Just-in-time manufacturing questioned once more as Thailand floods threaten global supply chains

For the second time this year, the viability of just-in-time manufacturing is being questioned. First it was the horrific Japanese earthquake and tsunami that caused disruptions in global supply chain. Now it is Thailand, as the country suffers through one of the worst flooding in five decades.

The floods began in July, but have steadily worsened throughout October, and are mainly limited to northern and eastern areas around Bangkok. However, these affected areas are home to hundreds of manufacturing facilities that are now completely flooded. The automotive and hard disk drive manufacturing industries appear to be among the hardest industries affected.

Japanese car makers that had just started to recover from the earthquake and tsunami are now facing shortages of key parts made in Thailand. Toyota and Honda both have had to halt production at facilities even in North America because their Thai suppliers are flooded.

The hard disk drive manufacturing has been particularly affected. Thailand is the second largest country for production of hard disk drives after China. Toshiba, the fourth largest producer of hard disk drives halted all of its production in Thailand, however, Seagate, the second largest producer of hard disk drives, has not had to stop production because its factories are in the northeast where flooding has been less severe. Shortages of supplies are expected to last into the first quarter of 2012. Prices have already increased 20%-40% and will probably increase even more depending on how long the flooding lasts and how quickly facilities can reopen.

Transportation throughout the country remains difficult. As roads and railroads remain underwater, Bangkok’s largest airport, Suvarnabhumi International Airport continues to operate. It is fortunately located in an area not affected by the floods. However, the country’s second largest airport, Don Mueang Airport is closed after floodwaters reached the runways.

Just-in-time manufacturing, used to reduce the need of holding expensive inventories, is being questioned once again. When one link is broken, it can disrupt production on a global scale. Indeed, it is a risk in which many manufacturers take because of competitive and/or cost reasons with the end user usually enjoying lower prices as a result. Be that as it may, it is always vital for companies of any type to have a disaster preparedness plan ready to act upon when a disaster of any type occurs. Although it will not solve all problems, it will allow companies to have an already well-thought out plan to implement in order to reduce as much as possible any disruptions in their supply chain.

Quelle: eyefortransport
Portal: www.logistik-express.com