Few global multinationals have been more vocal and forthright in their ambitions to take on climate change than Apple. Yet Apple’s vast supply chain — comprising more than 400 facilities across 180 regions in nearly 30 countries– stands in the path of some of the most damaging effects of climate change itself, .
Based on global databases of power-generation, extreme weather, flood zones, economic impact and carbon emissions, the very regions most vulnerable to climate change are those with the highest concentration of manufacturers, writes Bloomberg,com (Sept. 26. 2023). This risk isn’t exclusive to Apple. Global companies including Samsung, Sony, and Dell procure from many of the same vendors.
Put simply, the belt of the planet where natural disasters will intensify most rapidly due to global warming — from floods and heatwaves to increasingly powerful cyclones — is precisely the one where Apple has built its manufacturing footprint. It’s most visible in a swath of Asia from India to Japan.
We’ve already seen the damage weather disasters can do to multinational manufacturing operations. Floods across Thailand in 2011 shuttered more than 14,000 businesses, throwing a wrench into global automotive and electronics supply chains that were dependent on low-cost manufacturing. It was the biggest flood disaster in insurance industry history, causing about $55 billion of losses and slowing deliveries of Apple computers as component suppliers were forced to suspend work.
Much of the world has since made efforts to prevent such a disaster. Toyota, a pioneer of JIT, raised the time it held onto its inventory from 30 days to 49 now. Apple’s inventory days increased from 5 to 11 since the 2011 floods. Overall, larger inventories make supply chains more resilient to disaster — but they also cost money because of capital tied up in warehouses. Despite this, the countries in Asia where Apple’s supply chain has been built are also some of those that will be most prone to floods. Power cuts pose similar risks to manufacturers. A heat wave last year left India’s grid on perilously thin margins as coal-fired generators ran short of fuel.
Apple’s plans for greening its manufacturing network illustrate the challenge. The company has called on its suppliers to follow its own path to zero-carbon power by 2030. Yet many of the countries on which it is most dependent have unusually high shares of fossil fuels in their grids, with coal accounting for more than 60% in China and Indonesia, and nearly 75% in India.
Classroom discussion questions:
- What can Apple do at this point?
- What technique in Supp. 11 in your Heizer/Render/Munson text can be applied to analyze potential natural disasters?