Preparing, recovering from the Japan quake: One company’s response and plan

James Montgomery, news editor

May 16, 2011 — In the opening keynote at The Confab (May 16), Keenan Evans, SVP of quality, reliability, and EHS for On Semiconductor, explained how the company prepared for, and quickly mapped its response and recovery from, the March 11 earthquake/tsunami/nuclear disaster.

Among chip industry firms impacted by the Japan quake was ON Semiconductor (ONNN), which has five major facilities and 6000 employees in Japan, and a big chunk of its sales flows through there. In the company’s recent recent 1Q11 conference call, execs calculated a $10M impact to profits from the Japan quake, and widening in 2Q to a $50M dent in sales and $30M in net income.

In the above video from The ConFab, Evans summarizes the recovery effort, from the first 24 hours after the quake, when contacting and locating employees was paramount, to the aftermath, where supply chains and manufacturing operations must be reshuffled to continue business-as-close-to-usual. What’s left to be done? Evans says that the overall impact to the supply chain is as yet unknown, even though individual companies are back on-line. Evans speaks with senior technical editor Debra Vogler.

Keith Jackson, ON Semi president/CEO, told listeners that customers’ pursuit of alternative sources actually could translate into marketshare gains, though qualification of new components into electronics doesn’t happen quickly. And it’s not unreasonable to see improvement in 2H11 (CFO Donald Colvin was careful to separate speculation from actual visibility) as activity picks up, the supply chain smoothes out, and companies reverse course from revising down their build plans.

In the Confab opening keynote, Keenan Evans, SVP of quality, reliability, and EHS for On Semi, laid out how the company prepared for, responded to, and is recovering from the quake. He attributed ON Semi’s quick response and recovery efforts to an effective crisis prevention and management plan for natural disasters with four pillars: prevention, preparation, response, and recovery (P2R2). One does not prevent a >9.0 earthquake; so one must prepare as much as possible: establish a crisis management plan; develop response teams, resources, and protocols; perform regular exercises and drills, and review lessons learned. In the aftermath, priorities shift to response (protect life and safety, property, and assets) and ultimately recovery (return to normal production). Consolidating to fewer and larger sites adds risk, Evans noted, so a business impact analysis should take into account how much money flows through the sites; identify single points of failure and single supply sources, single threaded tools and sites; and identify alternatives and trade-offs. Some key infrastructure-improvement lessons were learned from the 2004 Chuetsu earthquake in Niigata: seismic cutoff valves, seismic bracing for building, equipment anchors/bracing, sway bracing, and rolling racks for work-in-progress (WIP) and inventory. (Quake-resistant technology is not new in Japan. From the same Chietsu quake, Sanyo adopted quake-mitigating improvements in facilities and procedures. Oki Electric had a system to detect initial seismic waves and quickly shut down supply lines mere seconds before more destructive energies arrive. And researchers had been exploring nanocrystalline materials for vibration-control dampers that absorb quake shocks and reduce seismic impact by up to 50%.) Preparing for a catastrophic event, one must keep global crisis management contacts updated and accessible, and map out a three-tiered response: emergency response team to evaluate safety and eventually resume activity, a crisis management team to determine the extended impact, and business continuity planning for long-term supply continuation. Evans showed a grid identifying the various impacts (human, facility, business, and media) from minor "incidents" to emergencies and severe crises. For the March 11 disaster, Evans showed ON Semi’s response timeline (and screenshots of examples):

<1hr: The company’s corporate crisis management team had been alerted, and a response log initiated on SharePoint.
2-10hrs: Sites were indicating all personnel safe, Japan travelers identified (via iJet, emails, phone, SMS), customer inquiries received, internal message to WW employees formulated, and a status message broadcast online.
10-24hrs: ON Semi’s business continuity team had convened, to go over global supply-chain operations, planning, logistics/purchasing, security/HR, internal/external communications, customer service/sales/marketing, facilities, EHS, coordination with site crisis teams, and finance/insurance. A CMT/BCP Sharepoint site was created to globally share information about the quake and response.
One day (3/11): All employees and travelers confirmed safe; only one major site ID’d with power outage/significant damage. Begin to assess local infrastructure stability, materials/chemical suppliers and alternate sourcing options.
Week one: Daily updates from all sites and functions. Confirmed no major damage to physical plant and equipment at 4 of 5 sites (three were returned to production). Identify major concern for chemicals to treat DI water and wastewater, and supply of heavy oil due to damage to suppliers and logistics/transportation (radiation leakage is also now a major concern). Pursue generators/cogeneration system options to address rolling blackouts and power stability. Address customer concerns about supply; establish humanitarian relief fund; and evaluate longer-term concerns about quartzware, polyimide, and targets.
Week two: A fourth site returned to production. Chemical supply issues solved, but H₂O₂ supply is a major issue, so multiple foreign sources are investigated. To address power stability, generators are purchased and a cogeneration system hookup is planned. Radiation levels are now at or near background at all sites. Customers still want guarantees of supply and radiation safety. WIP status is assessed. Local transportation and logistics begin to normalize.
Weeks three-four: Fifth and final site returns to production (insurance carrier visits sites); H₂O₂ supplies are secured from multiple foreign sources. Power situation further stabilizes, though generators/cogeneration will be needed for the summer season. Radiation levels are monitored on incoming supplies and outgoing shipments. Local transportation and logistics return to normal; customers receive updated delivery schedules.
Weeks five-six: All sites are ramping to full production; alternate production sites are in qualification. Generator is set on-site and cogeneration system connected. Alternate H₂O₂ source is received and qualified. Specialty substrates are secured and alternate BGA substrate source is in qualification. Long-term impact of supply chain to customers is still being assessed.

So what have been lessons learned from the March 11 quake? Conversation and cooperation were key themes — intersite and global cooperation facilitated a rapid recovery, solid relations with suppliers helped secure critical supplies, and customers greatly appreciate transparency, Evans said. To be sure there is still much work to be done, and full recovery for the industry — indeed the entire nation of Japan — will require substantial effort and time, Evans noted. But the spirit of Aizu ("never give up") will carry the day, and it permeates through the responses of On Semi’s Japan operations, he said. (He also invoked the image of Okiagari Koboshi, round-bottomed dolls that can’t be tipped over — think Weebles for a Westernized version.)

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