitive equipment and Toshiba is saying that <br>production will be affected for some time. <br>
<br>Actually, for an interesting map of the many electronics <br>companies producing around Japan, take a look at this: <br><br><a href="http://bit.ly/fAfEXv">http://bit.ly/fAfEXv</a><br><br>Another single-supplier example that has been highlighted <br>
by the disaster and which must surely result in legislative<br>changes in the future is that of power generation and Tokyo<br>Electric Power Company (TEPCO). The fact that TEPCO has had<br>a monopoly on power generation for the largest power <br>
consumption region in Japan for over 100 years has meant <br>that the company has had little incentive to modernize and <br>future-proof its systems. <br><br>As we have watched the Fukushima emergency unfold, we <br>couldn't help wondering whether if Japan had had an open <br>
power generation market then probably other suppliers <br>could have provided alternative power post-disaster. They <br>would also provide alternatives to the obsolete reactors <br>in the TEPCO generation network. Amazingly, the No. 1 <br>
reactor in the Fukushima Daiichi plant, at 40 years old, is <br>actually only the third oldest reactor... We wonder where <br>the other two are and why they are still operating? <br><br>Daiichi No. 1 was due to be decommissioned in February, but<br>
the Nuclear and Industrial Safety Agency (NISA), which <br>after all only has one company to oversight, approved <br>TEPCO's request to extend operation for the reactor for <br>another 10 years. If there were other players approved <br>
besides TEPCO, the government could require them to use <br>only the latest technology, which is much safer and <br>controllable, and to contribute funds to research into new <br>generations of reactors, such as thorium reactors. More <br>
importantly, they would allow NISA to upgrade its baseline <br>for evaluations and decision making.<br><br>Our guess is that while TEPCO is struggling to put together<br>US$20bn-plus to address the replacement of the Fukushima <br>
facility, the government could authorize 3-5 smaller <br>competitors to start operations and these firms would bring<br>at least the same amount of investment to the table to <br>create smaller, safer operations in more diverse numbers <br>
and more diverse locations.<br><br>All in all, looking at the lessons learned from the <br>aftermath of the disaster, we think Japan needs to revisit <br>the wisdom of eliminating diversity in its supply networks.<br>Yes, we understand that large businesses, whether <br>
authorized monopolies or not, want to have single-point <br>supply chains and more control over their suppliers, so as <br>to extract the best commercial advantage. However, just as <br>farmers have found with nature and factory farms, <br>
over-focus and over-control removes the ability to deal <br>with calamities as they threaten such highly-tuned systems.<br>In the food production world, the calamities are new <br>viruses, insects, and the weather. In the manufacturing <br>
business the threats are not so different.<br><br>We believe that the Japanese government needs to require <br>the nation's leading foreign exchange earners to urgently <br>engage in business continuity and supply chain diversity <br>
planning. Companies should be required to evaluate and plan<br>for the effects of earthquakes, floods, fires, financial <br>collapses, industrial espionage, and even threats of war. <br>However, rather than just limiting these activities to <br>
building scenarios and plans to deal with such challenges <br>-- all of which will be limited by the imaginations of <br>those involved in such work, companies should be required <br>to add back into their commercial equations another <br>
important variable -- that of diversity. Companies need to <br>ensure that there is no instance of a single supplier for <br>key components, nor a single point (or region) of <br>production. <br><br><br>...The information janitors/<br>
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<br>+++ NEWS<br><br>- Demand for portable cookers up 400%<br>- Which quake charities are safe?<br>- How to finance the relief effort?<br>- Restaurant ranking firm stock price falls<br><br><br><br>-> Demand for portable cookers up 400%<br>
<br>One company making hay out of the disaster in Tohoku/Sendai<br>is the portable gas cooker maker, Iwatani. Many survivors <br>are still living in primitive conditions and are having to <br>find alternative means of preparing food while waiting for <br>
official government assistance -- which may still take some<br>weeks. Iwatani is shipping 150,000 portable stoves in <br>April, about 400% of the normal volume. The number of gas <br>canisters being shipped is also up 50%, at 4.2m canisters a<br>
month. (Source: TT commentary from <a href="http://nikkei.co.jp">nikkei.co.jp</a>, Apr 2, <br>2011)<br><br><a href="http://e.nikkei.com/e/ac/tnks/Nni20110401D01JFA05.htm">http://e.nikkei.com/e/ac/tnks/Nni20110401D01JFA05.htm</a><br>
<br>-> Which quake charities are safe?<br><br>One of the unfortunate side events of a major disaster is <br>the appearance of fake charities to skim cash from <br>concerned donors worldwide. While we haven't heard of any <br>
specific instances, apparently the US FBI has warned that <br>such scams are proliferating. One way to ascertain whether <br>Japan-related charities are safe to give to is checking <br>whether they are registered with Charity Navigator, at <br>
<a href="http://www.charitynavigator.org">www.charitynavigator.org</a>. As of March 25th, 32 major US <br>charities had donated more than US$163m and many more <br>donations are coming from individuals. ***Ed: Two charities<br>
that we know to be safe, but which are not listed with <br>Charity Navigator because they are too small to meet the <br>organization's requirements are <a href="http://www.jhelp.com">www.jhelp.com</a> and <br><a href="http://www.2hj.org/index.php/eng_home.**">http://www.2hj.org/index.php/eng_home.**</a> (Source: TT <br>
commentary from <a href="http://wsj.com">wsj.com</a>, Apr 2, 2011)<br><br><a href="http://on.wsj.com/eNu6ku">http://on.wsj.com/eNu6ku</a><br><br>-> How to finance the relief effort?<br><br>DPJ party sources are apparently saying that the government<br>
is considering a number of measures on how to pay for the <br>massive relief effort needed for Tohoku/Sendai. The <br>government may need to find as much as US$300bn and among <br>the options being discussed are special taxes, including a <br>
form of temporarily increased consumption tax, and issuing <br>"disaster bonds". Others have suggested having the Bank of <br>Japan buy the bonds (a type of quantitative easing measure), <br>but so far this appears to be being ruled out since it <br>
could lead to inflation. ***Ed: Our guess is a temporary <br>increase in consumption tax from 5% to 7%-10% and<br>once there, it won't be lowered again.** (Source: TT <br>commentary from <a href="http://japantimes.co.jp">japantimes.co.jp</a>, Apr 2, 2011)<br>
<br><a href="http://search.japantimes.co.jp/mail/nn20110402a2.html">http://search.japantimes.co.jp/mail/nn20110402a2.html</a><br><br>-> Restaurant ranking firm stock price falls<br><br>Regardless of what you might think after seeing shoppers <br>
return to the streets of Tokyo, they are apparently not <br>spending as much as they did prior to the March 11 quake, <br>and they are going home earlier. As a result, restaurants <br>that are normally packed are now really hurting. This fact <br>
hasn't been lost on stock buyers, who are dumping stocks of<br>"Gurunavi" (Gourmet Navigator), which not only ranks <br>restaurants but also sells ingredients and services to them. <br>We expect sell-offs of similar entertainment stocks in the <br>
next few weeks. (Source: TT commentary from <a href="http://e.nikkei.com">e.nikkei.com</a>,<br>Apr 1, 2011)<br><br><a href="http://e.nikkei.com/e/ac/tnks/Nni20110401D01SS659.htm">http://e.nikkei.com/e/ac/tnks/Nni20110401D01SS659.htm</a><br>
<br><br>NOTE: Broken links<br>Many online news sources remove their articles after just a<br>few days of posting them, thus breaking our links -- we<br>apologize for the inconvenience.<br><br>***------------------------****-------------------------***<br>
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<br>-----------------------------------------------------------<br><br>***------------------------****-------------------------***<br><br>+++ UPCOMING EVENTS/ANNOUNCEMENTS<br><br>------------- Entrepreneur Seminar in Tokyo ---------------<br>
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-----------------------------------------------------------<br><br>------------------ ICA Event - April 21 -------------------<br><br>Speaker: Marc Einstein, Industry Manager - Frost & Sullivan<br>Title: APAC Mobile & Wireless Outlook in 2011<br>
<br>Details: Complete event details at <a href="http://www.icajapan.jp/">http://www.icajapan.jp/</a><br>(RSVP Required)<br><br>Date: Thursday, April 21, 2011<br>Time: 6:30 Doors open, Buffet Dinner included and cash bar<br>
Cost: 4,000 yen (members), 6,000 yen (non-members) Open to <br>all. Venue is The Foreign Correspondents' Club of Japan<br><br><a href="http://www.fccj.or.jp/aboutus/map">http://www.fccj.or.jp/aboutus/map</a><br>-----------------------------------------------------------<br>
<br><br>***------------------------****-------------------------***<br><br>+++ CORRECTIONS/FEEDBACK<br><br>In this section we run comments and corrections submitted<br>by readers. We encourage you to spot our mistakes and<br>
amplify our points, by email, to <a href="mailto:editors@terrie.com">editors@terrie.com</a>.<br><br>*** No comments this week.<br><br><br>***********************************************************<br>END<br><br>SUBSCRIBERS: 8,809 members as of April 03, 2011<br>
(We purge our list regularly.)<br><br>+++ ABOUT US<br><br>STAFF<br>Written by: Terrie Lloyd (<a href="mailto:terrie.lloyd@japaninc.com">terrie.lloyd@japaninc.com</a>)<br><br>HELP: E-mail <a href="mailto:Terrie-request@mailman.japaninc.com">Terrie-request@mailman.japaninc.com</a><br>
with the word 'help' in the subject or body (don't include<br>the quotes), and you will get back a message with<br>instructions.<br><br>FEEDBACK<br>Send letters (Feedback, Inquiries & Information) to the<br>
editor to <a href="mailto:terrie.lloyd@japaninc.com">terrie.lloyd@japaninc.com</a>.<br><br>ADVERTISING INFORMATION<br>For more information on advertising in this newsletter,<br>Contact <a href="mailto:ads@japaninc.com">ads@japaninc.com</a>.<br>
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<br>J@pan Inc is Japan's only independently published English-<br>language business website. Authoritatively chronicling <br>online the business trends in Japan, each posting brings <br>you in-depth analysis of business, people and technology in<br>
the world's second largest economy. <br><br>Visit <a href="http://www.japaninc.com">www.japaninc.com</a> for the best business insight on<br>Japan available.<br>-----------------------------------------------------------<br>
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