Category Archives: Japan

It’s Time For a Resurgence of Keiretsu!

Keiretsu, which can be briefly described as a long continual business relationship, in one way or another, has been a significant force in the Japanese economy for over four decades and, despite its long and varied history, criticisms, the Structural Impediments Initiative, and economic downturns, is still a strong foundation for many supply chain relationships in Japan. But now it needs to be the foundation for supply chain relationships the world over.

Twenty years ago we were in a period of (rising) globalization. Opening markets with the (first) cold war behind us. Limited, contained, conflicts. Relatively stable fuel prices. Piracy (off the Ivory Coast) was being curbed. And with the introduction of modern e-Sourcing and e-Procurement tools, it was easier by the day to invite more (and more) suppliers to events, to swap them out on a whim for (semi-)commodities, and keep supply lines fluid.

Relationships went on the decline for all but the most strategic suppliers because they weren’t necessary. But that was then, this is now.

Now we have anti-globalization and isolationism. Sanctions and closing markets. Escalating conflicts and closures of seas, straits, and critical shipping lanes. Rising and unpredictable fuel prices. A resurgence of piracy. Suppliers failing as a result of a myriad of tariffs, trade wars, border closings, shipping lanes, etc. Carriers failing as a result of rapid rising in fuel prices, insurance, increased theft, seizures, and blockades.

Suppliers who can actually fulfill your orders that you can actually receive products from that were once a dime a dozen to add to the RFP are now few and far between.

That means, now, more than anything, with risk and volatility increasing by the day, relationships matter again. Relationships that are:

  • long term: to create economic efficiencies that can help both parties survive the economic storm
  • knowledge sharing: workforce and even executives
  • business sharing: both parties buy from each other when possible and introduce throughout their partner networks
  • stock sharing: of the financial or physical variety — that reinforces each partner’s financial status when relevant or ensures security of cross-supply when stock-outs must be avoided
  • mutually beneficial asymmetrical trade: that works best for both parties

And relationships that can:

  • move low-value-add production to subsidiaries
  • ensure continuous high quality production capability to avoid excess production & consumer problems
  • improve risk management, especially with regards to variable or uncertain demand
  • ensure increased sales mean a corresponding increase for subsidiaries that are essential to the parent company’s survival
  • prevent critical confidential IP and technological information from being disclosed to short-term suppliers that may not be so obliged to keep it in the future, despite agreements

Which can help keep your supply chains running smooth in these troubled times.

the doctor’s Top 10 Mega Regions for Supply Management COEs (Where Should Your Supply Management Organization be Located? Part IV)

Our first post in this series began the discussion of where a better-than-average Supply Management (SM) organization on the path to becoming a world-class Supply Management organization should locate its new Centre of Excellence (COE) for its new centre-led Supply Management organization. We discussed the traditional factors of customer proximity, supplier proximity, business incentives, infrastructure, and the local talent pool and ended up demonstrating that the only thing that really matters in the end is the local talent pool. (This is because it is the people, not the process or the technology, that ultimately identify and drive the results.) Our second post discussed what type of talent you were looking for and where they were likely to be found. We concluded that you were definitely restricted to major urban areas, but did not identify which particular urban areas are likely to contain the talent your organization needs. Then, in our last post, where we dived into the findings of Professor Richard Florida, as chronicled in Who’s Your City, we illustrated that your new Supply Management COE should be in one of the top 40 mega regions, and a mega region with a strong innovation focus and a lot of open minded talent. We then indicated that, if you intended to be North America based, that you should be focussing on one of the following five mega-regions: the Boston-New York-Washington (D.C.) corridor in the Northeast; Miami and southern Florida in the Southeast; the Houston, Dallas, and Austin triangle in Texas; the San Francisco Bay Area down to LA on the West Coast; and the Portland-Seattle-Vancouver corridor on the West Coast. But kind of left you hanging if you were looking for a global SM COE outside of North America.

So, today, the doctor brings you his top 10 Mega Regions for Supply Management COEs, culled from the list of the 40 Mega Regions based upon North America data, cultural analysis, and emerging or current trends.

Rank Mega-Region Economic Clout Major Cities Rationale
10 The Rio de Janeiro to Sao Paulo corridor 230 Billion Rio de Janeiro, São José dos Campos, Sao paulo, São Bernardo do Campo Culture, fashion, finance, and the centre of the emerging South American Economy, lead by Brazil (but followed by Colombia and Argentina).
9 The Dallas Triangle 400 Billion + Dallas, Austin, Houston Finance, Oil, easy access to the Gulf of Mexico, and a good old fashioned “don’t mess with” attitude.
8 Greater Paris 380 Billion Paris, Versailles Culture, fashion, architecture, and a strange attractor for top talent across Europe and the Americas.
7 The Greater Seoul Region 500 Billion Seoul, Incheon, Ansan, Hwaseong, Suwon The economic power-house of South Korea and an economic powerhouse of Asia with a new generation culture that, unlike their predecessors, is (openly) embracing western styles of business, fashion, and life and that is the most willing of all of the Asian nations to take risks (which are often necessary for true creativity and innovation).
6 The Frankfurt-Gärtringen Corridor 630 Billion Frankfurt, Darmstadt, Mannheim, Heidelberg, Stuttgart, Cärtringen The Frankfurt stock exchange, renewable energy, and German engineering!
5 The California Coast 1280 Billion San Francisco, Sacramento, Oakland, San Jose, Los Angeles, Long Beach, San Diego Fashion, Entertainment, Technology, a global innovation leader, and home to the largest ports on the West Coast.
4 London – Leeds – Chester 1200 Billion London, Northhampton, Leicester, Nottingham, Leeds, Manchester, Chester, Birmingham Not only do we have (one of) the major financial, fashion, and trade centre(s) of Europe in London, but we also have the home of the Commonwealth. The UK may have been overtaken by the US in the final years of the 19th century in GDP production, but it is still in the top 20 and will always be of prominent importance.
3 Greater Tokyo 2500 Billion Tokyo The world’s largest mega-region in terms of economic clout, Greater Tokyo cannot be ignored. And while the Japanese are typically wary of uncertainty and risk, unwilling to commit to deadlines, very orderly in business, extremely respectful of hierarchy, very shy, and extremely respective of face, Tokyo is an exception. The younger generation have adopted a lot of western values, have no problem relating to the west, and are even willing to behave like outsiders in their soto groups. It’s also close to other major centres (and mega regions) in Asia.
2 Amsterdam – Brussels – Antwerp 1500 Billion Amsterdam, Rotterdam, Brussels, Antwerp The world’s fourth largest mega-region in terms of economic clout, one of the most open and advanced regions in Europe in terms of broadband penetration and clean technology, and close proximity to the UK and Germany, two European powerhouses.
1 Boston – New York – Washington Corridor 2300 Billion Boston, Hartford, New York, Philadelphia, Baltimore, Washington As the world’s second largest mega-region in terms of economic clout, the centre of the North American finance and fashion industries, and the nation’s capital, there is serious clout and talent readily available here.

Do You Know What Disaster Will Strike You Next?

Of course you don’t, but you can calculate the risks of one disaster vs. another and one site vs. another with some simple research into natural disasters.

Earthquakes
Earthquakes are more likely near the edges of tectonic plates than they are in the interior, especially if the plates are moving together and pushing on each other (and there is a history of earthquakes and activity). You can quickly identify areas at high risk by looking at a tectonic map, such as the one over on ThinkQuest. One quickly sees that high risk areas are the west coast of North and South America, South East Asia, Japan, and the island domains north of Australia, as per the Global Seismic Hazard Map over on Countdown.org.

Volcanos
You can get a list of volcano activity reports from the Smithsonian Institute which maintains a USGS Weekly Volcanic Activity Report. Most are usually in the Ring of Fire, which encompasses the high-risk earthquake zone around the Pacific. GeoCodeZip.com Google maps them for easy viewing.

Tsunamis
Coastal areas near sesimic hazard (earthquake) zones in the oceans are at the greatest risk of Tsunamis, which tend to build up in power and force as they approach shallow water and land. This says that some of the riskiest areas are on the Ring of Fire in western North and South America, Japan, and south-east Eurasia in the island domains North of Australia. More information on Tsunami Risk Zones can be found over on the International Tsunami Information Center.

Hurricanes
The greatest risk centers for hurricanes are coastal areas near the equator where hurricanes are normally a problem. The east coast of the US is particularly susceptible to hurricanes. The Global Weather Oscillations site specializes in in hurricane risk probability zone forecasts for the US and the risk zones for the coming year can be found on the Global Weather Cycles web site. The National Weather Service tracks the 10 global hot zones over on the National Hurricane Center site and a review of historical data will tell you how risky a certain area is.

Tornados
Tornados can occur anywhere in the world (including Antarctica, although this is the one continent where a tornado has not been documented) when the atmospheric conditions are exactly right. However, the most at risk zones are the middle latitudes between about 30 degrees and 50 degrees North or South where cold polar air meets warmer subtropical air and generates convective precipitation along the collision boundaries. As a result, taking weather patterns into account, the most at risk areas are the United States, western Europe, South Africa, the eastern and western coasts of Australia, New Zealand, the eastern and western borders of China, the eastern coast of Argentina, Japan, South Korea, and the Philippines. Good information on tornado climatology as well as a great map of global risk zones is found over on the National Climatic Data Center site.

Ice Storms
Blizzards can be bad, but generally don’t do much in the way of lasting damage. Ice storms, on the other hand, can do severe damage to infrastructure on a wide scale by downing power lines, and grids, damaging structures from the sheer weight of the ice, and even taking down trees. The most at risk areas tend to be Canada, the US, the UK, and most of Northern Europe and Russia.

Floods
Floods are not limited to the coastal variety, and can happen anytime the water level rises too quickly. Thus, in addition to worrying about flooding in coastal areas as a result of a tropical storm, hurricane, tsunami, or storm surge (tropical cyclone), flooding inland can occur from intense thunderstorms, sustained rainfall, or rapid snow melt. Thus, all of the coastal areas identified in your hurricane and tsunami risk lists are at risk at flooding plus any area with a history of flash floods, sustained rainfall (like they get in India during Monsoon season), or rapid snow melt (in Northern Canada) are at risk of floods.

Wild Fires
Wild Fires can occur on any continent at any time whenever the conditions are right and are likely to follow heat waves, droughts, and cyclical climate changes (such as El Nino) and high-pressure ridges. They are most common in climates that are sufficiently moist to allow regular vegetation growth but where extended dry, hot periods are also present. This keep parts of Africa, South America, South Eastern Eurasia, and Eastern Europe at high risk, but parts of the Southern US, Mexico, India, and Australia also enter the high risk zone on a regular basis.

In other words, there’s no excuse for not knowing which suppliers are at risk of which natural disasters and how great that risk is. (Some historical research will give you frequency of disasters in the area and a local climate institute likely has probabilities of occurrence for the event, such as once every twenty years.) So while it may be hard to say how risky your supply chain is from a holistic perspective (as some financial or political risks may not be identifiable until the last minute), it should not be hard to say how risky it is from a natural disaster perspective.

Interpreting Japanese Communication

Editor’s Note: Today’s post is from Dick Locke, Sourcing Innovation’s resident expert on International Sourcing and Procurement. (His previous guest posts are still archived.)

Note to readers of the Purchasing Certification Blog: most of this post appeared in this morning’s post on “Japan’s Supply Chain Recovery: Interpreting The Estimates”.

I’ve been watching and reading the various sources of information coming out of Japan and trying to interpret it after filtering it through the cultural differences that can impede communication and sometimes action. I see one apparent difference and am concerned about another potential difference.

One consistent complaint is that the various spokespeople in Japan seem to be understating the seriousness of the radiation hazards. It’s very likely that this is due to a cultural difference that strongly affects communication. The difference goes by various names, and I call it a “need for harmony”. It could also be called a “low score on a frankness scale”. A strong cultural need for harmony can make it difficult for people in that culture to deliver bad news directly. They will often resort to various expressions such as the Japanese “honto ni muzukashii“. That literally means “truly difficult” in English. However, people in Japan will correctly take it to be a very frank statement that something will not happen.

A classic example is in the Japanese Emperor’s speech to the nation announcing the surrender at the end of World War II. It included “the war situation has developed not necessarily to Japan’s advantage”. This was after two nuclear bombs and a total collapse of manufacturing and logistics.

While Japan is especially strong in this need for harmony, it’s a fairly widespread characteristic among Asian and some Latin American cultures. Keep in mind that Japanese may be perceiving the messages differently than Westerners.

The second difference is just a concern at this point. There’s a well known cultural difference called “Uncertainty Avoidance”. It influences the willingness of people to make decisions without being sure of the outcome. It makes people much more comfortable with routine situations and incremental improvements than they are with dealing with the unexpected. While Japan is extremely high on the “Uncertainty Avoidance” scale, I really haven’t seen any indication of lack of creativity in solving the problems.

Now, for those of you who are trying to gauge potential supply disruptions:

If you can manage face to face meetings that’s clearly the best way to handle it. You’ll have to judge the danger of traveling to a particular Japanese supplier of course. Second best is video conferencing, so you can watch facial expressions and body language. Third best is telephone. In all cases, send some questions ahead of time by email. In questioning, be sure to probe assurances of continuing supply more deeply than you would with people from a frank culture such as Germany or the US. It’s best to ask open ended questions such as “how are the roads to the airport” or “how are your suppliers in the affected area” than questions that can be answered with a simple yes or no such as “is everything OK”.

You should also keep in mind that Japanese communicators are usually not being dishonest when they seem overly reassuring. It’s just that their culture makes it difficult to say some things too directly and they are seeing themselves as courteous.

Dick Locke, Global Procurement Group and Global Supply Training.

Cultural Intelligence VII: Japan

This series is edited by Dick Locke, SI’s resident expert on International Trade, author of Global Supply Management — A Guide to International Procurement (which was the definitive guide for almost a decade), and President of the Global Procurement Group and Global Supply Training which regularly gives seminars on International Trade and working with International Cultures.

As highlighted in last year’s post on Overcoming Cultural Differences in International Trade with Japan, the Japanese are very different than anyone else. They were historically isolated, crowded by geography, and their language is pretty much its own language group, despite the fact that they have three writing systems (kanji, hiragana, and katakana). Furthermore, the beginning of Tokogawa rule in 1603 marked the beginning of 250 years of almost complete isolation, until 1853 when Commodore Matthew Perry arrived.

With respect to Locke’s seven key cultural differences (first outlined as six in his classic text on Global Supply Management), power distance is present, as there is a defined hierarchy and no decision can be made without approval from the top, but the power distance is not as great as one might think, as an approval will normally not be granted until a consensus decision has been reached at the lower levels and pushed up. Time is fluid. They are punctual to a tee (monochronic) but will never commit to a decision date (polychronic). The buyer always outranks the seller, but negotiations will continue only so long as their rules on social and business conduct are followed. Harmony is a fundamental foundation of their web society and face must always be maintained. Despite the appearances put on by the younger generation in the big cities (like Tokyo and Osaka), individuality is actually quite low and privacy is highly valued. Finally, uncertainty is to be avoided at all costs.

With respect to verbal communication, they are very indirect, even though, like the Chinese, they will ask you very blunt personal questions in order to determine how to best maintain harmony with you. Communications and negotiations should remain calm and soft, and you should never raise your voice.

With respect to non-verbal communication, your body language conveys your respect, and you should learn how to bow, stand, and even sit (suwari and seiza) appropriately. Despite the large number of gestures used in Japan (which you will not understand for quite some time), your gestures, facial expressions (as smiling and frowning have multiple meanings), and emotions should be reserved and your body position should mirror those around you. You should maintain as much distance as can be afforded, and reduce eye contact which is seen as disrespectful, especially to someone who is seen as your senior. Don’t touch in public, and especially don’t touch someone of the opposite sex. (Or, as indicated in Part II, you might end up with a new girlfriend or boyfriend.)

You should take notes in meetings (as it shows seriousness). It may take several meetings before you get down to business, as they will want to get to know you first. With respect to negotiations, your best offer is expected up front, and concessions are rare. Business is often discussed over meals, but you must wait for them to initiate. At a meal, do not empty your glass or plate as it is a signal to refill it, but do empty your rice bowl, as leaving a small amount is a signal that you want a refill.

Finally, the business card carries a pre-eminent importance in Japan, which has an elaborate custom around giving and receiving, and you should carry no less than a hundred for every week you plan to be in the country (with an English side and a Japanese side).

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