After Japan’s Earthquake, the Implications of Reconstructing Food Logistics in Asia

Earthquake's impact on Japan

Earthquake's impact on Japan

The earthquake and tsunami of March 11th, 2011 brought immense tragedy for Japan. Even worse, it has been a big shock socially and economically as people had to face contamination with radioactivity. Then, it negatively affected the global manufacturing network as well as financial markets. The damage is expected to amount for 16-25 BJPY which is much greater than the harm that resulted from the earthquake in Kobe in 1995. GDP this year is expected to decrease by 1.3-1.5% due to destroyed manufacturing equipment and shortages of supplies.

Peculiar Concentration of F&B Producers

This incident, and the compounded effects of an earthquake, a tsunami and radioactivity, shows us how much the corporate world depend on Japan. The country has been the main supplier for cutting-edge sub products which are used for producing finished goods in Asia as well as in many other countries. Therefore, globally acting companies are focussing their efforts on the reconstruction of manufacturing equipment in Japan. The Food and Beverage (F&B) industry provided a different picture; it tended to export less than, say, the electronics industry, thus having a weaker impact on other economies. But regardless, the structure of Japan’s F&B industry was the main source of concern, especially after the earthquake.

There are limits to the structure of the F&B logistics chain; dairy and food production equipment is concentrated in a specific area of the country, and at the same time imports are limited due to strict regulations. This prevents a smooth continuation of supply after a disaster such as this major earthquake. For example, 40% of milk products in Japan were affected by Fukushima, with the radioactivity forcing higher imports from Korea and other Asian countries. Accordingly, F&B industry-related companies started to move away from domestic-centered sourcing strategies, replacing them with more globally distributed ones. Consequently, F&B companies put more weight on sourcing from outside Japan.

Expect More Facilities Outside Japan

Because of obvious restrictions on distance and time in some parts of the F&B industry, targeting import countries can be limited. It is most likely that imports from Korea and China will increase in the near future. This would lead to the creation of additional logistics centers in countries near Japan; many Japanese companies are in the process of evaluating the construction of a cold storage facility in Korea, for example.

Catching up with increasing demand of up‐to‐date F&B logistic chain in Korea, fresh food and automated warehouse centers need to be constructed to improve existing manual warehouse systems for making inroads internationally. The key considerations for automated cold- and deep-freeze-centers are as follows:

  • more capacities for materials storage
  • more raw materials for food or instant food
  • more deliveries to be feasible within a shorter time, and
  • the necessity to preserve the ingredients of raw materials used for packaged food.

 

    Integrated cold chain in deep-freeze

    Integrated cold chain in deep-freeze

      

Fukushima Will Change Paradigm

The automation of logistics centers provides opportunities for efficient manufacturing and delivery. Moreover, it increases throughput without having to build a new facility. Finally, it enables a faster execution for distributors by cutting down picking and delivery times. As a result, extra investment in equipment eventually leads to savings in resources and operational costs. Therefore, automated solutions are likely to lead to a major success in the changing Japanese logistics paradigm caused by the earthquake.

4 Responses to After Japan’s Earthquake, the Implications of Reconstructing Food Logistics in Asia

  1. Youngune Lee says:

    Risk is another name of opportunity. The crisis will also put a good business chance in front of Swisslog.Thanks for your insightful article!

    • Kyun Wi says:

      Thanks for your comment. No doubt, the intralogistics landscape after Fukushima will look quite different. The challenge now is to come up with solutions for warehousing and distribution that meet the new requirements.

  2. Hyungsup Kim says:

    Thanks for the good report about Japan’s F&B Logistic.
    The number of nuclear-family households is increasing and they are seeking simplicity on eating.
    So, they will consume pre-packaged food more which must be handled in cold chain.

    • Kyun Wi says:

      Many people are focusing on food safety. So, in Korea, there is a growing need to automate a cool storage for keeping raw material and for production as well as distribution of products. In a few years we will see which solutions have prevailed.

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