Wednesday, March 16, 2011

Infrastructure Is the New Frontier

The terrible situation in Japan has caused untold human suffering and loss of lives. As the government and industry leaders assess the damage, help survivors, and prepare to rebuild, it's clear that infrastructure repairs and improvements will be needed just to get started. In other words, infrastructure is the new frontier for Japan.

This nearly-empty supermarket is fast becoming the norm throughout Tokyo and surrounding areas. Most streets are dotted with tiny convenience stores that, in ordinary circumstances, would receive daily shipments of fresh foods and ready-to-eat entrees. Vending machines are outside every major train station and on many street corners, and these are usually replenished every couple of days. Now, with train service spotty, and gasoline supplies dwindling or gone, the supply chain can barely function. The result: empty shelves, empty vending machines. And for survivors in the Sendai area, where the tsunami hit, food is scarce despite relief efforts, in part because it's simply a challenge to transport anything into this region.

Electricity is being shut off in different areas of Tokyo for hours at a time, with no end in sight, to conserve power. Imagine the impact on refrigerated foods and medicines that must be kept chilled. Friends in Tokyo say that many businesspeople are staying in downtown hotels because they must be at work but they can't get home to the suburbs. Yet how long can hotels and restaurants stay open when supplies run out and power is turned on and off erratically? Many restaurants are small businesses, and without customers or supplies, their ability to keep going in the long term is obviously in question.

To help its people and rebuild its economy, Japan will have to tackle its infrastructure problems--and quickly. The ripple effect throughout the global marketplace is already being felt. Japanese factories are big suppliers of memory chips for smart phones and other devices. Marketers that depend on Japanese suppliers are being forced to buy from other sources, when they can, and with limited supplies, prices are rising (which means higher retail prices at the end of the channel). Popular electronics products are made in Japan (think Sony Blu-Ray for example) and those factories aren't back to normal quite yet.

Car manufacturers like Toyota that operate local factories are gearing up again following nearly a week at a standstill. But they, too, rely on their supply chain partners for parts and materials. And they need a consistent, reliable power supply to keep their assembly lines going. If gasoline isn't available, Toyota can't get the parts it needs and its cars won't sell in Japan, anyway, if buyers are trying to survive or have money to buy a car but can't get gas.

Infrastructure is Japan's new frontier. It will be very difficult, time-consuming, and costly to rebuild, but Japan has done it before--and it can and will do it again.

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