PA’s Tim Lawrence, supply chain expert, is interviewed on the Reuters news channel for a piece examining the implications of the Japanese earthquake and tsunami on European supply chains.
Tim outlines his view that the automotive sector could face disruption to its supply chains for three to six months. The exact length of time will depend on how long the supplier base takes to recover. While some suppliers are already restoring production, getting back to normal is a difficult task.
Tim comments that the disruption will not lead to diversification of suppliers as so many parts are tailored to particular customers and it typically takes three to six months to switch suppliers. This means that there are limited opportunities for new providers to enter the market and instead customers are focusing on helping their suppliers get back on their feet as quickly as possible.
The winners in this situation are those companies who have diversified the risks of their supply chains and understand where their exposure lies. Tim outlines the evidence from PA clients, that customers are now looking to take a regional, rather than global view of their supply chains. As a result, they are considering reducing their positions in Japan and China and bringing some supply chains back to Europe and Latin America.
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