Thai Flooding Takes Toll on Global Manufacturing
Torrential flooding in Thailand in November, which killed more than 600 people, knocked out numerous factories that produce parts used in factories all over the world, underscoring once again the fragile nature of supply chains in the manufacturing sector. The disaster has had an impact on production in factories as far away as the United States, bringing further hardship to a sector that had just recovered from the impacts of the March 11th earthquake and tsunami that hit Japan, disrupting supply chains for months.
The flooding in Thailand would have brought disruptions to manufacturing anyway, but the impact was somewhat worsened by the fact that many factories had just returned to normal operating capacity following the disruptions caused by the Japanese disaster. Together, the two disasters have shown a spotlight on relatively unknown companies that produce key components for everything from consumer electronics to automobiles.
Invented by Toyota during the era of globalization, the lean supply chain essentially decentralized manufacturing with a multinational network of smaller factories that supply big manufacturers with components, allowing those factories to concentrate on the finished product. This has sped up the manufacturing process, but also made manufacturers more susceptible to natural disasters, even when they occur in areas where they do not have production facilities.
The economic impact of the Japan earthquake and Thai flooding are still being calculated, but German insurer Munich Re has estimated the earthquake and tsunami fueled losses of over $200 billion in just the first nine months of this year, while an official in Thailand said the flooding there has already cost $30 billion.
|
