Excessive flooding in Thailand has not only made life a challenge for locals, but global businesses are experiencing hardships due to the harsh monsoon season as well. Many technology suppliers are located in Thailand and have suffered because of the massive flooding and have caused a significant supply chain back up. Several have lost large amounts of inventory and suffered excessive property damage. Some say it could take up to a year for these plants to begin operating at normal capacity again.
Two industries that heavily rely on Thailand for manufacturing components are the auto industry and the computer industry. Many of the largest hard-drive manufacturers in the world are located in Thailand. With massive amounts of water filling these facilities, hard-drive producers around the world are experiencing missed deadlines and an increase in costs. This has led to a shortage of products and increase in prices for consumers. However, the hard-drive component factories that have not been affected by the weather will experience a welcome boost in margins as prices rise due to the drop in supply.
Several auto makers have also been affected by the floods with many of their suppliers out of commission. Both Honda and Toyota are seeing large delays in their manufacturing schedules and have already begun to slow production as a result of the floods in Thailand. After the devastating tsunami in Japan had already forced these auto makers to scramble to meet demand, the Thailand floods have really pushed them to their limits. At this point, both have slowed production and don’t expect to return to full capacity until next year.
The floods in Thailand and the tsunami in Japan remind us that these types of disasters are not only devastating for the citizens of each country, but also for global supply chains. The dependence that global companies have on international suppliers in great, and when natural disasters strike they are often at the mercy of mother nature. This causes price hikes and strain on customers. Due to this great dependence, setbacks like the Thailand floods have caused companies to look at diversifying their suppliers to ensure that when a disaster strikes in one country, suppliers in other countries will be able to pick up the slack.