The country of Thailand, which has become a manufacturing hub for many Japan based manufacturers, continues to be impacted by extraordinary monsoon floods, and these floods have now caused supply chain disruptions across automotive, electronics and high tech and other manufacturing sectors.
Teams with supply chains that extend to Thailand, or who have key suppliers whose supply chains include Thailand should initiate inquiries and, if required, contingency and risk mitigation plans.
At least 281 people have lost their lives since July and there are now growing fears that the capital city of Bangkok could be threatened. Weather forecasts have not been optimistic with potentially worsening rains in the coming weeks. According to published reports in both the Financial Times and the Wall Street Journal, (paid subscription or metered views may be required) the impact to companies is rippling through global regions as supply chains incur stoppage of production. Many assembly plants were forced to close and similarly may be impacted by suspensions from key supplier plants.
In the auto sector, Honda has been especially impacted with reports that it’s Ayutthaya based automobile and motorcycle plant have been flooded, potentially impacting close to 5 percent of global output. Honda is considering whether to re-route parts from its Japan facilities to Thailand and other impacted supply chain facilities, such as India. According to the FT and WSJ report, Toyota Corp. and Ford Motor Co. have temporarily suspended production at respective Thai facilities, with Toyota having to close three facilities impacting close to 8 percent of Toyota’s global production. General Motors and Nissan are reported to be still operating normally. The Rojana Industrial Park, located north of Bangkok where many parts suppliers are clustered was swamped by floodwaters.
High tech and image processing companies are also impacted. Nikon Corp. incurred a flooded production facility that produces single-lens reflex cameras and lenses, while a printer factory of Canon Inc. was also impacted. Earlier this week Western Digital had to suspend disk drive manufacturing to protect its facilities and is assessing impacts among its associated suppliers. The Sun Daily of Malaysia reports that the immediate impact on Malaysian high tech manufacturers is expected to be worse than the March tsunami that occurred in Japan. The extraordinary wet season is expected to continue in the next few weeks but businesses note that recovery could be rapid once the floods subside.
While the overall impacts of this natural disaster event in Thailand are yet to unfold, some initial observations are warranted. Some manufacturers are noting that they have adequate safety stocks to buffer the impact for the next several weeks. That obviously points to robust inventory and contingency planning. Other companies are obviously initiating their broader business continuity and supply chain risk mitigation plans. This is yet another reminder of the critical importance of having such plans, and whether inventory planning needs to be revisited in the light of more frequent occurrence of natural disaster occurrences. The year thus far has featured severe flooding events involving China, Japan, and now Thailand. India is also experiencing extraordinary flooding.
Supply Chain Matters will continue to monitor this supply chain disruption event and will feature additional commentary as more information comes forth.
In the meantime, readers are encouraged to share your first-hand observations either in the Comments section affixed to this posting or sending us an email update. The email address is info <at> supply-chain-matters <dot> com.