Osaka - Sunday, May 22, 2011
In a popular morning TV programme this morning, there was an interesting short discussion on energy policy of Japan, which started with the excerpt of the recent comment of Prime Minister Naoto Kan about “separation of power generation and power transmission”.
The basic idea agreed by the panelists was that Japan is at the verge of change in its energy policy, which requires paradigm shift in the way of thinking, and that vision based on solid philosophy delivered effectively and clearly by the Prime Minister.
1. How has electricity power business in Japan been until today?
Currently, electricity power companies such as Tokyo/Tohoku Electric Power Co., Inc. (TEPCO) have been responsible for both generation and transmission of electricity/power, based on the concept of “stable electricity supply”. In short, it has been of centralization of power supply
Under this situation, electricity power companies allocated by regions of responsibility such as Tokyo/Kanto, Tohoku (north eastern Japan), Chubu (midlands including Aichi where Toyota is located), and Kansai (Osaka, Kyoto, Kobe etc.) have been monopolizing electricity power businesses in their region.
2. What is “separation of power generation and power transmission” and what could it mean?
It is to separate power transmission from power generation.
This means dispersion and diversification of power transmission from centralization. It is quite similar to the ongoing transformation of information by the emergence of the Internet and social media.
It can be also quite similar to what happened in capital by the financial policy change before 2000 that triggered “Financial Big Bang” and reorganization of financial industry/sector in Japan. This was due to implementation of principle of competition and market mechanism in the financial sector.
Separation of power generation and power transmission is expected to implement the same principle in the energy supply sector as well, allowing power supply companies enter the market. It could also mean individuals who generated electricity by such system as solar to provide electricity to the public.
As a result, it is quite possible that citizens would benefit from reduction in their monthly electricity fee payment.
3. Is there any country that implemented this policy with success?
Yes, there is. It is Germany.
As a result of separating power transmission from power generation, the supply of natural energy increased from 6% to 16%. And the country aims to further increase to 30% by 2015 or so.
4. What are other requirements to increase natural energy?
1) Financial support from the government
In the initial stage, support from the government, financial in particular, is required because cost of anything new to the market is extremely high. A good, easy-to-understand example is of AV product of new technology and/or format and the author would like to add the explanation of this mechanism.
For example, when first launched in the market, LCD and plasma flat panel TVs were so expensive that the general public could not afford. But with further technological innovation and others, the cost went down so it became more affordable for more people. The more people buy and use the product, the great the reduction of the price per unit due to reduction in production cost per unit.
And when it reaches a “critical mass”, the product becomes popular all of a sudden, which is usually said that when 16% of the people in the market use the product.
Financial support from the government at the initial stage could speed up the whole process in popularization of natural energy.
2) Vision, roadmap, regulations and systems set by the government
Easy-going approach would only lead to failure of natural energy popularization. Solid energy supply vision, roadmap, regulations and systems to achieve the vision. Not only Germany but all other countries that the government initiated popularization of natural energy developed and implemented them.
3) Environment to drive popularization
There may be many factors for an environment to drive popularization of natural energy. One is the recent popularization of smart grid.
5. What should happen to the nuclear power?
This is a question that provokes a hot discussion. There were interesting comments by a panelist of the TV programme, whom he said is that he is more of a person who has been initiating nuclear power.
That is that Japan is the only country that has been leveraging nuclear power for electricity use only and not for producing atomic bombs (although it is the only victim country from atomic bomb in World War II).
Japan is also a country that has engineers in this realm, and since there are many neighbouring countries that initiate nuclear power generation, Japan is expected to protect the engineers and allow/encourage them so that they can utilize their skills and know how to such countries.
6. What are the author’s final thoughts?
The author is not a specialist in this realm but from general understanding she fully understands what the panelists said and agrees, especially the comment about the nuclear power made at last as conclusion.
It might be ideal to abolish nuclear power immediately; however, it is simply not feasible to do so completely and immediately under current circumstances of power generation; i.e. balance of demand and supply of electricity. Should nuclear power be immediately abolished, serious electricity shortage would spread worldwide and not only in Japan which has been suffering from electricity shortage since March because operation of Fukushima and recently other nuclear power plants are halted.
The electricity shortage is expected to be a serious problem in summer when electricity use is at one of the peak in the year therefore the country has been making upmost efforts to overcome it by all possible means as mentioned in the previous article 15% Energy Cut without Production Cut – The Japan Disaster as well as planned blackouts in Kanto (e.g. Tokyo, Yokoyama, Chiba) in March but worldwide.
With such a reality, while Japan is expected to terminate the Fukushima nuclear power issue with help and support from around the globe while it is also expected to protect and support its nuclear power engineers and encourage them to leverage their skills and know how for “safe and appropriate use of nuclear power” globally. This is based on mutual help philosophy.
And of course, all countries and parties are expected to get together to make innovation for discovery and/or proliferation of alternative energy while saving energy for sustainability and prosperity of our planet.
2011年5月22日日曜日
2011年5月15日日曜日
15% Energy Cut without Production Cut – The Japan Disaster
Osaka - Sunday, May 15, 2011
Nikkei, Japan’s leading newspaper specialized in business and economy, reported on May 14 that parties throughout the industries are to take actions to meet the request of cutting energy use by 15% from the Japanese government and Tokyo/Tohoku Electric Power Co., Inc. The request has been discussed to reach a consensus and was officially announced on May 13.
Actions range from shift in operation days/hours and location to production transfer to implementation of energy saving equipments and systems, with the objective of fulfilling both business continuity and energy saving.
1. What request is made to companies?
With Fukushima nuclear plant issue triggered by the earthquake and tsunami that occurred on March 11, Fukushima nuclear plant has stopped its operation. This made Tokyo Electric Power Co., Inc. unable to sufficiently supply electricity to its responsibility area including key cities of economy such as Tokyo.
1) Request made to companies operating in the area responsible by Tokyo and Tohoku Electric Power
All companies operating in the area that use electricity supplied by Tokyo and Tohoku Electric Power, i.e. eastern Japan, are requested to cut electricity use by 15%.
Plants that produce electronic components used in wide a range of fields including automotive and electronics are concentrated in the area so the request has much meaning.
2) Exceptions
The Japanese government has been studying fields that are to be exceptions because electricity cut is extremely difficult in some cases, such as medical devices. There are some industries that request to be handled as exceptions and the government is currently studying what can be exceptions with extreme care and is to make final decision and announcement by the end of this month.
Examples of the cases/fields that are studied whether to be included as exceptions or not at present are as follows, all of which are those that could severely impact lives of citizens and economic activities. Related ministries and industries are requesting exceptions such as easing the target.
- hospitals
- railway during commuting hours (mornings, evenings)
- sewerage facilities
- refrigerator warehouses
- data centres
2. What actions are planned or studied by companies?
There are mainly 3 kinds of actions and initiatives planned and studied by companies.
1) Shift/change of operating days and hours, and location
(1) Shift some operating days from summer to spring and autumn and winter by Toshiba, Hitachi and Mitsubishi Heavy Industries.
(2) Change plant shut down days by nationwide automobile plants based on the policy by JAMA (Japan Automobile Manufacturers Association, Inc.) to change plant shut down days from weekends to Thursday and Friday.
(3) Operate during the Golden Week Holidays (April 29 – May 8) and instead increase number of days that plants are shut down in summer by Nikon.
(4) Implement summer time by Sony, Sumitomo Metal Industries and Aeon.
(5) Implement work from home system to cut electricity use in offices by NTT Data and Teijin.
2) Transfer of production, equipments and facilities
(1) Transfer production from eastern Japan to western Japan or overseas by Honda, Toray and JFE Steel.
(2) Transfer 30% of servers for development from eastern Japan (around Tokyo) to multiple locations in western and other parts of Japan.
3) Implement energy saving equipments and systems
(1) Replace lights to energy saving ones such as LED by JX Nippon Oil & Energy Corporation, Marubeni and Seven Eleven.
(2) Rotate showing hours of movies at cinema by Shochiku.
(3) Terminate refrigerating hours of vending machines for 5 or 6 hours a day in turn by Coca Cola and other beverage companies.
3. What action is to be taken by Panasonic that enables achieving 15% electricity cut target without changing operation days/hours or transferring production?
1) Solution: installment of sensors to monitor and control electricity use
Panasonic is to install sensors in plants in the area to monitor and control electricity use to obtain data which will be used to streamline electricity use, with the objective of maintaining productivity while achieving the electricity cut target.
2) Benefit from the solution
The solution enable the company to avoid decrease in operating days and hours and transfer of plants so the company can avoid stagnation in its economic activities. This is amazing and can be a best practice when it is estimated that with 15% electricity cut initiative 50,000 jobs will be lost and wage of employees will be cut by 0.2%, leading to reduction of GDP growth by 0.3% in 2011.
It would require total of over 100 million yen investment for this initiative but the company estimates that it can earn back the investment in 3 years. The initiative for the upcoming summer focuses on those of immediate results and improvements will be added continuously next year onwards.
3) Upcoming actions
The sensors will be installed in all 30 plants in the area that produce products such as LCD panels and LCD flat panel TVs. 20 staff members are to start installation one after the other from the week starting May 16. The company is to add analysis and simulation with their unique software to establish a system in which they can continue lean, streamlined production by plants by the end of June.
When the sensors are installed, the company will be able to monitor use of electricity, gas and water, and temperature and humidity by production lines and equipments. The company is to initiate reviewing humidity control in clean rooms, reduction in compressors and short time operation halts in addition to reduction in lights and frequent termination in power.
As a result, the company is confident that it can achieve 15% reduction in electricity use at the peak this summer from last summer and has made agreement with Tokyo and Tohoku Electric Power to be provided with total of 160,000 kW. The company has tried using the sensor in multiple plants in other parts of Japan such as Wakayama.
Resources:-
To fulfill the request from the Japanese government of cutting electricity use by 15%, companies are taking measures to achieve the target such as shift/change of working days/hours and locations, production transfer and implementation of energy saving equipments and systems. An interesting solution by Panasonic is installing sensors in plants to monitor and control electricity use that enable achieving target while avoiding economic activity stagnation by change/shift of working days/hours and production transfer.
Nikkei, Japan’s leading newspaper specialized in business and economy, reported on May 14 that parties throughout the industries are to take actions to meet the request of cutting energy use by 15% from the Japanese government and Tokyo/Tohoku Electric Power Co., Inc. The request has been discussed to reach a consensus and was officially announced on May 13.
Actions range from shift in operation days/hours and location to production transfer to implementation of energy saving equipments and systems, with the objective of fulfilling both business continuity and energy saving.
1. What request is made to companies?
With Fukushima nuclear plant issue triggered by the earthquake and tsunami that occurred on March 11, Fukushima nuclear plant has stopped its operation. This made Tokyo Electric Power Co., Inc. unable to sufficiently supply electricity to its responsibility area including key cities of economy such as Tokyo.
1) Request made to companies operating in the area responsible by Tokyo and Tohoku Electric Power
All companies operating in the area that use electricity supplied by Tokyo and Tohoku Electric Power, i.e. eastern Japan, are requested to cut electricity use by 15%.
Plants that produce electronic components used in wide a range of fields including automotive and electronics are concentrated in the area so the request has much meaning.
2) Exceptions
The Japanese government has been studying fields that are to be exceptions because electricity cut is extremely difficult in some cases, such as medical devices. There are some industries that request to be handled as exceptions and the government is currently studying what can be exceptions with extreme care and is to make final decision and announcement by the end of this month.
Examples of the cases/fields that are studied whether to be included as exceptions or not at present are as follows, all of which are those that could severely impact lives of citizens and economic activities. Related ministries and industries are requesting exceptions such as easing the target.
- hospitals
- railway during commuting hours (mornings, evenings)
- sewerage facilities
- refrigerator warehouses
- data centres
2. What actions are planned or studied by companies?
There are mainly 3 kinds of actions and initiatives planned and studied by companies.
1) Shift/change of operating days and hours, and location
(1) Shift some operating days from summer to spring and autumn and winter by Toshiba, Hitachi and Mitsubishi Heavy Industries.
(2) Change plant shut down days by nationwide automobile plants based on the policy by JAMA (Japan Automobile Manufacturers Association, Inc.) to change plant shut down days from weekends to Thursday and Friday.
(3) Operate during the Golden Week Holidays (April 29 – May 8) and instead increase number of days that plants are shut down in summer by Nikon.
(4) Implement summer time by Sony, Sumitomo Metal Industries and Aeon.
(5) Implement work from home system to cut electricity use in offices by NTT Data and Teijin.
2) Transfer of production, equipments and facilities
(1) Transfer production from eastern Japan to western Japan or overseas by Honda, Toray and JFE Steel.
(2) Transfer 30% of servers for development from eastern Japan (around Tokyo) to multiple locations in western and other parts of Japan.
3) Implement energy saving equipments and systems
(1) Replace lights to energy saving ones such as LED by JX Nippon Oil & Energy Corporation, Marubeni and Seven Eleven.
(2) Rotate showing hours of movies at cinema by Shochiku.
(3) Terminate refrigerating hours of vending machines for 5 or 6 hours a day in turn by Coca Cola and other beverage companies.
3. What action is to be taken by Panasonic that enables achieving 15% electricity cut target without changing operation days/hours or transferring production?
1) Solution: installment of sensors to monitor and control electricity use
Panasonic is to install sensors in plants in the area to monitor and control electricity use to obtain data which will be used to streamline electricity use, with the objective of maintaining productivity while achieving the electricity cut target.
2) Benefit from the solution
The solution enable the company to avoid decrease in operating days and hours and transfer of plants so the company can avoid stagnation in its economic activities. This is amazing and can be a best practice when it is estimated that with 15% electricity cut initiative 50,000 jobs will be lost and wage of employees will be cut by 0.2%, leading to reduction of GDP growth by 0.3% in 2011.
It would require total of over 100 million yen investment for this initiative but the company estimates that it can earn back the investment in 3 years. The initiative for the upcoming summer focuses on those of immediate results and improvements will be added continuously next year onwards.
3) Upcoming actions
The sensors will be installed in all 30 plants in the area that produce products such as LCD panels and LCD flat panel TVs. 20 staff members are to start installation one after the other from the week starting May 16. The company is to add analysis and simulation with their unique software to establish a system in which they can continue lean, streamlined production by plants by the end of June.
When the sensors are installed, the company will be able to monitor use of electricity, gas and water, and temperature and humidity by production lines and equipments. The company is to initiate reviewing humidity control in clean rooms, reduction in compressors and short time operation halts in addition to reduction in lights and frequent termination in power.
As a result, the company is confident that it can achieve 15% reduction in electricity use at the peak this summer from last summer and has made agreement with Tokyo and Tohoku Electric Power to be provided with total of 160,000 kW. The company has tried using the sensor in multiple plants in other parts of Japan such as Wakayama.
Resources:-
To fulfill the request from the Japanese government of cutting electricity use by 15%, companies are taking measures to achieve the target such as shift/change of working days/hours and locations, production transfer and implementation of energy saving equipments and systems. An interesting solution by Panasonic is installing sensors in plants to monitor and control electricity use that enable achieving target while avoiding economic activity stagnation by change/shift of working days/hours and production transfer.
2011年5月14日土曜日
LNG as an Alternative Energy Replacing Nuclear Power – The Japan Disaster
Osaka - Saturday, May 14, 2011
Nikkei, Japan’s leading newspaper specialized in business and economy, reported on May 12 that electricity and trading companies have managed to obtain additional LNG (Liquefied Natural Gas) of 5 million ton to overcome the anticipated electricity shortage in summer when the electricity use is at the peak because of termination of nuclear plant operation (Fukushima and Hamaoka) since the Japan disaster.
It is estimated that total of additional 10 million ton of LNG would be necessary and therefore the companies are making upmost efforts to do so.
This means increase in thermal power plant in mid and long term; therefore, companies of heavy industries are planning to increase their production capacities of large gas turbines.
1. What is the background of electricity and trading companies obtaining additional LNG as an alternative energy of nuclear power?
With Fukushima nuclear plant issue triggered by the earthquake and tsunami that occurred on March 11, Fukushima nuclear plant has stopped operating. This made Tokyo Electric Power Co., Inc unable to sufficiently supply electricity to its responsibility area including key cities of economy such as Tokyo.
Taking this incident into account, the Japanese government recently decided to terminate operation of Hamaoka nuclear plant as well that supplies electricity to Chubu including key area of Aichi where Toyota is located. This is because experts estimate that earthquake of magnitude 8 or larger is to occur in Tokai area where Hamaoka nuclear plant is located within 30 years with possibility of 87%.
Under such a situation, it is almost impossible to open new nuclear plants or re-start nuclear plant operation and therefore replacement to alternative energy is urgent.
Currently LNG is the optimum alternative energy because the cost is stable due to technology innovation meaning stable supply of energy, and also CO2 emission is lower than other energy such as coal and oil.
2. How have the constituents of energy supply been and how are they to change?
Thermal power including LNG has been the primary source of energy supply constituting 64%, followed by nuclear power constituting 29%. Other forms of energy supply includes hydraulic power that constitutes 6% and others including new energy that constitutes 1% or less.
Nuclear power supply is to decrease from current 288.2 billion kW to 200 billion kW if operation of total of 6 nuclear plants including Fukushima Daiichi and Hamaoka are to remain terminated. It could even decrease to as low as 100 billion kW if operation of other nuclear plants that are currently under regular inspection cannot re-started.
This means the nuclear power supply would drop from 29% to 10 - 20%, and the decrease in nuclear power supply is planned to be replaced by LNG that currently constitutes 30%.
3. How much additional LNG needs to be obtained?
To replace the energy which had been generated by Fukushima and other north eastern nuclear plant, Tokyo Electric Power Co., Inc and Tohoku Electric Power Co., Inc need to additionally obtain LNG of 6.2 – 8.6 million ton.
To replace the energy which had been generated by Hamaoka nuclear plant, Chubu Electric Power Co., Inc need to additionally obtain LNG of 3.2 million ton.
This means that when Japan has been the largest LNG importer in the world importing LNG of 70 million ton a year, the country needs to additionally import 10 million ton, i.e. 14% of its current import.
The Japanese government has requested companies in Tokyo Electric Power area to cut electricity use by 15% in upcoming summer when it is at the peak. Even if the 15% reduction target is achieved, it is estimated that 55 million kW will be short.
4. What actions have been taken by companies to make up for the estimated electricity shortage?
1) Obtain additional LNG
According to related parties, Tokyo Electric Power is said to have obtained additional LNG of 2 – 3 million ton required to supply 55 million kW.
Tohoku Electric Power, which managed to gain word of “provide maximum support to supply LNG” from Katar, is said to have obtained additional LNG of 1 million ton.
Other electricity companies are said to have obtained 5 million in total.
However, additional 5 million ton would be necessary as risk management; i.e. in case electricity shortage should occur despite such efforts of electricity companies and of electricity use cut of 15%, and to be prepared to the next peak of electricity use in winter.
For this reason, trading companies such as Mitsubishi Corporation and Mitsui ＆Co., Ltd are planning to additionally obtain from such countries as Malaysia, Indonesia, Russia and Katar (and even Nigeria and UAE if necessary) by one-time trading. They plan to do so by leveraging the project they belong through investment.
2) Establish and increase operation rate of thermal electric power plant by gas
Additional electricity supply by LNG requires additional establishment and increase in operation rate of thermal electric power plant by gas.
This kind of investment is rationale even if fuel cost (total cost of oil and LNG) would increase by 1.15 trillion yen at maximum if all energy supply is to be replaced by thermal power by gas because unit cost of power generation by LNG thermal power is lower that that of oil thus stable energy supply can be expected.
3) Increase production capacity of gas turbines
Mitsubishi Heavy Industries is to increase production capacity of gas turbine plant in Takasago, Hyogo from 20/year to 36/year within 2011. The additional gas turbines produced are mainly to be supplied to electricity companies mainly in Japan such as Tokyo Electric Power and Tohoku Electric Power. Their new plant in the U.S. is to start operating in 2012. As a result, more than 50/year in total can be produced and supplied from plants in Japan and the U.S.
IHI is to increase the production capacity in Hiroshima from 10/year to 20/year. The company is also to shorten the lead time that is currently approximately 1 year by reviewing processes.
Such investments are rationale because cost and time required to produce new gas turbines are far lower and shorter than producing new nuclear plant equipments. It requires as much as 400 billion yen and 7 years to produce one new nuclear plant equipment when it requires less than 100 billion yen and 1 year to produce one new gas turbine equipment.
Nikkei, Japan’s leading newspaper specialized in business and economy, reported on May 12 that electricity and trading companies have managed to obtain additional LNG (Liquefied Natural Gas) of 5 million ton to overcome the anticipated electricity shortage in summer when the electricity use is at the peak because of termination of nuclear plant operation (Fukushima and Hamaoka) since the Japan disaster.
It is estimated that total of additional 10 million ton of LNG would be necessary and therefore the companies are making upmost efforts to do so.
This means increase in thermal power plant in mid and long term; therefore, companies of heavy industries are planning to increase their production capacities of large gas turbines.
1. What is the background of electricity and trading companies obtaining additional LNG as an alternative energy of nuclear power?
With Fukushima nuclear plant issue triggered by the earthquake and tsunami that occurred on March 11, Fukushima nuclear plant has stopped operating. This made Tokyo Electric Power Co., Inc unable to sufficiently supply electricity to its responsibility area including key cities of economy such as Tokyo.
Taking this incident into account, the Japanese government recently decided to terminate operation of Hamaoka nuclear plant as well that supplies electricity to Chubu including key area of Aichi where Toyota is located. This is because experts estimate that earthquake of magnitude 8 or larger is to occur in Tokai area where Hamaoka nuclear plant is located within 30 years with possibility of 87%.
Under such a situation, it is almost impossible to open new nuclear plants or re-start nuclear plant operation and therefore replacement to alternative energy is urgent.
Currently LNG is the optimum alternative energy because the cost is stable due to technology innovation meaning stable supply of energy, and also CO2 emission is lower than other energy such as coal and oil.
2. How have the constituents of energy supply been and how are they to change?
Thermal power including LNG has been the primary source of energy supply constituting 64%, followed by nuclear power constituting 29%. Other forms of energy supply includes hydraulic power that constitutes 6% and others including new energy that constitutes 1% or less.
Nuclear power supply is to decrease from current 288.2 billion kW to 200 billion kW if operation of total of 6 nuclear plants including Fukushima Daiichi and Hamaoka are to remain terminated. It could even decrease to as low as 100 billion kW if operation of other nuclear plants that are currently under regular inspection cannot re-started.
This means the nuclear power supply would drop from 29% to 10 - 20%, and the decrease in nuclear power supply is planned to be replaced by LNG that currently constitutes 30%.
3. How much additional LNG needs to be obtained?
To replace the energy which had been generated by Fukushima and other north eastern nuclear plant, Tokyo Electric Power Co., Inc and Tohoku Electric Power Co., Inc need to additionally obtain LNG of 6.2 – 8.6 million ton.
To replace the energy which had been generated by Hamaoka nuclear plant, Chubu Electric Power Co., Inc need to additionally obtain LNG of 3.2 million ton.
This means that when Japan has been the largest LNG importer in the world importing LNG of 70 million ton a year, the country needs to additionally import 10 million ton, i.e. 14% of its current import.
The Japanese government has requested companies in Tokyo Electric Power area to cut electricity use by 15% in upcoming summer when it is at the peak. Even if the 15% reduction target is achieved, it is estimated that 55 million kW will be short.
4. What actions have been taken by companies to make up for the estimated electricity shortage?
1) Obtain additional LNG
According to related parties, Tokyo Electric Power is said to have obtained additional LNG of 2 – 3 million ton required to supply 55 million kW.
Tohoku Electric Power, which managed to gain word of “provide maximum support to supply LNG” from Katar, is said to have obtained additional LNG of 1 million ton.
Other electricity companies are said to have obtained 5 million in total.
However, additional 5 million ton would be necessary as risk management; i.e. in case electricity shortage should occur despite such efforts of electricity companies and of electricity use cut of 15%, and to be prepared to the next peak of electricity use in winter.
For this reason, trading companies such as Mitsubishi Corporation and Mitsui ＆Co., Ltd are planning to additionally obtain from such countries as Malaysia, Indonesia, Russia and Katar (and even Nigeria and UAE if necessary) by one-time trading. They plan to do so by leveraging the project they belong through investment.
2) Establish and increase operation rate of thermal electric power plant by gas
Additional electricity supply by LNG requires additional establishment and increase in operation rate of thermal electric power plant by gas.
This kind of investment is rationale even if fuel cost (total cost of oil and LNG) would increase by 1.15 trillion yen at maximum if all energy supply is to be replaced by thermal power by gas because unit cost of power generation by LNG thermal power is lower that that of oil thus stable energy supply can be expected.
3) Increase production capacity of gas turbines
Mitsubishi Heavy Industries is to increase production capacity of gas turbine plant in Takasago, Hyogo from 20/year to 36/year within 2011. The additional gas turbines produced are mainly to be supplied to electricity companies mainly in Japan such as Tokyo Electric Power and Tohoku Electric Power. Their new plant in the U.S. is to start operating in 2012. As a result, more than 50/year in total can be produced and supplied from plants in Japan and the U.S.
IHI is to increase the production capacity in Hiroshima from 10/year to 20/year. The company is also to shorten the lead time that is currently approximately 1 year by reviewing processes.
Such investments are rationale because cost and time required to produce new gas turbines are far lower and shorter than producing new nuclear plant equipments. It requires as much as 400 billion yen and 7 years to produce one new nuclear plant equipment when it requires less than 100 billion yen and 1 year to produce one new gas turbine equipment.
2011年5月8日日曜日
New Market Demand and Business from the Japan Disaster
Osaka - Sunday, May 8, 2011
Nikkei, Japan’s leading newspaper specialized in business and economy, reported on May 7 that with the Japanese government’s policy of reducing energy in the peak of summer to minimize planned blackout, there are some unexpected possibilities of new demand to be created.
In this article, the author would like to explain the background of the policy and introduce the outline of the article with some possible insights at the end.
1. What is the background of the Japanese government’s policy?
The Japan disaster of earthquake and tsunami that broke out on March 11 triggered the Fukushima nuclear plant issue, leading to electricity supply shortage. For this reason, there have been some planned blackouts as mentioned in the previous article The Reality of Japan Disaster – Affecting Nationwide. It has been effective to some extent so far but has been negatively affecting some businesses as reported in recent TV programmes/news.
However, the real challenge comes in daytime of summer, the peak of electricity used because offices and factories are operating and everyone use air conditioner.
For this reason, the Japanese government had set a target of reducing maximum electricity use at the peak by 15% and requested industry parties to take measures to achieve the target. Some companies have been working on it such as shifting summer holiday and operating at night time; however, some experts estimate that the energy saving policy could mean reduction in productivity.
On the other hand, there have been some signs that the policy may trigger creation of new market demand and business.
2. What kind of new marketing demand and business is likely to be created, according to Nikkei?
1) Services targeting “overtime work refugees”
Many companies are to set room temperature at 28℃ or above at summer and turn off the air conditioner after official working hours. This means many business persons working in offices in cities to become “overtime work refugees”, getting out of their offices as soon as the official working hour ends because it is too hot and humid to work in the office after the air conditioner is turned off in Japan in summer.
Taking this opportunity, comic cafes that usually target young generation and other businesses started to exploit market targeting such business persons. For example, business owner that provides study room charging by hour has been providing seminars on accounting mostly at weekends but he is to change operating hours to evenings during week days to attract “overtime work refugees”.
2) Accommodation at summer resorts with discount rate
A business owner of a pension in Nagano, a popular summer resort in Japan, created a new discount plan to attract customers. The customer can benefit from 20% discount if he/she stays more than 5 nights.
The department in Mitsui Fudosan that runs hotels is to discount hotel rates for customers staying 2 or more nights in their hotels in Sapporo in Hokkaido (northern Japan, famous for cool summer) and other hotels located in summer resort area in Japan.
Some companies that use electricity supplied by TEPCO is planning to make their summer holiday longer than previous years as a counter measure of energy saving when many Japanese companies set their summer holiday only 1 week or less, making many Japanese people to enjoy their vacation “near their house, spending less, in short time”.
If more people get longer holidays, it is likely that they enjoy vacation leveraging discount rate of accommodations at summer resorts mentioned above, which could help tourism that is suffering from less revenue/business fewer tourists from outside Japan.
3) Energy saving LED bulbs
Power consumption of LED bulbs is half of LCD so although its price is 2,000 – 4,000 JPY which is higher than LCD bulbs and many people are now buying LED bulbs to benefit from energy saving. This is why recently there has been a crowd of people in LED bulb display corners of a leading mass merchandiser of consumer electronics in Tokyo.
METI (Ministry of Economy, Trade and Industry) has drawn up a blue print of replacing all bulbs in Japan to LED and other energy saving ones by 2030. The electricity supply shortage attributing to the Japan disaster is expected to accelerate popularization of LED.
4) “Energy saving biz” products (vs. “Cool biz” that has already become popular)
“Cool Biz” (the name of an energy-saving campaign the government started in 2005) products such as business casual clothes without neck ties for men has taken root and is a pillar of summer business for department stores, and this year it has started to spread to “electricity saving biz” products. This is because some companies are to approve their employees to come to their offices in polo shirts. Taking this opportunity, a few department stores imported fashionable polo shirts and plan to expand polo shirts corner by 40%.
In addition, some business men who go to work without jackets started to buy sun screen creams as a counter measures to protect themselves from ultra-violet lights, which is an unexpected demand. Taking this opportunity, Shiseido, a leading maker in the industry, is operating at its maximum to meet such market demand to produce sun screen creams.
3. The author’s final thoughts
As Nikkei reports, industrial output index for March dropped by 15.3% from February, which the largest drop in the history attributing mostly to broken link of global supply chain due to the Japan disaster. Many experts say that the recovery of the index is to be in autumn or later. Thus, Japanese companies, especially manufacturers, are facing challenges that they had never faced.
However, “hot summer without sufficient electricity and air conditioning” can mean creation of new market demand meaning new businesses and this would stimulate consumer spending when “jishuku”, restraining from spending money, have been proliferating after the disaster, as mentioned in the previous article Impact of “Jishuku” (Self-Restraint) in the Japan Disaster Aftermath. Stimulation of consumer spending is a requirement for Japanese economy to recover.
The companies operating in Japan, both Japanese and non-Japanese (foreign affiliates), are expected to convert the challenges they are currently facing into opportunities for the growth of themselves and the economy.
As often said, necessity is the mother of invention. The author believes that under the current tough situation, companies will come up with breakthroughs by creativity and innovation to create and develop new products, services and businesses from which consumers and the companies benefit.
Resources:-
The Japan disaster triggering electricity supply shortage has been negatively impacting Japanese economy and businesses but there have been signs of new market demand creation and new businesses. Companies operating in Japan are expected to leverage this opportunity to grow their businesses and the economy with creativity and innovation, to stimulate consumer spending, a requirement for Japanese economy to recover.
Nikkei, Japan’s leading newspaper specialized in business and economy, reported on May 7 that with the Japanese government’s policy of reducing energy in the peak of summer to minimize planned blackout, there are some unexpected possibilities of new demand to be created.
In this article, the author would like to explain the background of the policy and introduce the outline of the article with some possible insights at the end.
1. What is the background of the Japanese government’s policy?
The Japan disaster of earthquake and tsunami that broke out on March 11 triggered the Fukushima nuclear plant issue, leading to electricity supply shortage. For this reason, there have been some planned blackouts as mentioned in the previous article The Reality of Japan Disaster – Affecting Nationwide. It has been effective to some extent so far but has been negatively affecting some businesses as reported in recent TV programmes/news.
However, the real challenge comes in daytime of summer, the peak of electricity used because offices and factories are operating and everyone use air conditioner.
For this reason, the Japanese government had set a target of reducing maximum electricity use at the peak by 15% and requested industry parties to take measures to achieve the target. Some companies have been working on it such as shifting summer holiday and operating at night time; however, some experts estimate that the energy saving policy could mean reduction in productivity.
On the other hand, there have been some signs that the policy may trigger creation of new market demand and business.
2. What kind of new marketing demand and business is likely to be created, according to Nikkei?
1) Services targeting “overtime work refugees”
Many companies are to set room temperature at 28℃ or above at summer and turn off the air conditioner after official working hours. This means many business persons working in offices in cities to become “overtime work refugees”, getting out of their offices as soon as the official working hour ends because it is too hot and humid to work in the office after the air conditioner is turned off in Japan in summer.
Taking this opportunity, comic cafes that usually target young generation and other businesses started to exploit market targeting such business persons. For example, business owner that provides study room charging by hour has been providing seminars on accounting mostly at weekends but he is to change operating hours to evenings during week days to attract “overtime work refugees”.
2) Accommodation at summer resorts with discount rate
A business owner of a pension in Nagano, a popular summer resort in Japan, created a new discount plan to attract customers. The customer can benefit from 20% discount if he/she stays more than 5 nights.
The department in Mitsui Fudosan that runs hotels is to discount hotel rates for customers staying 2 or more nights in their hotels in Sapporo in Hokkaido (northern Japan, famous for cool summer) and other hotels located in summer resort area in Japan.
Some companies that use electricity supplied by TEPCO is planning to make their summer holiday longer than previous years as a counter measure of energy saving when many Japanese companies set their summer holiday only 1 week or less, making many Japanese people to enjoy their vacation “near their house, spending less, in short time”.
If more people get longer holidays, it is likely that they enjoy vacation leveraging discount rate of accommodations at summer resorts mentioned above, which could help tourism that is suffering from less revenue/business fewer tourists from outside Japan.
3) Energy saving LED bulbs
Power consumption of LED bulbs is half of LCD so although its price is 2,000 – 4,000 JPY which is higher than LCD bulbs and many people are now buying LED bulbs to benefit from energy saving. This is why recently there has been a crowd of people in LED bulb display corners of a leading mass merchandiser of consumer electronics in Tokyo.
METI (Ministry of Economy, Trade and Industry) has drawn up a blue print of replacing all bulbs in Japan to LED and other energy saving ones by 2030. The electricity supply shortage attributing to the Japan disaster is expected to accelerate popularization of LED.
4) “Energy saving biz” products (vs. “Cool biz” that has already become popular)
“Cool Biz” (the name of an energy-saving campaign the government started in 2005) products such as business casual clothes without neck ties for men has taken root and is a pillar of summer business for department stores, and this year it has started to spread to “electricity saving biz” products. This is because some companies are to approve their employees to come to their offices in polo shirts. Taking this opportunity, a few department stores imported fashionable polo shirts and plan to expand polo shirts corner by 40%.
In addition, some business men who go to work without jackets started to buy sun screen creams as a counter measures to protect themselves from ultra-violet lights, which is an unexpected demand. Taking this opportunity, Shiseido, a leading maker in the industry, is operating at its maximum to meet such market demand to produce sun screen creams.
3. The author’s final thoughts
As Nikkei reports, industrial output index for March dropped by 15.3% from February, which the largest drop in the history attributing mostly to broken link of global supply chain due to the Japan disaster. Many experts say that the recovery of the index is to be in autumn or later. Thus, Japanese companies, especially manufacturers, are facing challenges that they had never faced.
However, “hot summer without sufficient electricity and air conditioning” can mean creation of new market demand meaning new businesses and this would stimulate consumer spending when “jishuku”, restraining from spending money, have been proliferating after the disaster, as mentioned in the previous article Impact of “Jishuku” (Self-Restraint) in the Japan Disaster Aftermath. Stimulation of consumer spending is a requirement for Japanese economy to recover.
The companies operating in Japan, both Japanese and non-Japanese (foreign affiliates), are expected to convert the challenges they are currently facing into opportunities for the growth of themselves and the economy.
As often said, necessity is the mother of invention. The author believes that under the current tough situation, companies will come up with breakthroughs by creativity and innovation to create and develop new products, services and businesses from which consumers and the companies benefit.
Resources:-
The Japan disaster triggering electricity supply shortage has been negatively impacting Japanese economy and businesses but there have been signs of new market demand creation and new businesses. Companies operating in Japan are expected to leverage this opportunity to grow their businesses and the economy with creativity and innovation, to stimulate consumer spending, a requirement for Japanese economy to recover.
2011年4月30日土曜日
How is the Japan Disaster Changing Japanese Consumers?
It is often said that the worldwide economic recession has made worldwide consumers smart, who have become severe on price, prefer valued brand and switch channels of purchasing products and services as appropriate.
In a similar manner, the Japan earthquake and tsunami disaster that occurred on March 11, 2011 is assumed to change the consumers in Japan. For this reason, Boston Consulting Group (BDG) in Japan executed a survey to approximately 3,000 consumers in Japan 1 month after the earthquake and tsunami disaster.
Their conclusion was that the companies need to know “how consumers in Japan are to change in the future” rather than “when consumers will start to proactively spend their money”.
In this article, the author would like to introduce the essence of the survey and some possible insights at the end.
1. How was the survey planned and executed?
The outline of the survey by BCG in Japan is as below.
Period: April 8, 2011 (Fri) – April 10, 2011(Sun)
Methodology: online survey
Number of respondents: 3,091 in total
Information about the respondents:
Region: Toyoku (Akita/Yamagata):103, Kanto (excluding Ibaragi):2,060, Midland/Kinki:618, Other Western Japan: 310
Age/Gender: male and female of 20 – 69 years old, same constituent as that of population in Japan
1) Consumers are becoming smart in the long-term
(1) Background to Japanese consumers becoming smart is long-lasting stress
The background of “consumers becoming even much smarter” is the stress from the disaster which can be seen nationwide, attributing to “anxiety to the future”. It is possible that the stress proliferates for a long time because 60% of the respondents said that the stress will not eliminate/will remain for a long time. In the case of Kanto (eastern Japan), much of the stress attributes to “anxiety of radiation”, “fear from the disaster” and “anxiety of black out”.
(2) 6 consumer trends making consumers smart
6 consumer trends are revealed from the survey, which are “economy and saving”, “staying at home”, “risk diversification/evasion”, “healing”, “energy-saving” and “safe/security”. The first two “economy and saving”and “staying at home” are the short-term trend.
As in one of the previous article Impact of “Jishuku” (Self-Restraint) in the Japan Disaster Aftermath many people in Japan has been restraining from spending their money and was evident from the survey result as well; 40% of Kanto consumers replied that “consumer spending should be restrained” and “actually restraining from spending”. This trend is prominent among people above 60 years old (i.e. with relatively large disposable income); 50% of them answered that they are to cut spending on travelling/trip. Indeed, spending on travelling, entertainment and eating out has been cut when online shopping has been decreasing a little.
In addition, approximately 50% of Kanto respondents answered that they now spend more time at home. This trend is evident among females; 60% of them answered so. From the survey results, people spending their time at home enjoy their hobby, watching TV, reading and online shopping.
The remaining 4 trends “risk diversification/evasion”, “healing”, “energy-saving” and “safe/security” are regarded to be of long-term trend; 50-60% of respondents answered so. Regarding “energy-saving” already over 90% of Kanto residents and over 80% nationwide have been saving energy in some way or other and majority of them are to continue saving energy in the future. Regarding “safety/security”, approximately 60% answered that now they value food safety than they used to and more than 50% do not intend to change their stance at least for a while after the radiation/contamination issue is solved.
2) Social media (twitter, YouTube) is gaining more popularity especially among people in 50s and 60s
Twitter broke out in 2010 mostly among early adaptors of younger generation. And with the Japan disaster, Japanese people on twitter increased from 5.6 million to 7.5 million. This attributes to the fact that people online realized anew that the Internet is a valuable infrastructure, and that the Japanese government recommended public sectors to leverage social media.
In fact, 10% of the respondents answered that “they started using twitter” or “they would like to start using twitter”. This trend is conspicuous among people in 50s and 60s; 13% of them answered so. Similar trend can be seen for video such as YouTube.
3) More consumers have more social mindset
30% of the respondents answered that “they love their country more than they used to” when only 7% answered that “the hate their country than they used to”. 32% answered that they are determined to proactively donate and 16% answered that they will get involved in volunteer activities. In addition, 80% answered that they would like to help Tohoku (the hard-hit region) by proactively purchasing Tohoku products and services.
3. The author’s final thoughts
Although one of the consumer trends is spending less, the change in Japanese consumers can be a good opportunity for companies to exploit new market and create a new business model.
In fact, there have been some products and services that started to draw attention from consumers such as car sharing, cloud services and renting a house instead of owning a house because consumers realized “risk of owning something” from the disaster. Also, more people are now willing to pay for products and services of power generation and energy saving.
Online shopping has been one of the industries that were not negatively impacted by the worldwide recession and it is possible that this industry plus social media can be a source of a new business model as well. At least companies need to review and change their marketing mix considering the trend of increasing use of the Internet and social media.
Talking about marketing, with more consumers with social minds, it is possible that it is more effective to deliver the stance and philosophy of the company and safety/security of the products and services rather than functions of the products. Moreover, even though social marketing, very often collaborating with NPO and NGO, has been unpopular in Japan, with rise in social minds, social marketing may start to come in and spread also in Japan.
Thus, the disaster can trigger a positive change, an opportunity for companies to gain competitiveness, by being creative and innovative.
References:-
Ohtani, Naoki and Saito, Naoto from Boston Consulting Group in Japan (April 28, 2011), The Japan Disaster is to Change Japanese Companies – Do Not Miss the 3 New Trends (in Japanese)
http://business.nikkeibp.co.jp/article/topics/20110426/219657/
Resources:-
The Japan disaster is changing consumers in Japan in 3 ways; making them smarter, making them leverage social media, and making them with more social mindset. By understanding such changes in consumers, it is possible for companies to create new market and develop new business model by being creative and innovative, thus gaining competitiveness.
In a similar manner, the Japan earthquake and tsunami disaster that occurred on March 11, 2011 is assumed to change the consumers in Japan. For this reason, Boston Consulting Group (BDG) in Japan executed a survey to approximately 3,000 consumers in Japan 1 month after the earthquake and tsunami disaster.
Their conclusion was that the companies need to know “how consumers in Japan are to change in the future” rather than “when consumers will start to proactively spend their money”.
In this article, the author would like to introduce the essence of the survey and some possible insights at the end.
1. How was the survey planned and executed?
The outline of the survey by BCG in Japan is as below.
Period: April 8, 2011 (Fri) – April 10, 2011(Sun)
Methodology: online survey
Number of respondents: 3,091 in total
Information about the respondents:
Region: Toyoku (Akita/Yamagata):103, Kanto (excluding Ibaragi):2,060, Midland/Kinki:618, Other Western Japan: 310
Age/Gender: male and female of 20 – 69 years old, same constituent as that of population in Japan
1) Consumers are becoming smart in the long-term
(1) Background to Japanese consumers becoming smart is long-lasting stress
The background of “consumers becoming even much smarter” is the stress from the disaster which can be seen nationwide, attributing to “anxiety to the future”. It is possible that the stress proliferates for a long time because 60% of the respondents said that the stress will not eliminate/will remain for a long time. In the case of Kanto (eastern Japan), much of the stress attributes to “anxiety of radiation”, “fear from the disaster” and “anxiety of black out”.
(2) 6 consumer trends making consumers smart
6 consumer trends are revealed from the survey, which are “economy and saving”, “staying at home”, “risk diversification/evasion”, “healing”, “energy-saving” and “safe/security”. The first two “economy and saving”and “staying at home” are the short-term trend.
As in one of the previous article Impact of “Jishuku” (Self-Restraint) in the Japan Disaster Aftermath many people in Japan has been restraining from spending their money and was evident from the survey result as well; 40% of Kanto consumers replied that “consumer spending should be restrained” and “actually restraining from spending”. This trend is prominent among people above 60 years old (i.e. with relatively large disposable income); 50% of them answered that they are to cut spending on travelling/trip. Indeed, spending on travelling, entertainment and eating out has been cut when online shopping has been decreasing a little.
In addition, approximately 50% of Kanto respondents answered that they now spend more time at home. This trend is evident among females; 60% of them answered so. From the survey results, people spending their time at home enjoy their hobby, watching TV, reading and online shopping.
The remaining 4 trends “risk diversification/evasion”, “healing”, “energy-saving” and “safe/security” are regarded to be of long-term trend; 50-60% of respondents answered so. Regarding “energy-saving” already over 90% of Kanto residents and over 80% nationwide have been saving energy in some way or other and majority of them are to continue saving energy in the future. Regarding “safety/security”, approximately 60% answered that now they value food safety than they used to and more than 50% do not intend to change their stance at least for a while after the radiation/contamination issue is solved.
2) Social media (twitter, YouTube) is gaining more popularity especially among people in 50s and 60s
Twitter broke out in 2010 mostly among early adaptors of younger generation. And with the Japan disaster, Japanese people on twitter increased from 5.6 million to 7.5 million. This attributes to the fact that people online realized anew that the Internet is a valuable infrastructure, and that the Japanese government recommended public sectors to leverage social media.
In fact, 10% of the respondents answered that “they started using twitter” or “they would like to start using twitter”. This trend is conspicuous among people in 50s and 60s; 13% of them answered so. Similar trend can be seen for video such as YouTube.
3) More consumers have more social mindset
30% of the respondents answered that “they love their country more than they used to” when only 7% answered that “the hate their country than they used to”. 32% answered that they are determined to proactively donate and 16% answered that they will get involved in volunteer activities. In addition, 80% answered that they would like to help Tohoku (the hard-hit region) by proactively purchasing Tohoku products and services.
3. The author’s final thoughts
Although one of the consumer trends is spending less, the change in Japanese consumers can be a good opportunity for companies to exploit new market and create a new business model.
In fact, there have been some products and services that started to draw attention from consumers such as car sharing, cloud services and renting a house instead of owning a house because consumers realized “risk of owning something” from the disaster. Also, more people are now willing to pay for products and services of power generation and energy saving.
Online shopping has been one of the industries that were not negatively impacted by the worldwide recession and it is possible that this industry plus social media can be a source of a new business model as well. At least companies need to review and change their marketing mix considering the trend of increasing use of the Internet and social media.
Talking about marketing, with more consumers with social minds, it is possible that it is more effective to deliver the stance and philosophy of the company and safety/security of the products and services rather than functions of the products. Moreover, even though social marketing, very often collaborating with NPO and NGO, has been unpopular in Japan, with rise in social minds, social marketing may start to come in and spread also in Japan.
Thus, the disaster can trigger a positive change, an opportunity for companies to gain competitiveness, by being creative and innovative.
References:-
Ohtani, Naoki and Saito, Naoto from Boston Consulting Group in Japan (April 28, 2011), The Japan Disaster is to Change Japanese Companies – Do Not Miss the 3 New Trends (in Japanese)
http://business.nikkeibp.co.jp/article/topics/20110426/219657/
Resources:-
The Japan disaster is changing consumers in Japan in 3 ways; making them smarter, making them leverage social media, and making them with more social mindset. By understanding such changes in consumers, it is possible for companies to create new market and develop new business model by being creative and innovative, thus gaining competitiveness.
2011年4月29日金曜日
The Japan Disaster Cuts Revenue of Japanese Companies
Osaka - Friday, April 29, 2011
Nikkei, Japan’s leading newspaper specialized in business and economy, reported today that the Japan disaster of the earthquake and tsunami is negatively affecting revenue of Japanese listed companies. Consolidated net profit for January – March 2011 was minus 32% from those of 2010. This is the reduction in revenue/profit when their revenue/profit has been improving consecutively for the last 6 quarters.
The main reasons include the extraordinary loss attributing to the damage to production equipment and the profit cut due to decrease in revenue.
As a result, the loss attributing to the damages of listed companies totaled approximately 1 trillion yen as of April 28. This clearly indicates that the Japanese companies had overcome the worldwide economic recession (Lehman's fall) and their profitability had been recovering but their management environment is now deteriorating to negatively affecting their profitability.
1. How did Nikkei come to the conclusion?
Nikkei collected financial data of 544 listed companies (excluding financial and new companies) whose financial announcement including revision of the previous estimation for January – March 2011 has been made by April 28 and calculated consolidated net profit of the 544 companies.
Nikkei also collected financial data of approximately 1000 listed companies whose financial announcement including revision of the previous estimation has been made for February and/or March 2011 and calculated their extraordinary loss.
2. What is the conclusion?
January – March 2011 was reduction in profitability. However, with accumulative profit of April – December 2010, their revenue and profit increased from those of previous year for fiscal year ending March 2011.
Financial performance of the Japanese companies has been recovering due to demand increase of emerging countries since they had overcome the worldwide recession.
However, for January – March 2011, the Japan disaster from earthquake and tsunami that occurred on March 11 negatively impacted their financial performance. This is why companies such as Seiko Epson and ANA ended up being in red for January – March 2011.
With calculation of the extraordinary loss from the disaster and other negative impact from the disaster across the industry, the total loss from the disaster of all companies is estimated to teach more than 1 trillion yen.
3. How the Japan Disaster affected the financial performance of Japanese Companies?
According to the calculation by Nikkei, the extraordinary loss totaled approximately 600 billion yen. This is more than that of the Kobe earthquake in 1995, which was approximately 400 billion yen.
Major Companies with Loss from the Disaster over 10 Billion Yen (in billion yen)
(Source: Nikkei, translated by the author)
Industry / Company Name / Loss / Main Reasons
Electronics & Machinery / Hitachi / 50.0 / Damaged power generation equipment plant
Electronics & Machinery / Fujitsu / 11.6 / Damaged factories, recorded loss of fixed cost due to operation halt
Electronics & Machinery / IHI / 10.5 / Eliminating production equipment, recovery cost
Iron & Steel / Sumitomo Metal Industries / 62.0 Damaged Kashima plant
Iron & Steel / JFE / 28.3 / Tsunami directly hit factory in Sendai
Iron & Steel / Nippon Steel / 23.7 / Kamaishi plant in Iwate flooded by tsunami
Oil & Chemical / JX Holdings / 126.0 / Damaged oil factory in Sendai and Miyagi
Oil & Chemical / Shin-Etsu Chemical / 21.0 / Damaged Kashima plant that produces vinyl chloride
Telecommunication & Transportation / NTT / 110.0 / Damaged power poles, optical cables, base station of mobile phones
Telecommunication & Transportation / JR East / 58.7 / Damage of railroads and bridges of Tohoku Shinkansen Lines
Telecommunication & Transportation / KDDI / 17.5 / Damaged base stations of mobile phones, loss from eliminating optical cables
Retailer / AEON / 30.0 / 200 damaged supermarkets
Retailer / Seven & i Holdings / 26.0 / Damaged supermarkets in North East Japan
* Loss of some companies excludes those of insurance
The extraordinary loss of the top 4 iron and steel companies totaled 114 billion yen. The main loss is of Sumitomo Metal Industry which is more than 60 billion yen. Another is of 23.7 billion yen of Nippon Steel that made financial announcement on April 28, with half of the extraordinary loss of Kamaishi plant in Iwate flooded by tsunami.
The impact of the disaster is not limited to extraordinary losses. There are some cases in which operating profit was negatively impacted by the disaster such as of Hitachi and Canon. The loss from the disaster excluding the extraordinary loss totals approximately 400 billion yen.
The loss from the disaster is to negatively impact the revenue for April – June 2011 of many companies, especially that of automobiles. It is estimated that the loss for retailers for fiscal year ending February 2012 is to total 80 billion yen.
Some experts say that the revenue across industries would start to recover from October 2011 benefitting from increased demand attributing to recovery from the disaster; however, many company executives are extremely anxious of the future.
Resources:-
Nikkei, Japan’s leading newspaper specialized in business and economy, estimated that although financial performance of Japanese companies has been recovering lately, the loss of Japanese companies across the industry from the Japan disaster (earthquake and tsunami) is to total more than 1 trillion yen.
Nikkei, Japan’s leading newspaper specialized in business and economy, reported today that the Japan disaster of the earthquake and tsunami is negatively affecting revenue of Japanese listed companies. Consolidated net profit for January – March 2011 was minus 32% from those of 2010. This is the reduction in revenue/profit when their revenue/profit has been improving consecutively for the last 6 quarters.
The main reasons include the extraordinary loss attributing to the damage to production equipment and the profit cut due to decrease in revenue.
As a result, the loss attributing to the damages of listed companies totaled approximately 1 trillion yen as of April 28. This clearly indicates that the Japanese companies had overcome the worldwide economic recession (Lehman's fall) and their profitability had been recovering but their management environment is now deteriorating to negatively affecting their profitability.
1. How did Nikkei come to the conclusion?
Nikkei collected financial data of 544 listed companies (excluding financial and new companies) whose financial announcement including revision of the previous estimation for January – March 2011 has been made by April 28 and calculated consolidated net profit of the 544 companies.
Nikkei also collected financial data of approximately 1000 listed companies whose financial announcement including revision of the previous estimation has been made for February and/or March 2011 and calculated their extraordinary loss.
2. What is the conclusion?
January – March 2011 was reduction in profitability. However, with accumulative profit of April – December 2010, their revenue and profit increased from those of previous year for fiscal year ending March 2011.
Financial performance of the Japanese companies has been recovering due to demand increase of emerging countries since they had overcome the worldwide recession.
However, for January – March 2011, the Japan disaster from earthquake and tsunami that occurred on March 11 negatively impacted their financial performance. This is why companies such as Seiko Epson and ANA ended up being in red for January – March 2011.
With calculation of the extraordinary loss from the disaster and other negative impact from the disaster across the industry, the total loss from the disaster of all companies is estimated to teach more than 1 trillion yen.
3. How the Japan Disaster affected the financial performance of Japanese Companies?
According to the calculation by Nikkei, the extraordinary loss totaled approximately 600 billion yen. This is more than that of the Kobe earthquake in 1995, which was approximately 400 billion yen.
Major Companies with Loss from the Disaster over 10 Billion Yen (in billion yen)
(Source: Nikkei, translated by the author)
Industry / Company Name / Loss / Main Reasons
Electronics & Machinery / Hitachi / 50.0 / Damaged power generation equipment plant
Electronics & Machinery / Fujitsu / 11.6 / Damaged factories, recorded loss of fixed cost due to operation halt
Electronics & Machinery / IHI / 10.5 / Eliminating production equipment, recovery cost
Iron & Steel / Sumitomo Metal Industries / 62.0 Damaged Kashima plant
Iron & Steel / JFE / 28.3 / Tsunami directly hit factory in Sendai
Iron & Steel / Nippon Steel / 23.7 / Kamaishi plant in Iwate flooded by tsunami
Oil & Chemical / JX Holdings / 126.0 / Damaged oil factory in Sendai and Miyagi
Oil & Chemical / Shin-Etsu Chemical / 21.0 / Damaged Kashima plant that produces vinyl chloride
Telecommunication & Transportation / NTT / 110.0 / Damaged power poles, optical cables, base station of mobile phones
Telecommunication & Transportation / JR East / 58.7 / Damage of railroads and bridges of Tohoku Shinkansen Lines
Telecommunication & Transportation / KDDI / 17.5 / Damaged base stations of mobile phones, loss from eliminating optical cables
Retailer / AEON / 30.0 / 200 damaged supermarkets
Retailer / Seven & i Holdings / 26.0 / Damaged supermarkets in North East Japan
* Loss of some companies excludes those of insurance
The extraordinary loss of the top 4 iron and steel companies totaled 114 billion yen. The main loss is of Sumitomo Metal Industry which is more than 60 billion yen. Another is of 23.7 billion yen of Nippon Steel that made financial announcement on April 28, with half of the extraordinary loss of Kamaishi plant in Iwate flooded by tsunami.
The impact of the disaster is not limited to extraordinary losses. There are some cases in which operating profit was negatively impacted by the disaster such as of Hitachi and Canon. The loss from the disaster excluding the extraordinary loss totals approximately 400 billion yen.
The loss from the disaster is to negatively impact the revenue for April – June 2011 of many companies, especially that of automobiles. It is estimated that the loss for retailers for fiscal year ending February 2012 is to total 80 billion yen.
Some experts say that the revenue across industries would start to recover from October 2011 benefitting from increased demand attributing to recovery from the disaster; however, many company executives are extremely anxious of the future.
Resources:-
Nikkei, Japan’s leading newspaper specialized in business and economy, estimated that although financial performance of Japanese companies has been recovering lately, the loss of Japanese companies across the industry from the Japan disaster (earthquake and tsunami) is to total more than 1 trillion yen.
2011年4月18日月曜日
Global Components Shortage - Time for Companies to Become Competitive
As in the previous article 40 Trillion Yen Loss from Broken Global Supply Network – the Japan Disaster as much as 40 trillion yen loss is estimated to occur due to broken global supply chain of critical components of automotive and electronics, attributing to the Japan disaster and its aftermath. Negative effects on business and economy from the broken links have been one of the hottest topics about the disaster, both English and Japanese sources, such as the fact that Toyota has been halting operation in its plants in Japan and cascading that it may affect operation in their dealers in the U.S.
On the other hand, there was an online Japanese article that insists that this critical situation of shortage of electronics components can be converted to an opportunity to strengthen the nature of companies to become competitive.
The author would like to first briefly explain why the broken global link occurred then introduce the essence of the article published on April 14, written by a Japanese management consultant, Kishira, Yuji.
1. What is the reason for severe shortage of critical electronics components due to broken global supply chain?
According to Nikkei, Japan’s leading newspaper specialized in business and economy reported on 9th April, it is ironically the management innovation of Japanese electronics components suppliers.
With “kaizen” spirit, many of the Japanese components suppliers, although they might be small in size, radically improved productivity while boosting quality to become extremely competitive globally. Such companies became (almost) “the only one” supplier in their respective business domain, with worldwide market share of 70% or more in some cases. Also such companies integrated their plants in pursuit of efficiency and productivity to plants in Tohoku (the hard hit region from the disaster).
And, with the disaster that made such plants to operate for weeks and/or broke physical distribution network because roads are piled with wreckage and requires clearance etc., the global supply chain of critical electronics components collapsed, affective automotives and high-tech industries in particular.
As Kishira points out, finished products cannot be made even if one single component out of hundreds and thousands of components lacks. Thus, worldwide finished product makers and trading companies supporting them are making upmost efforts to assure components, when finished makers had been minimizing inventory of components with long year cost reduction and just-in-time efforts and thus have no additional inventories.
2. How can this critical situation of component shortage be converted into an opportunity to become competitive?
1) Check inventory of finished products recorded in financial statement
Kishira agrees that inventory of components are likely to be drying up but insists that inventory of finished products needs to be checked and if it is equivalent to 2 months supply to the market it means in average supply of 2 months is secured.
In addition, there should be inventories of finished products in whole sellers and retailers, meaning that it is quite possible that there are more inventories of finished products than recorded in financial statement.
This means that although it is of extreme view, while the inventories of finished products are available, it is possible that the actual loss turns out to be smaller even if the production stops. And, if inventories are cleared out without drop in sales during period, it is possible that the profitability of the company improves drastically.
2) Focus resources (including components) only on selling well products from end-to-end total optimization perspective
Of course there can be many types of inventories, such as those of selling well products with very little inventories from those of slow moving products with too much inventory because few consumers buy. Products with much inventory will not be produced, and this means components of such products will become overabundant.
Although finished products are different, there are many cases in which same components are used. If that would be the case, the overabundant components can be used to product selling well products.
This approach is of utilizing components exclusively to selling well products with scarce inventories, meaning providing only products that consumers buy. This would also mean gradual decrease in inventory of slow moving products. This really is about focusing resources on what the market really needs.
With 2 months inventory, the products made from how will in average reach market 2 months from now. When critical components are insufficient finished product makers cannot afford to produce products that “might” be necessary in 2 months time. Many of production touch time (time actually required to manufacture products) are constituted by processes in (ten) minutes. It is not necessarily required to have 2 months inventory if products can be manufactured in such a time.
The minimum inventory required is total of manufacturing time, lead time to restock including transportation time and estimated maximum number of products to be sold at the peak. Production planning can be made and implemented with minimum inventory plus trend in demand.
This approach requires sharing such information with component suppliers as well, to maximize efficiency of limited capacity to make and provide finished products to market from end-to-end (component suppliers to retailers) total optimization perspective.
If this approach is taken appropriately it would mean optimization of constituents of finished product inventory, leading consequently to improvement in profitability.
3) Make the operation of new approach permanent
Many companies may well be executing operation mentioned above to some degree and it is in crisis that many companies come up with great discovery and implement thoroughly operation of new approach.
However, many companies go back to their old operation when the crisis passes by. That is what should be avoided. Companies need to embed the new productive approach in everyday operation to make it permanent. This would lead to sustainable growth of the company.
If there is a few months inventory recorded in financial statement, regard that few months as transition period to switching to the operation of the new approach and establish a system to make that operation sustainable. Then the company will be able to transform to a productive operation and process system with minimum inventory of optimum constituents, a requirement for high performing and sustainable company.
3. The author’s final thoughts
What Kishira says reminds the author of the objective and concept of Change Management based on the book “Leading Change” by Professor John P. Kotter of Harvard.
This is of 8 steps in managing change, change in processes, systems, and how people do everyday business. This requires cultural change, as mentioned in step 8, in which the new way of doing everyday business is “embedded” in the organization. In many cases, such change management starts with some kind of “trigger” that creates sense of urgency as mentioned in step 1. Sense of urgency usually comes from some kind of crisis.
To the author, what Kishira want to say is to take this opportunity to make and manage change to make the company competitive, and that is what the author would like to advocate, taking this opportunity.
This is to start with creating sense of sense of urgency under the current crisis (shortage of critical components attributing to the broken global supply chain), to change processes, systems, operation and how companies engage in everyday business. And the companies need to make sure to complete until the last step so that the operation with the new approach is becomes a part of their DNA and they would not go back to old way of doing business/operation.
References:-
Kishira, Yuji (April 14, 2011) Electronics Component Shortage is Serious – But No Need to Worry. Now is the Time for Companies to Become Competitive. This is Why
http://diamond.jp/articles/-/11893
On the other hand, there was an online Japanese article that insists that this critical situation of shortage of electronics components can be converted to an opportunity to strengthen the nature of companies to become competitive.
The author would like to first briefly explain why the broken global link occurred then introduce the essence of the article published on April 14, written by a Japanese management consultant, Kishira, Yuji.
1. What is the reason for severe shortage of critical electronics components due to broken global supply chain?
According to Nikkei, Japan’s leading newspaper specialized in business and economy reported on 9th April, it is ironically the management innovation of Japanese electronics components suppliers.
With “kaizen” spirit, many of the Japanese components suppliers, although they might be small in size, radically improved productivity while boosting quality to become extremely competitive globally. Such companies became (almost) “the only one” supplier in their respective business domain, with worldwide market share of 70% or more in some cases. Also such companies integrated their plants in pursuit of efficiency and productivity to plants in Tohoku (the hard hit region from the disaster).
And, with the disaster that made such plants to operate for weeks and/or broke physical distribution network because roads are piled with wreckage and requires clearance etc., the global supply chain of critical electronics components collapsed, affective automotives and high-tech industries in particular.
As Kishira points out, finished products cannot be made even if one single component out of hundreds and thousands of components lacks. Thus, worldwide finished product makers and trading companies supporting them are making upmost efforts to assure components, when finished makers had been minimizing inventory of components with long year cost reduction and just-in-time efforts and thus have no additional inventories.
2. How can this critical situation of component shortage be converted into an opportunity to become competitive?
1) Check inventory of finished products recorded in financial statement
Kishira agrees that inventory of components are likely to be drying up but insists that inventory of finished products needs to be checked and if it is equivalent to 2 months supply to the market it means in average supply of 2 months is secured.
In addition, there should be inventories of finished products in whole sellers and retailers, meaning that it is quite possible that there are more inventories of finished products than recorded in financial statement.
This means that although it is of extreme view, while the inventories of finished products are available, it is possible that the actual loss turns out to be smaller even if the production stops. And, if inventories are cleared out without drop in sales during period, it is possible that the profitability of the company improves drastically.
2) Focus resources (including components) only on selling well products from end-to-end total optimization perspective
Of course there can be many types of inventories, such as those of selling well products with very little inventories from those of slow moving products with too much inventory because few consumers buy. Products with much inventory will not be produced, and this means components of such products will become overabundant.
Although finished products are different, there are many cases in which same components are used. If that would be the case, the overabundant components can be used to product selling well products.
This approach is of utilizing components exclusively to selling well products with scarce inventories, meaning providing only products that consumers buy. This would also mean gradual decrease in inventory of slow moving products. This really is about focusing resources on what the market really needs.
With 2 months inventory, the products made from how will in average reach market 2 months from now. When critical components are insufficient finished product makers cannot afford to produce products that “might” be necessary in 2 months time. Many of production touch time (time actually required to manufacture products) are constituted by processes in (ten) minutes. It is not necessarily required to have 2 months inventory if products can be manufactured in such a time.
The minimum inventory required is total of manufacturing time, lead time to restock including transportation time and estimated maximum number of products to be sold at the peak. Production planning can be made and implemented with minimum inventory plus trend in demand.
This approach requires sharing such information with component suppliers as well, to maximize efficiency of limited capacity to make and provide finished products to market from end-to-end (component suppliers to retailers) total optimization perspective.
If this approach is taken appropriately it would mean optimization of constituents of finished product inventory, leading consequently to improvement in profitability.
3) Make the operation of new approach permanent
Many companies may well be executing operation mentioned above to some degree and it is in crisis that many companies come up with great discovery and implement thoroughly operation of new approach.
However, many companies go back to their old operation when the crisis passes by. That is what should be avoided. Companies need to embed the new productive approach in everyday operation to make it permanent. This would lead to sustainable growth of the company.
If there is a few months inventory recorded in financial statement, regard that few months as transition period to switching to the operation of the new approach and establish a system to make that operation sustainable. Then the company will be able to transform to a productive operation and process system with minimum inventory of optimum constituents, a requirement for high performing and sustainable company.
3. The author’s final thoughts
What Kishira says reminds the author of the objective and concept of Change Management based on the book “Leading Change” by Professor John P. Kotter of Harvard.
This is of 8 steps in managing change, change in processes, systems, and how people do everyday business. This requires cultural change, as mentioned in step 8, in which the new way of doing everyday business is “embedded” in the organization. In many cases, such change management starts with some kind of “trigger” that creates sense of urgency as mentioned in step 1. Sense of urgency usually comes from some kind of crisis.
To the author, what Kishira want to say is to take this opportunity to make and manage change to make the company competitive, and that is what the author would like to advocate, taking this opportunity.
This is to start with creating sense of sense of urgency under the current crisis (shortage of critical components attributing to the broken global supply chain), to change processes, systems, operation and how companies engage in everyday business. And the companies need to make sure to complete until the last step so that the operation with the new approach is becomes a part of their DNA and they would not go back to old way of doing business/operation.
References:-
Kishira, Yuji (April 14, 2011) Electronics Component Shortage is Serious – But No Need to Worry. Now is the Time for Companies to Become Competitive. This is Why
http://diamond.jp/articles/-/11893
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