The ‘long tail’ aftermath of a supply chain disruption – Takata inflators recall

In 2008, Takata Corp., a Japan-based manufacturer of automobile airbag inflators, issued a recall that would go on to become the largest auto-related recall in U.S. history. According to the Associated Press, approximately 100 million inflators worldwide have been recalled. Almost a decade has passed since the recall was first announced, but the disruption is not over. Supply chain managers may have responded to and moved past the initial recall, but the long tail aftermath of the Takata inflators recall continues to bring disruptions and uncertainty to the whole industry.

 

Takata inflators recall

Takata inflators recall

 

Takata inflators recall: The ‘Long Tail’ aftermath

Just this week we got an update about the status of Takata’s Japanese-based operation. There is a case working its way through the Japanese legal system that will decide whether the courts or private investors are given the authority to restructure the company so that it is able to contribute to and recover from the costs of the recall – yet another (extremely) long tail. In the U.S., bankruptcy filings are being considered for their American division.

These examples of ongoing uncertainty don’t even touch on the impact of the criminal charges and settlement fines (which could approach $1B) expected to follow Takata’s guilty plea in U.S. Federal court.

 

A problem for others to solve

From a business continuity perspective, the problem of the Takata inflators has become a problem for others to solve. Automakers are working with the National Transportation Safety Board (NTSB) to manage the recall and replacement process, but Takata is in no operational state to supply the new components themselves. Even if they were able to manufacture the replacements, many consumers (and auto manufacturers for that matter) have lost faith in Takata’s product quality and management ethics. As a result, other parts manufacturers have been called upon to produce replacement inflators that meet safety requirements.

Unfortunately, because the Takata inflators were used in over 5.7M vehicles from 19 manufacturers for over 15 years, meeting demand for replacement parts is not as simple as mass producing one design in high volumes. Without the recall, there would be no reason to have that kind of inventory on hand – a shortage that has created a secondary supply chain challenge affecting manufacturers and consumers alike.

 

Takata inflators recall: Two options for replacing

The options for replacing the recalled inflators are:

1. Replace with parts from alternate manufacturers
2. Replace the recalled parts with new Takata inflators

Neither of these options are ideal. There are wait times associated with some of the alternate manufactured parts, even when the service capacity is available to install them. Takata replacements are immediately available in some cases, but manufacturers such as Ford are considering this a temporary replacement as the new parts are the same as the ones covered by the recall. The only reason they are preferable to the ones already in vehicles is because they have not been exposed to weather conditions such as humidity, a factor that increases the likelihood of malfunction.

A supply chain disruption such as a recall, especially one that affects a global industry like auto manufacturing is not one event, but a catalyst for a whole series of changes and reactions that can last years or even decades.

Not only does the recall and replacement need to be managed for vehicles already on the road, it also creates an unexpected source of demand that must be sourced from new suppliers. New cars – either sitting on dealer lots or working their way down the assembly line – have to have their parts switched out for alternatives not affected by the recall.

This effort competes with the need to repair used cars, a critical effort as it is their drivers – more than Takata or the auto manufacturers – that will determine the full, long term impact of the disruption by either rewarding companies with their loyalty or not. This entire supply chain is going through a transformative disruption, one that will continue to play out for years to come.

 

Have you also read our blog post about the Disruption at Volkswagen production plants? Another example how supply chain disruptions can create a bottleneck in production.

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Kelly Barner is the Owner and Editor of Buyers Meeting Point, LLC. Kelly has a unique perspective on procurement from her experience on both sides of the negotiation desk. She has led projects involving members of procurement, supplier and purchasing teams. She has practical skills in strategic sourcing program design and management, opportunity assessment, knowledge management, and custom taxonomy design and implementation.

Kelly has her MBA from Babson College as well as an MS in Library and Information Science from Simmons College. She was recognized as a Supply & Demand Chain Executive ‘Pro to Know’ every year from 2012-2016. In 2013 Kelly was also recognized as one of S&DCE’s 28 ‘Top Female Supply Chain Executives.’ In 2014, Kelly co-authored Supply Market Intelligence for Procurement Professionals: Research, Process, and Resources and in 2016 she released her second co-authored title, Procurement at a Crossroads: Career Impacting Insights into a Rapidly Changing Industry.


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