Virtual Dual Sourcing Of Specialized

Goods
Main Issue
In today’s uncertain business environment where small delays in
production could cost firm a fortune because of the grave competition in the
marketplace. Natural disaster can occur anywhere and anytime, and thus
companies must prepare for it while they have to improve productivity in
order to compete. That is why this paper focuses on supply chain disruption
by natural disaster. Companies face a dilemma of either creating
robustness by building a buffer stock or building a backup production line.
But at the same time there is global competition which is inevitable to
avoid. Usually supply chain failures are dealt with by creating a buffer stock
or setting up backup production lines. However, this is not feasible in all
situations. For example, companies manufacturing products with integral
architecture can hardly keep much buffer stock or establish backup
production line because the products are highly customized in design and
process. This implies that the multiple sourcing and substitution of other
products or processes is difficult. When the supply chains of such products
are disrupted, substitution is more difficult than for standardized goods.
However, standardizing designs or making them more flexible is not usually
allowed by customers or market needs. Moreover, establishing other
backup production lines is not feasible in terms of competitiveness because
it increases the cost and requires more lead time.

Organization of study
This paper focuses mainly on supply chain disruptions at the Kumagaya
plant and the relationship between these plants when Riken faced
disruptions. Epson Atmix, a supplier of high-performing metal powder,
suffered the impacts of the Great East Japan Earthquake in 2011.
Objective of article
The purpose of this paper is to examine how the Japanese firms who make
customized goods respond to supply chain failure caused by natural
disaster because Japan is prone to natural disasters like frequent earth
quakes which could results in stoppage of supply, and shows the process
and problem to build virtual dual sourcing with relation to product/process
architecture which combats this problem. It examines how a firm making
such products can fulfill order deliveries in disruptive situations.

Literature Review
The manufacturing process of any organization is halted by certain
unpredictable events like parts shortages, the need for changes to product
design, manufacturing stoppages and logistics breakdowns. In supply
chain, there are two kinds of risks that are identified; daily operational
uncertainty with respect to quality, cost, and delivery and disruptions owing
to natural disasters or unexpected incidents. In this case, the temporary
providers of parts do not work because the design and nature of products,
such as product complexity, uniqueness and customization vs.
standardization are crucial variables around which the supply chain is
created. The manufacturing methods and processes of a disrupted item or
process constrains the range of responses to supply chain disasters.

Adding more buffer inventories or copying production lines is not practical

from the point of view of daily competition. The inventories could pose a
challenge because of uncertainty of demand. On the other hand, building a
second production line is not also feasible for firms because it requires
time, investment and massive skill set to make it from scratch which is not
possible in competitive marketplace.

According to recent studies, information visibility is important for supply

chain management. Rather than physically duplicating critical design
information in the form of production equipment, the firms may retain the
backup design information electronically or virtually, which may be called
“virtual dual tooling”. In terms of physically duplicating critical production
lines as a whole, they may build capability for quickly restoring the design
information either to the damaged process or an alternate production line,
which may be called “virtual dual sourcing”. This all became possible by
using information technology, information technology (IT) can provide
effective support for responses to supply chain disruptions.

Virtual dual sourcing is defined as maintaining supply at a satisfactory level

for the market without regularly maintaining two or more similar production
lines or other physical equipment.

The key here is to choose carefully between two options: process

restoration on the spot whenever there is time or the emergency transfer of
critical design information to the backup production line until the damaged
line is restored.

Result
The main finding of the research is that visualizing design information of
product is important for recovery of supply chain disruption, because it
enables them to recover the damaged production site or building the new
facility entirely from information of the previous design. Balancing
contingent activity and competitiveness is important for firms and building
“virtual dual sourcing” system is one of the effective ways of business
continuity plans (BCP). In which the firm facing supply chain disruptions
caused by a disaster carefully choose either to quickly recover a damaged
line or transfer critical design information to a substitute line.