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Business Systems and Operations Management

Business Systems and Operations Management

The main aim of businesses is realising a competitive advantage over other companies to attract most customers, increase sales and profit margins. To reach these goals, the management team must choose the most suitable locality where they can locate the manufacturing capacities. Some companies only consider the factors related to raw materials, target customers and location of the suppliers, and fail to assess the vulnerability of the location to the effects of natural disasters, for example, tsunami, volcano eruptions, and extreme weather, to name a few. Such an omission in strategic planning can lead to huge losses of the company when a disaster strikes. Fukushima nuclear disaster is a vivid example of the effects of natural disaster to normal business operations in light of ARM Holdings as a case study.

Background of the Event and the Loss Suffered

Fukushima nuclear disaster refers to the energy accident that took place in 2011 at the nuclear power plant in Fukushima, Japan, and affected the normal operation of ARM Holdings and other companies. ARM Holdings is one of the top technology companies of the world that focuses on designing ARM processors, central processing units (CPUs), which are used in making mobile phones (Davis 2008, p. 11). As a microprocessor supplier, ARM Holdings also creates and licenses its technology instead of creating and selling its CPUs or microcontrollers, similarly to other companies, such as Intel, in their business performance. Although the company’s headquarter is located in Cambridge, UK, ARM Holdings have offices in different cities across the world, including Yokohama in Japan. The manufacturing sites in the country supply ARM-based chips to different mobile phone manufacturers across the globe (Davis 2008, p. 15). Considering the fact that Japan has some mobile phone manufacturing companies, including SoftBank Corp, Disney Mobile, and Willcom, ARM Holdings has many customers in this country. ARM Holdings supplies a large quantity of its products to various mobile phone manufacturers in Japan.

The Fukushima disaster disrupted the supply chain of the company that caused delays when different partners were transporting various products across the country. The disaster affected the supply chain in two main ways, which related to the power and fuel shortage. The accident affected the main source of power to different industries and homes (Holt, Campbell & Nikitin 2012). This issue negatively impacted the normal operation of various industries across Japan due to the lack of a reliable and adequate source of power supply. Most phone manufacturers, who are main customers of products offered by ARM Holdings, had to suspend operations for several weeks. This situation has meant that those companies could not receive any supply for the duration they were not in operation.

The disruption of the main source of energy in the major power station at Fukushima reduced the supply of energy to an oil refinery in Japan and led to the fuel shortage across the country. In Japan, fuel is used as the main source of energy in the transportation industry, particularly road, air and water transport. Thus, the fuel shortage negatively affected the movement of product and people from one location to another. This issue caused the delay when transporting the consignment from the roducers to the consumers (Kumar, 2015). Being one of the companies affected by the Fukushima disaster, the ARM Holdings supply chain was greatly affected. The company was unable to supply its product to different companies, particularly mobile phone makers in Japan. This circumstance reduced the company’s sales and resulted in sufficient losses, which caused the company’s share price to fall by 4.14% (Kumar, 2015).

Reasons of ARM Holdings Investment in the Country Located in the Earthquake-Risk Area

The main reason for ARM Holdings to concentrate so much capital in a nation located in a high earthquake-risk area relates to the fact that Japan is one of the countries with a large number of technology companies from across the world. ARM Holdings have focused on Japan as the country that has a ready market for its products because of the existing companies using chips in making different products, including smartphones (Davis 2008, p. 15). Although the country is prone to earthquakes, the management team of ARM Holdings decided to take a risk of investing in Japan because of the increased return on investment that company could realise due to increased sales.

The other reason that influenced ARM Holdings to invest in Japan relates to the availability of the workforce with knowledge in advanced technology. The country has always focused on ways of improving the level of technology used in different sectors (Gottlieb 2013). The Japanese government has invested heavily in the technology-related education with the aim of increasing the knowledge and understanding of technology. As a result, the country has produced many experts in the field. The management team of ARM Holdings found that the firm would benefit from the knowledge and skills of experienced specialists in the technology sector. These experts would help the company in improving the design of their CPUs and creating other innovations.

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Supply Chain Management Lessons Learnt from the Fukushima Disaster

The main lesson learned from Fukushima is that there is a need to employ multiple modes of transportation on a matter related to supply chain. When the Fukushima disaster took place, power supply was disrupted that led to the fuel shortage across the country. As a consequence, some modes of transportation, particularly road transportation, was greatly affected (Hofmann & Kotzab 2010, p. 307). This issue has greatly impacted the supply of ARM Holdings’ products to various customers. The factor indicates that overreliance on one mode of transportation can result in huge loss in case that mode is affected by the natural disaster. It is important to focus on different modes of transportation simultaneously to ensure that supply chain remains active even when one mode of transportation is interrupted.

Another important lesson learned from the Fukushima disaster relates to the importance of outsourcing some production. In this case, it is necessary for ARM Holdings to create a production plant in Japan. This approach would help in ensuring that the supply chain is not affected in case of a natural disaster.

Risks of Highly Efficient and Lean Supply Chain

ARM Holdings focuses on the high-efficient supply chain to ensure that the customers are offered the product they have ordered on time. In the case of the Fukuushima disaster, the company experienced the consequences of the risks related to poor communication. Due to the power interruption, there was a communication breakdown between the producer and the consumer. Additionally, the high-efficient supply chain suffered from disruption in the medium of transport resulting to delays in distribution of products to the customers.

ARM Holdings has employed a lean by ensuring that the quantity of goods produced in the company matches the market needs. The main risk of lean supply chain, especially during the Fukushima disaster, related to poor decision making. Due to the communication failure between the company and customers, the management team lacked the adequate information. This issue led to availability of less production as compared to customer needs. The clients were not satisfied, and the factor negatively affected their loyalty to the company. The situation means that a single catastrophic supply chain can destroy years of profit or decrease the market share.

   

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Enterprise System

ARM Holdings has employed enterprise planning systems (EPS) to automate various operations in the organisation with the aim of managing the business operations. EPS has helped the company in coordinating the product planning, manufacturing, marketing and sales. Due to the Fukushima disaster, the communication process was disrupted affecting the coordination among various operations in the organisation (Davis 2008, p. 18). This framework can help in dealing with a accidents, similar to the Fukushima disaster, by using the available and adequate information in making decisions, which can ensure that the normal operation in the organisation is restored.

Conclusions and Recommendations

In accordance with the findings of the report, a natural disaster has a catastrophic effect on the operation of various organisations. The Fukushima nuclear disaster is a perfect example of disastrous impacts of natural disaster on the normal business operations. The energy accident took place in 2011 at the nuclear power plant in Fukushima. This disaster affected many companies, including ARM Holdings, which focuses on designing ARM processors (CPUs). The particular impact was linked to the supply chain because of the power and communication interruption. The event led to huge loses to ARM Holdings indicating that a single catastrophic supply chain can destroy the years of profit or decrease the market share of any organisation. Based on the effect of the Fukushima disaster on the operation of ARM Holdings, it can be recommended that the management team of the company should assess the vulnerability of the area in relation to occurrence of natural disasters. This prediction would help in avoiding the effects of natural disaster on the normal business functioning. Moreover, the company needs to focus on several modes of transportation to ensure that supply chain is not heavily affected by the natural disaster. In addition, employment of enterprise systems is crucial to help in automating the operation in the company and making sure that the capacities work in a smooth manner in spite of occurrence of any disaster. Finally, there is a need for investing on the most suitable supply chain to ensure that distribution of the finished product to customers is not affected in case of a disaster.

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