Workers at Japanese hard-drive maker Nidec Corp.’s plant in Thailand have a remedy for the flooding that has shut 1,000’s 
of factories there. They use narrow wooden boats to ferry boxes of delicate motors across a flooded plain to a truck that will haul them to Bangkok. But The Wall Street Journal (Nov.3, 2011) asks: “Are the companies to blame for some of the economic costs of the disaster”? Some experts say, yes, that flooding in Thailand should serve as a warning to companies world-wide: thin supply chains for critical components are vulnerable to disasters.
“Companies never see the big picture, and see where the potential problems in their supply chains might be; and this is especially true as these supply chains become more geographically dispersed”, says a McKinsey & Co. partner. Thailand’s flooding (as did Japan’s earthquake) has ricocheted around the world in ways few businesses expected. For example, about 1/4 of the world’s hard-drive output is under water. And Honda’s main Thai plant is semi-submerged, choking off the supply of key components to factories around the world. (The Honda factory in Brazil is cutting production by 1/3). In all, 7 of Thailand’s industrial parks are flooded.
Supply chain experts say much of the disaster “could have been averted if companies themselves hadn’t been so focused on saving money by using lean supply chains”. In a country prone to major flooding, insurers may now be reluctant to offer coverage, forcing manufacturers to move out. Nidec has already announced plans to transfer some output to the Philippines and China, even as its workers in Thailand paddle out to salvage what they can from the plant.
Discussion questions:
1. Discuss the danger in “thin” (lean) supply chains.
2. What is the solution for the OM manager?