It might be easy for an outsider with little knowledge of extended global supply chains to look at this situation and suggest that the billions of dollars of supply disruption are limited to an island country in an earthquake prone part of the world. But such a statement is completely incorrect, as Japan also has many smaller suppliers (and large) producing lower-tier supply chain parts, components and semi-finished materials (and in some cases raw materials) used in export markets across the world. Spend Matters believes that the global cost of supply disruptions, stock-outs and other direct items related to the disaster are likely to exceed $10 billion by the time all costs are added up. It's likely the actual number could dwarf this conservative estimate.
While many procurement executives are already using the Japanese tragedy as a rallying cry to build support for supply chain risk investments, until companies create an operational culture of resiliency that permeates the thinking of workers, managers and executives alike, it's likely that future events such as this will have similar costs. Fortunately, though, by looking at the hard-dollar numbers reported by the Japanese automakers, it should be that much easier for procurement and supply chain executives to gain support for business cases and investment to put in place not only the right tools and enabling content to help manage and mitigate risk, but also the cultural changes and education necessary to change buying culture. Just as strategic sourcing transformed how many of us think about a standardized negotiation process -- from up-front spend and market analysis through to contract award and implementation -- so to will events like the tragedy in Japan change how we consider and structure risk and our toleration for it, rather than just our ability to react after the fact or just before an incident occurs.