The Floods in Thailand and Contingency Planning
Monday, October 31, 2011 at 12:00PM There were floods in Thailand the past week. The floods were the result of inordinately heavy rains. There is no place for the rain water to go as the intense population growth have minimized the flood plain. The paving and building have also minimized the amount of water that can be absorbed by the ground. It is definitely a story we should follow from a humanistic standpoint as over 350 lives have been lost and countless numbers of people have had their lives and businesses disrupted. The property loss and clean up costs will be astronomical.
The impact of these floods have caused ripples in the global supply chain. As it turns out, Thailand is a major source of some automotive and computer components. The auto industry in Japan has been trying to catch-up for lost production due to the earthquakes there earlier this year and now they are impacted by this. There were reports that Toyota was suspending all production in the US for a week. They have also curtailed overtime in their Japanese factories and cut back their production in Vietnam and the Philippines. Honda halted their production of vehicles in Malaysia. Both companies operate factories in Thailand and those factories have been idle during these floods. Both companies rely on a supply base in Thailand for about 100 parts. Shortages of just one part out of thousands of components can shut down an automotive assembly plant.
Perhaps more importantly, Thailand is a major source of hard drives and thus more of a choke point for the computer industry. Western Electric has two plants in Thailand dedicated to hard drives. These factories supply 20% of the hard drives globally. The factories are not currently producing and Western Electric has stated it cannot fully access the damage and provide an estimate when the factories will return to full production. Acer and Samsung seem to be mostly affected by this shortage. Acer has even raised prices immediately much like orange juice seems to go up in price the minute a frost is reported in Florida.
We have commented on the global supply chains most companies are now part of . We have discussed in this blog the difficulties of a natural disaster in one part of the world influencing global commerce. From the volcano in Finland to the above mentioned earthquakes in Japan and now to these floods in Thailand we have commented on risk, disruption management, and contingency planning.
Luckily, none of these disruptions have been too long. The recovery has been quick in most cases. There has been no need for contingency planning beyond what we have recommended and what most companies do: Pull the executive team together and have “what should we do” meeting.
We like to remind our clients and readers to at least think about contingency planning when these types of disruptions occur to others. Take a moment and read our Practical Guide to Contingency Planning and add contingency planning on the agenda of your next management team meeting. Your organization will be better off with it.
Reader Comments (1)
http://news.yahoo.com/apnewsbreak-panel-says-wild-weather-worsens-084540799.html
"WASHINGTON (AP) — Freakish weather disasters — from the sudden October snowstorm in the Northeast U.S. to the record floods in Thailand — are striking more often. And global warming is likely to spawn more similar weather extremes at a huge cost, says a draft summary of an international climate report obtained by The Associated Press."