April 10, 2011 in Business

Disaster in Japan affects businesses’ supply, demand

By The Spokesman-Review
 
Kathy Plonka photoBuy this photo

Mike Bufalo, of the Camera Corral, talks with a customer at the store in Coeur d’Alene on Friday.
(Full-size photo)

Right after the first earthquakes and the tsunami rocked Japan on March 11, Ed Schweitzer and his company managers got on the phone. They began ordering electronic components needed by Pullman-based Schweitzer Engineering Labs and shipping them to the company’s Palouse warehouses.

The privately held company, started by Schweitzer and now employing more than 2,500 people worldwide, makes products used by power utilities to ensure and protect against blackouts and power disruptions.

Schweitzer, the founder and president of SEL, said, “If we are unable to make a product because of one part out of 5,000 not arriving on time, we might disappoint a customer.”

He didn’t say exactly how much SEL is spending to gather up a six-month inventory of key electronic components that generally are made in Japan. “It’s in the millions,” he said.

In the aftermath of the destruction, many of the region’s companies are seeing delays in product deliveries, from cameras to new Camrys; at the same time many area firms realize disruptions in Japan open the door for increasing sales to a country whose domestic supplies are no longer at normal levels.

Mike Bufalo, who helps run the Camera Corral retail shop in Coeur d’Alene, said expected deliveries of new digital cameras have slowed. He hasn’t gotten an exact explanation for product delays. One distributor suggested that larger retail companies, feeling the same supply pinch, are jumping in and buying up the available new cameras.

“I haven’t seen an order come in to our store for more than a week,” Bufalo said.

Bob Mclean, general manager of Larry H. Miller Toyota in Spokane, said he’s been told deliveries of new Toyotas will be disrupted for an unknown period.

“Normally we’d be getting vehicles on a regular basis. We’re now expecting to be a little light on new vehicles through mid-May,” Mclean said.

Mclean said he’s been told Toyota plants are operating in Japan. “It’s the little suppliers who provide a lot of the systems and parts that are affected,” he said.

Also likely to face disruptions are manufacturers who rely on motors, circuit boards and chip-based controllers made in Japan.

The group includes Spokane Valley-based contract manufacturer Servatron. Sales vice president Tom Vietri said distributors have told him the tsunami disaster will have a certain effect on key parts, including those made in Japan by Texas Instruments, Murata, Panasonic and Hirose.

“One supplier has already raised their prices 30 percent in direct response to the disaster,” Vietri said. But he declined to say how Servatron will adjust prices.

One company that will feel both the upside and downside of the earthquakes is Spokane Valley-based Hotstart Inc., which makes a variety of industrial heaters used in factories, businesses and construction operations.

Trond B. Liaboe, Hotstart’s director of sales, said the company sees supply shortages looming in the short term, particularly for components needed to build the various heaters the company sells.

At the same time, Hotstart has existing customers in Japan for its heaters. And once reconstruction moves forward, Liaboe anticipates an upswing in product orders as many construction companies need Hotstart heaters for their heavy equipment.

Hotstart also sells a number of products designed to be used with power generation systems. As reconstruction and cleanup projects in Japan move forward, he says orders should increase.

The impact on farm and agriculture exports to Japan can’t be easily predicted, but certain Washington crops are likely to see a boost in sales, if not immediately.

Scott Hitchman, who has worked for three decades in Japan with Washington state’s International Marketing Program, said the 1995 Kobe earthquake hobbled Japan’s economy for two quarters. American exports soared in 1996.

Hitchman expects a similar scenario for the next 12 to 18 months.

The earthquakes and tsunami have not affected state grain exports to Japan, including Washington wheat, he said. Washington exports about 20 percent of its wheat, 950,000 metric tons, to Japan.

B.J. Thurlby, president of the Washington State Fruit Commission and Northwest Cherry Growers, said regional growers regard the events in Japan as a somber recognition of the fragile balance of a global economy.

At the same time, fruit growers here hope Japanese consumers will be able to afford the roughly $10 million they buy in Washington-grown cherries every year, Thurlby said.

If things stay stable, and especially if nuclear radiation problems are resolved, Thurlby is led to believe the cherry market will have a “better than average” year in terms of exports to Japan, he said.

“We hope to export between 300,000 and 400,000 boxes into Japanese ports,” he said.


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