Case study – December 2011
© IGD 2011
Disaster recovery after Japan’s ‘3/11’
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On March 11th, 2011, an earthquake measuring magnitude 9, Japan’s largest ever
recorded earthquake struck, off the coast of Sanriku in Miyagi prefecture
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This earthquake produced tremors across an extensive area from the Tohoku
region all the way to Kanto region and triggered a massive tsunami in its wake
creating extensive damage
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AEON, Japan’s largest multi-format retailer, was forced to close 65% of the
449 stores in Tohoku region
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Although physical infrastructure was important for a quick recovery, close
collaboration with suppliers was critical
This presentation is an example of how beverage
manufacturers and retailers in Japan, through close
collaboration, successfully responded to market
needs within the bottled products category in times
of adversity.
IGD would like to acknowledge the contribution of
AEON Global SCM Co. Ltd and Kirin Beverage
company in developing this case study
Source: www.japan-guide.com, Aeon, 2011
AEON’s Sendai food
processing centre
© IGD 2011
About the businesses
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The Kirin Group is a leading food and beverage
company in the Asia-Oceania region in a
diverse range of businesses
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The US$ 28 billion (revenue) group has 15
manufacturing locations in Japan
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The group’s product portfolio in beverages
range from beer, chu-hi drinks, shochu, whisky,
and includes branded liquors produced by
Diageo and wines by Mercian Corporation
AEON is Japan’s leading retail group which consists of
around 168 companies in Japan and overseas, structured
round the core holding company AEON Co Ltd.
About 70% of its US$ 57 billion revenue is from retail
store operations
AEON Global SCM Co. oversees group-wide distribution
and inventory management using its own distribution
network across Japan for AEON
Source: IGD Research, 2011
© IGD 2011
Disaster impact on AEON’s supply chain
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The scale of disaster meant that multiple functions were
disrupted. For example,
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Distribution centre in Tohoku, northern Japan was damaged
Regional DCs in eastern Japan were also damaged
Kanto RDC located near Tokyo, pallet stacking frames and the
automated storage and retrieval systems were among the many
assets that were damaged
In the Tokyo bay area, liquefaction of land caused many problems
This meant that products could not be received or shipped from
these DCs as they were ‘blacked out’
•
Right after the earthquake, about 30% of supply chain capacity
was lost. Further, many roads in Tohoku region were cut-off
and there was a shortage of fuel and trucks
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A decision to shift the logistics network the day-after the
disaster struck meant that DCs in western Japan were
operating at over 200% of their capacity. In addition,
temporary DCs in Sendai city and Ibaraki prefecture (200km
from Tohoku) were set up
Source: IGD Research, AEON, 2011
© IGD 2011
Disaster impact on Kirin’s supply chain
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Two of Kirin’s plants and other facilities were
damaged in the earthquake / tsunami
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Major damage included damage to facilities,
buildings, and product stocks at the Sendai plant
and Toride plant
Chitose
Sendai
Kobe
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In addition to the collapse of beer storage tanks,
the packaging equipment and warehouses were
inundated and the stock flowed out in the Sendai
plant
Okoyama
Siga
Gotemba
Toride
Fukuoka
Nagoya
Yokohoma
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Automated warehouses in the Tokyo metropolitan area and Toride were run down
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Material supplies such as cans and PET bottle caps were affected as manufacturers of these
materials were badly damaged as a result of the disaster
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Loss related to the earthquake is forecast to be less than 20 billion yen (US$ 257 million)
Source: IGD Research, www.kirinholdings.co.jp
© IGD 2011
Scale of the problem
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Retail sales in Japan plunged in March
2011 as consumers stayed away from
shops in the wake of the earthquake
and tsunami, registering a year-onyear 8.5% drop, according to the
Japanese trade industry
(Source: www.bbc.co.uk)
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In addition to affecting store opening
hours, demand and supply of everyday
products such as water, milk, canned
tuna and paper products were affected
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There was a nationwide panic over a shortage of bottled water. AEON’s weekly sales of bottled
water was up 250% in the first week and 375% in the second week after the disaster, as
shoppers resorted to ‘panic buying’
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Regulation on bottled water imports were relaxed during the disaster (bottled water could be
sold in Japan without labels written in Japanese only during this time) and AEON’s import of
bottled water from South Korea, Canada and France had to be ramped up
© IGD 2011
Bottled water – creating new priorities and
industry solutions
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The industry had to ‘pull together’ when a manufacturer of
PET bottle caps in the area was seriously damaged and a
shortage of bottle caps caused severe shortage of plastic bottle
products
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Retailers including AEON and beverage manufacturers such as
Kirin, Suntory, Itoen, Asahi and Coca-Cola Japan shared the
target to increase the amount of beverage supply to consumers
and co-operated with each other
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For example, having shifted its logistics network to the nearby
DCs, Kirin Beverage company delivered their products to
AEON’s temporary depot, and these products were delivered
to AEON stores by AEON’s temporary supply chain network
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AEON’s private brand suppliers followed the actions, which
increased the amount of beverage production
Before the disaster
280mlPET500mｌ
PET
Source: IGD Research, Kirin holdings, 2011
2LPET
2LPET
© IGD 2011
An urgent need to respond
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Japan Soft Drink Association decided to request the use of the same white plastic bottle caps
for all soft drink brands on April 13th, 2011
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Plastic bottle caps manufacturers located in western Japan were not damaged by the
earthquake; however, it was difficult to cover up the supply of damaged suppliers in northern
Japan by using caps in different colors and different shapes
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Beverage manufacturers including Kirin Beverage company
took the lead as standardised plastic bottle caps improved
the efficiency in production, which increased the amount of
production
After the disaster
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In order to maximize the production capacity, beverage
manufactures and the trade association in Japan released a
newsletter to inform consumers about the situation
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This was an integral part of the road to recovery both for
AEON and its suppliers
280ml
PET
500ml
PET
2L
PET
2L
PET
© IGD 2011
Progress in the changeover to white bottle caps
Stage 1
“It was thanks to our close relationship with top
national brand manufacturers and our private brand
and global sourcing capabilities that we were able to
provide bottled water even in the disaster time”
March, 2011
Kirin decided to use the same caps for all brands inside the
company
White colour & Company Logo.
Midori Yamaguchi, General Manager,
AEON Global SCM Co. Ltd.
Stage 2
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In the early stages, each beverage
manufacturer acted independently
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Subsequently, the Soft Drink Association
(JSDA) announced the decision to
consolidate all caps of plastic bottles which
is designed with some various sizes, colours
and prints by manufacturers to a white
solid colour one
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Through this unification the supply capacity
of caps increased around 10 percent
April, 2011
Beverage manufactures in Japan decided to use the same
white bottle caps without company name/logo.
Stage 3
September, 2011
Following the recovery of the bottle cap manufacturers, each
beverage manufacture is going back to the original bottle caps
for each brand; with original colours and logos.
Image source: www.reuters.com
© IGD 2011
Taking the consumer along in the journey
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AEON’s single biggest priority during the disaster
recovery phase was to maximise the supply capacity, and
it was important even in this hour of need that
consumers aligned with their thinking
“Retail is a people business and communities rely heavily
on us”
Midori Yamaguchi, General Manager,
AEON Global SCM Co. Ltd.
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AEON tried to maximise production capacity of its
private label products, and reorganised procurement
and supply of more than 5,000 items sold under its
Topvalu label to respond to the immediate needs
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By working with suppliers, AEON used plastic caps for
the products such as seasonings in different colours from
the original colour/design. Pack design was simplified
and the number of SKUs reduced, which maximised the
production efficiency/capacity.
On explaining the need for product design simplification
to customers, customers understood the situation and
agreed to the use of white bottle caps for all brands
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According to a survey done by Nikkei Design,
most male consumers answered that they do
not care about the colour of the caps, and 32.4%
of female consumers said that they prefer the
white bottle caps, because they look clean
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About Coca-cola, consumers have strong images
on red bottle caps and answered, “Coca-cola
with a white bottle cap does not look tasty. The
design does not look good with the Coca-cola
label and the white cap.” (Source: Nikkei Design
June. 2011 issue)
© IGD 2011
Critical success factors
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Building collaborative
practices into everyday
actions
Understanding the
benefits of business
continuity planning and
role of collaboration
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Leadership qualities
across the organisation
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Acting decisively and
‘beyond training manuals
to serve customers’
Partnership
Leadership
“Our strong supply chain partnerships made it possible
for us to keep our stores open and to keep providing
our customers with products of daily necessities even
during the disaster time”
Responsibility
People power
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Communication, at the
right time
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Problem solution
approach
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High ethical standards to
earn the customer’s trust
at all times
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Colleague empowerment
to make the right
judgement
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Deep understanding of
and demonstration of
shared values, everyday
“Keeping our stores open and providing products to our
customer is our social responsibility. This is the role of
supply chain and the supply chain is formed of many
partners”
Midori Yamaguchi, General Manager, AEON Global SCM Co. Ltd.
Source: IGD Research, AEON, 2011
© IGD 2011
For further insight
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IGD would like to acknowledge the help of AEON Global SCM
Co. Ltd. and Kirin Beverage company in developing this case
study
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To gain further insight on best practice supply chain
collaboration case studies from across the world, click here
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For a detailed understanding of leading retailers’ supply chain
strategies, click here
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For all the latest news and updates on how retailers and
manufacturers are improving their supply chain’s strategy and
planning , click here
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For any other information, please email Nick Downing at
nick.downing@igd.com or call him on +44 (0)7730 822274
© IGD 2011