The following is this author’s weekly guest commentary appearing on the Supply Chain Expert Community web site.
Two recent research reports better catch the attention of supply chain management and corporate operational risk leaders. Then again, the predictions may already be known, but not absorbed by senior management. The potential for a major supply chain disruption exists in many existing and emerging supply chain geographic concentration areas, including in all likelihood, your supply chain.
A posting appearing on the Environmental Leader LLC web site makes reference to recent studies and charts produced by global risk analysis firm Maplecroft. The analysis indicates that the countries of: “Bangladesh, the Philippines, Myanmar, India and Vietnam are among 10 countries where supply chains are at greatest risk from natural hazards such as flooding, earthquakes and tropical cyclones.” That quote captured our Supply Chain Matters attention for two significant reasons. First, these countries have been often referenced as being emerging candidates for current and next era of low cost manufacturing for certain industry supply chains, or an important industry sourcing hub. In the case of the Philippines, it serves as a concentration for semiconductor packaging, test and assembly activity as well as a building concentration of external customer support centers. Second, unusually severe monsoon driven rains in the past several weeks have caused severe flooding conditions in these countries, the most severe of which has been the Manila area. Severe flooding conditions inundated that city forcing the evacuation of thousands, along with interruptions in transportation and business activity. The risk is thus in the moment, and ongoing.
Maplecroft also names the countries of Japan, China, Taiwan and Mexico as having the highest economic exposure to natural hazards in economic terms. No need to reiterate how crucial these individual countries are as supply and production concentrations among industry supply chains, particularly China. When this author conducts workshops or provides consulting in supply chain risk management, I can often get total attention of an audience by posing one question: As devastating as the 2011 floods were in Thailand, what if a similar flooding event occurred in China?
While on that specific topic of China, a posting this week on Epoch Times, makes reference to a study published by the Journal of the International Society for the Prevention and Mitigation of Natural Hazards (obviously have wide letter head). That study identifies Shanghai, the largest city in China, and indeed in the world, as the most vulnerable global area to major coastal flooding, surpassing cities such as Bangkok, Dhaka and Manila. The researchers in this study expanded their assessment criteria beyond the hydrologic factors for flood surges, to include “the effect it actually has on communities and businesses and how much a major flood disrupts economic activity.” The supply chain community knows the critical importance that the greater Shanghai area has both as a center for automotive, industrial, heavy equipment and other types of manufacturing along with serving as the host region for the busiest inland and export container port in the world.
In previous a prior Supply Chain Expert Community and Supply Chain Matters posting, I urged manufacturers, service providers and their associated supply chain teams to have active supply chain risk identification and mitigation process frameworks augmented by robust response management capabilities. Whether you agree or disagree with any one study or methodology, the mounting evidence and occurrence of a supply chain disruption is becoming rather profound. Once again, insure your organization has a plan.