Blog
Silicon Valley Nation: Maybe we're just stupid
Brian Fuller
8/24/2012 5:07 AM EDT
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.
Risk analysis
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 map
Survival 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?
|
|
|
|
|
Navigate to related information
R0ckstar
8/24/2012 10:18 AM EDT
I think you have the right idea with Canada. Setting up shop just off the Hudson bay gives you access to the northwest passage, and with the global warming and all, it's also destined to be a tropical paradise as well. Eh?
Sign in to Reply
Brian Fuller2
8/24/2012 12:41 PM EDT
@R0ckstar... good point. Plus Canadians are delightful, friendly people. And I think some tech hubs in the country (Vancouver in particular) aren't getting the credit they deserve.
Sign in to Reply
dylan.mcgrath
8/24/2012 12:16 PM EDT
To me, it's not surprising or particularly alarming that the electronics industry is going with business as usual in the wake of the floods. The companies have well trained employees there (who buy the way are happy to have the work). Most of the facilities are intact, and much of the equipment. You can't hide completely from natural disasters (even in Canada). Best you can do is fortify your facilities to hopefully better withstand the next one.
Sign in to Reply
David Ashton
8/25/2012 5:51 AM EDT
Australia's had its share of floods recently as well. And I thought it was just one big solid piece of rock, but there have been a few earthqukes here too.
Sign in to Reply
http://www.lulu.com/spotlight/poconoarmchairreview
8/26/2012 5:58 PM EDT
"the reality of the effectiveness of being in certain parts of the world far override the risk of natural disasters"
I think everyone would agree that business hates ignoring profits, and will fill a space that offers to produce a profit. Even though the way to lower the risk of local disasters is to spread operations out geographically, that entails higher overhead to manage the facilities. (Remember the great drive to consolidate industries in the 90's? It helped drive stock prices of some consolidating companies to crazy levels.)
On the other hand, more automated factories will mean it will be easier to geographically diversify operations, which will probably lessen the need for intermediary warehousing, and so shorten the supply chain, which should reduce costs. By shrinking and multiplying operations via automation, it will be possible to be nearer to markets while maintaining the safety of place-diversified factories.
Sign in to Reply
I_B_GREEN
8/31/2012 12:18 PM EDT
Murrata is moving there design center to this very area out of the states.
Sign in to Reply