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Don't Japanese companies use JIT process? Yes they do! Whoopsie daisy! That means little inventory. I cant wait to see how the global chain breaks apart this May! BADABING!
Yet the problems do not appear severe enough to spur a large number of companies to move factories, change suppliers or shift their target markets, with 79 percent of respondents saying they were not considering moving offices or factories, or shifting suppliers.
They may reconsider moving factories when their employees cannot show up for work anymore...
Where are they going to go? It's almost certain that many of their needed parts are coming from highly specialized factory lines. It takes from one to five years to plan, design, tool, and build a manufacturing facility. In war time the Govt. can increase the pace by pouring gobs of money on the problem - but these companies don't have that kind of capital at hand. Chances are they are still paying consultants to do option studies. Make no mistake, this is a major world wide supply chain mess.
By the way, most of the electronics for our defense industry have been off shored to Japan and Korea since the 1980's. There is a good chance the Navy had to back off from Libya because they realized they couldn't replace the fancy smart missiles and bombs they love so much. Shit -> Fan!
I dont know Micheal Ruppert to well, but I watched one of his videos the other day and he speaks of the possible effects that Japans circumstance may have on the rest of the world.
I am by far a novice, at best, when it comes to the stock market but I think this video may be worth watching.
while many denials as to the cessation of QE2 are being bandied about here and across the more enlightened financial blogs across the net such as Jim Sinclair, Trader Dan, and of course Turd's Spot, it is becoming apparent, especially with the latest Goldman pullback on commodities and doctor copper that we are approaching a real watershed event in June/July which Mr. Ruppert suggests will coincide with the quarterly earnings reports due in June. His cohort Chris Martensen, a real gold bug if there ever was, has been calling for the temporary cessation of quantitative easing since early March. This in concert with Martin Armstrong's expectations of a significant retracement in the precious metals June 13/14 is the handwriting on the wall (street). Get ready! The image of a financial deflationary earthquake sucking global liquidity into its vortex only to inundate the markets with a tsunami of hyperinflationary fury is not only highly counterintuitive but quite possibly inevitable.
well, shit! make lemonade!kondratieff winter---in the good old summertime!got PMs? cash? food? luck?good thing we have a printing press &it can't happen here!
For a second, I took this to mean we shut down the federal reserve http://us.mobile.reuters.com/article/idUSTRE73C7NQ20110413?ca=rdt
Such a predictable outcome in a JIT economy, eh?
Given that the whole world is now pretty much a JIT chain, not just in automotive, but electronics too where Japan provided many key copmponents, watch the slow domino acclerate into mayhem. May-hem... yup, probably next month.
MEanwhile, you can bet that some products being produced right now are sub-par, with manufacturers rushing existing vendors to up production to keep manufacturing apace.
Tragic reason, but the system was strung too tight, it had to give, one way or another.
Yup...I mentioned this a couple weeks ago.
I've experienced the supply disruptions first hand....
A delivery reliant on parts from Japan was delayed, and delayed, and delyed, and delayed.
Any other first hand accounts from ZH posters?
I am disrupting, and disrupted.
One key part for an industrial component I sell could not be purchased, so I failed to deliver a product to a major car maker. This component is used in the assembly line for a very popular car. If any of the equipment that uses this component for whatever unfortunate reason, the production may stop. Although, I don't expect that to happen since I am pretty confident that that car maker would be able to pull that component from some place or another.
Some other stuff have seen are>Initial hoarding by Toyota Coroporation (Not Motors). By the way, they have stopped hoarding a while ago.>Loading an extra tank of diesel to pick up products manufactured in distressed areas where gas is not available.>Complete unavailability of some key parts. Many seems to be resin related.>Rescuing critical dies from suppliers located in nuclear evacuation areas to continue production elsewhere.
I expect the manufacturing business to be pretty much back to normal some time during June.
Just another phase in the surreal state of non-depression enveloping the old alliance economies. Destruction of infrastructure, supply-chain and commerce? Not to worry, a freshly minted cash infusion will solve the problem. Just let the central bank play the part of the end-consumer of goods and services Without actually consuming such goods and services, yet paying for them at full price. And if the US and Eurozone are doing the same you can;t get in trouble. It's a utopian world we live in indeed!
Japan shakes semiconductor industry - Wafers, batteries, some chemicals in short supply12 April 2011, by Aude Lagorce - London (MarketWatch)http://www.marketwatch.com/story/japan-shakes-semiconductor-industry-2011-04-12
That's gonna hurt a lot of companies going forward.
o oh, domino. roll me over there ya go. 60 after a few weeks, 70 next, 80? 92 when only 2 of the islands are habitable? The optimism of rebuilding is incredible. All the old partially spent fuel that never stops glowing and giving out good vibes is hanging around in all the old reactors and no one will bury it for anyone else.
Our leaders are so smart they scared to go near it. Political hot potato irradiating the voter!
+10 for the Van Morrison reference...
One wonders how many fronts the Japanese can fight on simulataneously. Fukushima and the condition of the other northern Honshu nuclear power plants has got to be tying up much of the engineering and management staff of Japan's electric utility industry yet getting adequate power available for the summer is crucial for the Japanese economy.
The Japanese government managed the Kobe earthquake very well but where you have a far more powerful seismic event coupled with that godawful tsunami maybe a far more difficult problem to deal with. Infrastructure isn't just damaged its gone! Toss in TEPCO's disaster, for which Japan was clearly not prepared and the notion that the Japanese government is just overwhelmed and demoralized at this point is not unreasonable to believe.
All that leading to a moderate to outright severe economic depression in Japan would be my guess. It will take years to rebuild infrastructure and lot of capital. I see a major debt default coming, just to speed things up.
"The Japanese government managed the Kobe earthquake very well"
Yes, but let's not forget that a big slug of the 220% of GDP debt mountain was as a result of the rebuilding after Kobe....
Good observation and logical conclusion:
Scary as well.
Good Vid TnX.
I notice Mike has his window opened. A gentle breeze blowing the fresh radiation in.....
How is japan going to generate a surplus to buy our treasury bonds?
This may be the bond surprise of the year. Not the end of qe2
With the levels of Cesium-137 making it's way to the US. I think the last thing people should be worrying about is the availability of consumer electronics and such.
Does no one value health? Have you all gone mad?
Here is a visual for you and as of today it looks even worse than ever.
Tokyo Bay Home Demand to Drop as Quake Turned Land to Mud, Shattered Pipes
Deepest Japan Slump Since Lehman Fails to Derail Predictions for Rebound
A longish article critical of the "bounce back" thesis, on Bloomberg:
Where Chernobyl Outlook Is Shakier Than Ground: William Pesek
It's a BS theory...most funds are lining up bets on a recovery charge in stocks. I hope they loose billions. Oil was at 147 when (pre) Lehman was decimated, so the markets corrected as CM's froze, big deal. CB's have been printing ever since, they send oil upward and food prices + Japan barely functioning as an economy = FUBAR. It remains to be seen how much cash will end up in stocks, when half their businesses may go bankrupt or are bailed out by Japans gov.
Bulls are leveraged up like 2008, they just have CB's gov guaranteeing, printing...
The mind boggles as dumb-ass journalists blowing of the Fuckashima meltdown and a oil inflaion wipeout for Japan
You mean no iPhone 5s until fall, and I still have a long wait for an iPad 2?! WTF am I going to do? I'm shaking from withdrawl of new, shiny, Apple toys.
yeah. things might slow down a bit for a while. they call that a recession. again, that's why i think da big boyz called the bullshit they did the last coupla daze. japan is the world's what? 3rd largest economy? pretty devastated. unbelievable! not good for global supply chain grooves. not good for capitalism for things to slow/shrink a bit, now. not good for "securitization".
of course the whole freakin place is getting really good at pretending everything is wunnerful, wunnerful, no matter what. we just fukin threw, like several $ tril. into this criminal maelstrom of fraud and shady accounting practices, and now this?
nanny state central planning and fiat banksterism may get their fukin lights punched out!
Those morons (BRICS) have just drawn a line under $100.00 (oil), you think the middle east will allow oil to drop?
*(Dow Jones)--The state development banks of Brazil, Russia, India, China and South Africa signed an agreement Thursday to open credit lines in their national currencies to each other, the latest concrete step by developing nations to reduce their reliance on the U.S. dollar. The grouping of five developing nations, known collective as BRICS, said separately in a joint statement that they support reform of the international monetary system leading to "a broad-based international reserve currency system providing stability and certainty," an apparent reference to a diminished role for the U.S. dollar as the world's primary reserve currency. The framework credit-line agreement was signed on Wednesday by Russia's Vnesheconombank, Brazil's Banco Nacional de Desenvolvimento Economico e Social, China Development Bank, Eximbank of India, and the Development Bank of South Africa, according to the statement.
That was their intention. They are tiring of Chairsatan's inflation. Perhaps Barry didn't get the memo about the work that needed to done to protect US interests while he was vacationing in several of these countries. Perhaps GS called a commodity top so they could BTFD before their customers.
perhaps GS called a commodity top because their econometric models turned bright freaking red when they factored in Japan.
666: as far as the "new reserve currency" goes, and the line under oil, we've been hearing this bullshit since timmah g. called out the chinese for not valuing their currency right, years ago. in a way, it's just bullshit: a bunch of fiat bankster bullshit about the race to the bottom and how to stay on top, too. one good fiat deserves 5-6 others. it just seems so much like noise to me, at times. propaganda 1; 2; 3; rinse, repeat; 2; 3...and so on. what's the big dill? i fail to see it!
Fair point on GS, they could actually place the financial interests of their customers above their own.
The problem with the fiat banker bullshit is that the consequences are now expanding from the paper banking world into the brick and mortar world. Politicians haven't liked food riots on their watch since at least Louis XVI- and this season heads are actually rolling. So if the price of global economic stability is that US consumers must pay more for shit, then the rest of the world is perfectly ready to pay that price.
Name suits you, chump. "Those morons", right... Look no further than the US Fed and investment banks. Why trade in dollars when you have a deliberate policy to undermine its value? Been working since 1913, about time other countries wake up to this reality.
SCM, Logistics, Transportation, Procurement, Warehousing all getting thrown down the well -- this will take more than a Quarter to recover from kids
I have a car Audio store. SONY, Kenwood, and JVC are telling us HUGE supply problems over the next 90 days and beyond due to the expansion of the Radiation zone. Chip sets and knobs that were made in Japan....the companies were wiped off the map. Also....Sony and Kenwood just announced across the board price increases TODAY because of the dollar falling. Here we go. 3% to 6% accross the board as of Tonight. Ouch.
I expect anecdotes like this to continue to appear, almost like a tsunami. Right now, we're all just seeing the wave approaching on the horizon.
Good luck to you, sir.
In a social setting this past Saturday, I asked a pal who works for a large building technology company. Microprocessors are the most scarce item and prices increased from $1-$3/each to $30-$40 each. JIT was not his main reference; single sourcing was the issue. His company and his competitors are doing some interesting steps: 1) hoarding; 2) talking daily with Japanese suppliers about progress, by walking the plants in Japan, 3) accelerating new product introduction to a faster date (ie replacing current tech with new);4) scouring the earth for new suppliers;5) abandoning single source and planning to add costs of multi sourcing going forward;6) planning for margin compression due to higher key component costs (2nd quarter);7)generally freaking out. He said his whole division worked harder this week planning for contingency than ever. First quarter results will not show a problem. Q2 will. I found the possibility of accelerating new innovations to be a very interesting outcome of this problem. A normally slow and conservative corporation is now in fast track innovation adoption mode out of necessity to keep the volume sales going and revenue numbers in line to keep stock price signal constant. Flipping out inside these companies. Oh, and all products need microprocessors. Plus all plastics have some Japanese element to them so plastic packaging is tight. And no suppliers are saying much except apologies for the slight delay.
Japan turmoil disrupting U.S., Fed survey finds 13 April 2011, by Greg Robb - Washington (MarketWatch)http://www.marketwatch.com/story/japan-turmoil-disrupting-us-fed-survey-finds-2011-04-13
The Japanese earthquake may be having more of an impact on the U.S. economy than previously believed, according to the Federal Reserve’s latest Beige Book survey of current economic conditions released on Wednesday.
A majority of the Fed’s 12 regional districts reported “actual or expected disruptions to sales and production” as a result of the Japan earthquake.
Surprisingly most of the districts that reported difficulty as a result of the Japan tragedy were on the East Coast or in the middle of the country.
The Minneapolis Fed said it was surprised when a quick survey of the factories in its district showed that 41% of them indicated that they had been unfavorably impacted by the disaster in Japan.
“Inputs from Japan are expected to be in short supply soon if they are not already,” the Boston Fed reported.
One must ask, previously believed by whom? Dumbasses who can't put two and two together?
Maybe you guys dont find it surprising that the treasury market may tank due to a weak japan unable to buy the expected amounts of treasury bonds......
But it will be a surprise to the bond market and almost all treasury bond owners.
The end of qe2 is already priced in. Later if japan cant maintain a trade surplus it might increase bond yields.
Well, it's hit Australia already.
Toyota has a substantial manufacturing facility in Victoria. Announced today, half shifts "until the problem is resolved".
3,300 jobs at Toyota's factory. Getting a bit messy, one would think........
Most Toyota plants in Japan aren't moving until next week.They will start moving at 50% capacity next week using inventories.(Just because they are JIT, does not mean they have zero inventory)
Nothing compared to whats going on in Japan.
Good thing we didn't put microprocessors into absolutely everything...
Someone should have said it already - Complex structures are prone to breakdowns. The more complex they get, the more vulnerable they become and it's harder to mend the disruption in the technological chain. There has been a lof of discussions about this in the recent years, at theoildrum and other forums. We have a glaring example of that today when we look at Japan and how it already affects and will be affecting the world economy further on (scuze me for that pathetic mentoring tone - i can't help it xP)
Your commets are very true, if we were talking about the financial sector.In the manufacturing sector, I believe that the difficulty of mending depends more on the size than complexity.
Think about it.Which takes more time to fix?A seamless pipe manufacturing plant or a semiconductor plant?Even if a complex equipment breaks down, it can be replaced if somebody can make that make it and if its small enougth.However, replacing it will not be easy if its huge.
I am not an expert in either manufacturing or microelectronics (or financials or pretty much anything else lol). From my layman point of view it's the fact that the world economy has been pushing its limits in terms of interconnectedness and complexity. Take a look at this article:
and the comments section:
"I design electronic products and many of my products are facing shortages on some components, which basically puts the entire product on hold.For some reason there are certain components or products that seem to be mostily specialized to particular countries or parts of the world".
It sounds pretty damn obvious, but that's what it is. Yes, maybe you could set up production of those certain components and products at some other location (eg, in China or S. Korea) quite fast - but you could also lose out on quality. But it's not even the disruption in the production chain that is the problem here. What's the cause of it? Energy. Japan's got its power system disrupted.
"Even with the current three-hour rolling blackouts, industry is complaining that it cannot keep its factories running. TEPCO says the rolling blackouts will have to go on at least through the end of April, and are likely to be necessary again in summer when air conditioners add to the load on the grid"
"Energy consumption is said to be closely linked to GDP. Even if the situation appears to be less critical than before for oil and gas, the ongoing shortage of electric power, Japan's most important energy source, will inevitably have a deleterious effect on the economy. Industry is now waiting with bated breath to see how long this energy bottleneck will throttle the economy".
My whole point is Japan is not a black swan - we have been building our way towards this point. It's a symptom of the way the world economy is unraveling.
If we could solve problems of the current magnitude fast - it would be awesome. But we can't - with our current means we can't.
Thank you for your insights.I just ordered the collapse of complex societies on amazon and I actually agree with almost 100% of what you said.
But the reason cars in tuxedo black can not be produced....is not because cars are complex.It is because the plant that produces the paint is huge, thus requiring lots of time and effort to recover.The risk of a complex product with many different parts bares a higher risk of using a product produced in a plant with huge equipments.However, the length of the delay will be capped by the lead time of the product arriving last. It will not exceed that by far.Huge items are manufactured using humongous equipments. For exampble 4 meter wide pipe for drilling oil will be delayed much further than complex hybrid cars if the plant is hit by a quake. Also, production lines for huge products are usually very limited making it much more difficult to replace or outsource. And, yes.....energy is a extremely critical factor.Plants that make huge items and run huge equipments, tends to require constant supply of energy. Power disruption is already a major concern, and my point is ..... size matters.Please believe me, I visit many factories every week, and size do matter more than most people think.
Also, I believe that size do seriously matter in finance/economy/society as well.Just...look at this.http://boombustblog.com/reggie-middleton/2009/09/18/an-independent-look-into-jp-morgan/
In my opinion, the size of the problem determines the damage when stuff hits the fan.The complexity determines the ability of the fan to avoid the stuff.I feel that things are getting bigger and more complex, both in the real economy and finance, and it does not look good to me also.
Didn't Michael Crichton write a bestseller in the 90s about that very thing? Something about dinosaurs if memory serves me. (All the investors in that "park" were Japanese BTW)
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