Mother Nature has been tough on us this year. The recent floods in Thailand are just another example of how she can wreak havoc. With the flood waters in the Nava Nakorn Industrial zone currently at two meters, 250 factories—including Western Digital, Toshiba, Nestle, Toyota, Seiko and Casio, as well as many others—have suspended operations.
In today’s age of global supply chains, when disaster strikes, it’s not just local companies that are impacted.
Knowledge & Skills: These disasters are felt on a local and global scale. In Japan, 15,824 people died in the earthquake and tsunami earlier this year—more than five times the casualties of September 11th. How many of the victims were product or service experts or skilled workers? How many workers fled the country? In addition to the devastation of lost life and property, years of knowledge and expertise may also have been lost.
Competition: As the hard disk drive (HDD) industry (which supplies PC makers) recovers from the earthquake in Japan, it’s facing new floods in Thailand. The rising waters are creating havoc for Western Digital Corp and Seagate, the two largest providers of HDD’s. Sixty percent of Western’s drives come from Thailand and this isn’t the only factor hitting the HDD market. With the current shortage smack in the middle of the upcoming holiday season and rising prices, this could provide an even bigger window for competitors—think Apple—to gain an advantage.
Manufacturing: In March, US auto manufacturers started to run out of parts made in Japan. The disasters in Japan are forcing the auto industry to re-evaluate. Suzuki Motor Corporation has decided to spend serious money to relocate facilities away from earthquake and tsunami zones as well as nuclear power plants.
With global manufacturing comes the heightened risk of disruption. Companies need to think about how much stock they should have on-hand and whether multiple vendors can supply the same part in case one supplier is suddenly shut down. Do we need to reevaluate just-in-time delivery?
Product Quality: Disruptions can cause all types of repercussions. When supply is limited, prices increase, products are not in stock and your customers look to the competition.
Product quality may suffer as companies scramble to get orders out the door after a disaster. Poor product quality could tarnish your brand for years to come.
In global sourcing, flexibility and planning is becoming much more important. Is your company ready for the next curveball?
Photo Credit: Luzi Matzig on Flickr