Japanese Supply Chain Relationships in Recession

The remarkable nature of Japan’s supply chain relationships has been identified as a significant factor in its industrial success, especially in the automotive and electronics sectors. Yet, Japanese companies do not recognise the term ‘supply chain management’. For four decades Japan’s industrial giants developed sourcing strategies based on highly-pressured, customer-dominated supply relationships in which sub-contractors enjoyed the benefits of the success of their customers at the expense of yielding their autonomy. In 1991, the Japanese economy plunged into deep recession and has yet to recover. Large corporations now appear vulnerable and almost all Japan’s banks are technically insolvent. This article explains the ways in which recession has affected the supply chain relationships in Japan and the domestic and international sourcing strategies that shape them. Japanese industrial customers are now putting increased pressure on their suppliers to provide technical solutions and to develop links with other customers for the first time. The sub-structures of the keiretsu appear to be giving way to open competition with ‘parent’ firms selling equity in subsidiaries. Profound changes appear to be underway in Japanese industrial sourcing strategies—suppliers can no longer rely on retaining business simply by obedience and hard work. Instead, they face an open, fiercely competitive environment—at home and abroad. In this new order, Japanese suppliers are developing new competitive technical and commercial capabilities, enabling their Japanese industrial customers to concentrate on real-time, market-driven configuration of products, without needing to hold stocks in their supply chains and distribution channels. Meanwhile, Japan is seeking to re-establish its position of leading player in East Asia.