On Friday March 11, 2011, a magnitude 9.0 earthquake struck Japan; it was the largest earthquake on record. Although it was the middle of the afternoon, I happened to be home on vacation. The vibrations gradually increased during the first minute. I became panicked as the shaking lasted more than five minutes and my belongings began falling off the shelves of my home. I was afraid and wanted to flee the house with my wife, but the world was also shaking outside. The aftershocks continued after the epicenter moved south. Over the next half an hour, four more earthquakes of M7.0 or higher struck. The original earthquake struck just 350Km away from my home. This time it occurred just 80Km from my home.
After the shaking stopped, the power shut off, as did the water and the telephone service. Two of my relatives live nearby with their families. Their houses were rendered unsafe by the events and so it was deemed best for the entire family to shelter in my home. Ten
people, including me and my wife, would then live together for the foreseeable future in a house with no electricity or running water. Fortunately, we were moderately prepared. We have solar access during the daylight hours and were able to watch the events unfolding on the television.
Next, The Tsunami
The five largest earthquakes in human history have occurred in Japan, but the effects of the tsunami caused by the earthquake were unimaginable. I was overwhelmed beyond all human understanding by the power of nature. We watched as the damage caused by the double disaster was surveyed. Tears of ten years would not drown out the horror we felt as they screened images of the wreckage in the wake of the tsunami. More than 15,000 people were killed. More than 8,000 more were missing. Some 110,000 homes were destroyed. More than 70 bridges were knocked down, and the combined damage to the railway tracked spanned 26 locations. At its highest point, the tsunami was 15 to 30 meters high. The coastline in this region is like a saw tooth and the wave ran into the bay in the shape of the letter V,
reaching the height of 30 meters or more.
In the coastal area near where I live, there has been significant soil liquefaction, with the ground sinking tens of centimeters. As a result, many of homes and many roads are now partially destroyed, including nearly 2000 buildings and about 700 houses. Furthermore, fires spread for several days and caused substantial fire damage. These losses also affected the supply of gasoline, which had a major impact on logistics. The residents of Tokyo (approximately 400 km from the epicenter of M9.0) also felt the effects of the earthquake. All trains stopped due to power failures, such as transportation, causing many people to find shelter if they could or walk home even if the walk was longer than 7 or 8 hours.
Then, Nuclear Meltdown
This was the situation before word came of the nuclear reactor meltdown at a nuclear power facility in Fukushima. Immediately following a hydrogen explosion at the plant, the Japanese people were told by the government that conditions were safe. The facility was prepared to automatically stop the fission process during a large earthquake, with backup generators kicking in to provide power to the cooling system to keep the core reactor (ECCS) cool. The tsunami, however, wiped out these generators and the disaster continued. Atmospheric radioactive material spread to the sea and air, with the total impact still largely unknown. Even months later, the 80,000 people who lived in the surrounding area have been forced to remain in shelters. The effects of human exposure, disruption of the food supply chain and rumors of even greater damage have had a severe impact on the economy. Added to demands for power rationing through the summer and the possibility of mandated rolling blackouts, the potential repercussions are immeasurable. Aftershocks still occur every few days, even months later.
Personal to Professional
So far, I have discussed the events of the earthquake from my perspective. I would now like to offer a review of the resounding business impact to both industry in Japan and across the globe. There are an extensive number of SMEs and other manufacturing companies in the Sendau region that support Tokyo. Additionally, the region was a thriving tourist hub and was home to a large fishery. The impacts were extensive and touched many sectors.
The manufacture of electronics components and semiconductors, automobile assembly and related parts, and LCD screens were particularly hard hit. Because of just-in-time supply chains and lean manufacturing models, many companies stocked insufficient inventory, which impacted both foreign and domestic companies. One reason for this is the popularity of broad complex supply chain models (SCM) that are multi-layered and vulnerable to catastrophes. Most large companies have competitive SCM strategies, but can only build strong relationships with perhaps the second and third layers. Once there are five or six layers, it is difficult to understand the SCM in any depth, even though those smaller suppliers may be essential to the differentiation of the product. They can build custom-made parts that have become the source of suppliers for the company. In some cases, these five or six suppliers were all impacted by the earthquake, which caused shortages and disruptions in production.
This is not the first time that automotive SCM was severely disrupted by natural disasters. In recent memory, there was the Hanshin Awaji earthquake in January 1995 and the Niigata earthquake in 2007, which delayed supply parts to nearly twenty companies. The companies took several months to recover from the disruption. According to IDSR, the global disasters that occurred in 2007 are considered to have been a significant contributor to the ensuing economic harm.
In this section, I will consider the topic of crisis management in Japan. I want to say that assumptions were made about the disaster prevention phase of the threat, namely how to prepare for an earthquake, flood, fire, etc. The trend in crisis management in Japan is to focus on disaster prevention as a component of BCP, which has been researched and executed in many organizations. When this name and people said that it was completely unexpected and beyond preparation, it became an event beyond the scope of BCP. Based on the prior experience following the Hanshin Awaji earthquake, 72 percent of enterprises had not returned to the income level prior to the quake, even ten years later.
However, it is definitely outside of the scope of normal BCP for both small- and medium-sized enterprises and even big enterprises with sophisticated technology when they are hit with a triple disaster (earthquake plus tsunami plus nuclear meltdown) that resulted in power failures, roads cut in half, and railway disruptions that occurred in a 500km area. Perhaps the restoration process will present a useful opportunity to consider decentralizing operations and present an opportunity to rethink BCP’s place in a country like Japan, where the number of disasters far exceed the average. It was thought sufficient to separate operations by a distance of 40 to 50km in general, but we have learned this may not be sufficient.
It is also important to consider the role of emergency response as a disaster is occurring. Some companies were prepared and were able to respond calmly, but many companies were unprepared even if they had a written plan. Many of these had never performed a drill or training session for their employees. With outdated BCP and emergency response manuals, the personnel reporting method and the point of contact are notalways clear, especially if the lines of communication are down. Judging by the Hanshin Awaji earthquake, prompt initial response is essential and will impact how fast information can be received to start subsequent recovery activities. Especially if the catastrophe had a wide impact on a whole region, information from the site may be hard to come by.
BCP teams have to make rapid-fire decisions based on this information. Prior experience through training and exercises and a strong connection with human resources are important and should be reviewed on a daily basis. It is critical key to have the consent of top management to foster a sense of urgency to employees. Secondly, it is important for the disaster site management team to be able to delegate tasks with authority and have the support necessary to have the offsite up and running as soon as possible. All departments are key to this process and mutual trust of the management team is necessary in order to gain that support.
Supply Chain Models (SCM)
Next, I will review SCM. In response to this earthquake, even the largest companies have stated the need for a review of SCM, which can be time-consuming, but would ultimately move the industries toward eliminating regional dependency. In-house or overseas relocation strategies with multiple vendors and suppliers are two strategies under consideration for ensuring the continuity of the specialized manufacture of competitive parts and the assembly of these specialized parts that are common in this region. As to the direction of crisis management in the future, it seems that more thorough disaster prevention strategies are needed as well as continuing to build a BCP plan based on the original BIA for more day-today needs. On the other hand, a redesign of the big enterprise to reduce dependency on any one location will simultaneously create a resilient enterprise in the face of disaster and add competitive advantage.
If we build BCP into part of the regional SCM strategy, we can foster awareness of the crisis for the local SMEs that have scarce fiscal resources and talent, urging them to build a network of inter-regional cooperation and inter-enterprise support. Focusing on BCP as a practical rather than a theoretical exercise is expected to become an urgent issue in Japanese business and will help companies, especially the networks of small enterprises that need to, prepare. The wake of the earthquake is expected to significantly change the business environment and to highlight the importance of BCP.
Beyond natural disaster, greater BCP will also help companies prepare for other changes in the business environment, such as technology obsolescence and the emergence of new competitors and technology. Additionally, BCP can help with the survival of a company through innovation and change, both of which will be required to rebuild. BCP is business continuance and the business exists only because there is a customer. Maintaining the capacity to continuously offer products with superior service, high quality and a competitive edge—no matter what occurs—is a business continuity plan. Having a plan lets your customers know that you understand their perspective and their needs.
In Japan, we have a history of coming together to help ourselves out of disaster. I defend myself. My family defends me. My company defends me. We defend our country. The eternal problem is, then, how to continue fostering this awareness of crisis after everyone has moved on.
Kanryu Nagase’s experience with business continuity began as IBM started increasing their mainframe shipments to the Asia Pacific region in 1965. From that time on, Mr. Nagase has supported disaster recovery and emergency management of natural disasters for core business in many industries during his 35 year career with IBM Japan. In addition to his many years with IBM in Tokyo, Mr. Nagase was also assigned to IBM Poughkeepsie, New York, IBM Raleigh, North Carolina, IBM Jakarta, Indonesia, and eventually headed the service organization for the Asia Pacific region. After retiring from IBM, Mr. Nagase’s experience with business continuity deepened when he became a director of the Crisis Management & Preparedness Organization (CMPO), which was the first NPO for crisis management established in Japan in 1999. Since then, Mr. Nagase has established and represents the Japan Service Value Association (JSVP) that organizes IT service corporations and promotes efficiency among mutually compatible concerns including business continuity planning and consulting. In 2010, Mr. Nagase was elected chairman of the board for DRI Japan.