The electronics industry is rebuilding in Thailand after the massive 2011 floods nearly flatlined some companies. Why?
bf sv nation blog thailand floods
We live with a great historical and biological contradiction.
Those of us here on the planet today are descended from people who
managed risk well, who heard the rustling in the grass as a
possible lion rather than just the wind. That would suggest we're
good at building a sustainable, sound global manufacturing strategy. But we're not. That's because of the other aspect of the contradiction: Most of us have optimism bias. That is, we think we're less exposed to risk
than others. It's all going to be just OK.
Water, water everywhere
Flash back more than a year to Thailand, where parts of that
country and a huge chunk of the electronics supply chain went
underwater. Many companies were staggered; the hard disk drive
industry, which concentrates a lot of factories there,
almost went toes up.
As my colleague on EBN Jennifer Baljko points
out in a great piece:
Core to the next phase of
recovery is an evaluation of supply chain practices. And, one
thing is for sure: The dusty emergency management books
sitting on some back-office shelves need serious updating.
Kevin Camelon, general manager of global
supply chain at Fabrinet, which provides precision optical,
electro-mechanical, and electronic manufacturing services,
said: This has been the
ultimate test for supply chain management. You learned about
what emergency policies were written down and what needed to
be updated. Logistics was one of the most important things to
consider. You have to know where your products and how to get
them out of the factory. How do you do that when there's water
miles wide and two meters deep?
There may be a widespread gut check going on, but let's be
honest, for the most part the strategy has become shelter in place.
Companies are building berms, walls, dikes -- almost
anything except getting completely out of the way. It's not unique
to Thailand. Taiwan is shake city and you don't see TSMC and other
fabs picking up and leaving the island. Japan too.
These regions are undeniably vital to the daily pulse of the
electronics corpus and yet we still seem to eat fatty foods, chain smoke and watch too much television.
Over lunch, John Kispert, CEO of Spansion, says: "I'm joking when I
say this but everybody went out and did a ton (or risk assessment),
they dollarized it and brought it into their board, and the board
said 'we're not going to spend money on it.'"
"Everybody's got risk mitigation for these, but the reality of the
effectiveness of being in certain parts of the world far override
the risk of natural disasters." Kispert is quick to add that his Thailand
facility was up a hill out of harm's way.View Thailand Flood Map in a larger mapSurvival instinct?
Maybe it's come to the point where our survival instincts are
actually mitigating our optimism bias, and we're actually making
really sound decisions. Or maybe we're just as stupid as ever. After
all, we have various levels of survival instinct, optimism bias and
herd mentality to wrestled with.
We can talk about relocating a whole sector like packaging to a safer region, but it won't happen in practice.Relocate?
But what if you could? The safest places to relocated might be somewhere in central Canada,
the poles, or the Australian outback, but for a vibrant business
like ours that demands a certain proxmity in its supply chain, not
high on the list.
So, if you ruled the industry, where would you set up manufacturing
options to ensure safety and stability?