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‘Cluster effect’ puts global supply chain at risk, says expert

[ July 19, 2012   //   ]

The geography of the modern global supply chain is making it vulnerable to the weather, says leading consultant. Dave Alberts, director at UK-based ‘end-to-end’ supply chain experts Crimson & Co, says that concentration of manufacturing in specific areas of the world makes supplies of many components particularly vulnerable to disruption.

For example, he says, a quarter of the world’s hard drives come from a relatively concentrated area around Bangkok. “Clearly there are disadvantages to sourcing products from countries that suffer from extreme weather conditions, especially when supply is so geographically focused,” Alberts says.

He adds: “Last year’s Tsunami in Japan wreaked havoc on businesses and supply chains alike, with widespread affects across the globe. Now the floods in Thailand have caused two-thirds of the country to be affected, initiating factories and supply chains to face disruption as the severe flooding impacts Thailand’s economy. Companies such as Western Digital and Honda Motor have been forced to stop production in central Thailand due to disruptions to local supply chains and some Japanese car manufacturers such as Toyota and Nissan are also experiencing production disruptions. Sony temporarily closed its facility in Ayutthaya and Seagate Technology has also said its production of hard drives in this quarter will be effected by supply chain disruptions, and that supply will be constrained until at least the fourth quarter.”

The weather is also already affecting other global supply chains. Marks & Spencer, Starbucks and The Body Shop are just a few examples of companies who have contributed to research on how flooding, drought and other extreme weather conditions are threatening supply of particular goods.

Unfortunately, Alberts explains, “there is no way in which to fully prepare for such natural disasters as they are unexpected.” However, their frequency justifies having contingency plans wherever possible and organisations must attempt to protect product supply through efficient, planned out strategies and best practices. “Research into the effects is a good start and companies participating in this are clearly at the forefront of successful and adaptive supply chains,” he continues.

The jury is out on whether these events are linked to global warming, Alberts says, “but in board rooms around the globe supply chain resilience is back on the agenda.”

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