Global Supply Chain

December 13, 2011 by staff 

Global Supply Chain, The image to the right is almost surreal: It shows part of a Honda auto factory in central Thailand, one of the largest in Southeast Asia, swamped under 15 feet of water, brand-new cars floating in the currents. The devastating November flooding in Thailand, which killed more than 600 people, also knocked out some of Honda’s key suppliers, including electronics component maker Rohm & Co., forcing production delays in plants as far away as Ohio.

The Thailand floods alone would test any company’s operational prowess; now consider that much of the auto industry and many technology companies are still recovering from the earthquake and tsunami that tore through north-central Japan in March, shutting down dozens of contractors and subcontractors that supply everything from glass to test parts.

The twin tragedies in Asia have shone a spotlight on the often anonymous but incredibly important niche companies whose products and parts go into every MacBook or Prius. Invented by Toyota Motor Corp., (TM) and perfected in the era of globalization, the lean supply chain completely decentralized manufacturing: Big manufacturers developed a multinational network of specialists to supply them with parts and to make sure those components arrived at assembly plants at the moment they were needed. When things go as planned, the system benefits everyone in the chain: The assembly plant is more efficient (no pesky inventories to manage), suppliers keep the cost of parts down by locating in regions with cheap labor, and consumers enjoy lower prices.

But natural disasters such as the earthquake and tsunami reveal just how fragile this carefully crafted ecosystem can be. As Bob Ferrari, a leading supply-chain consultant, puts it: “You never want to hear about the guys who run the supply chains for multinational companies. When you do, usually it means something really bad has happened.”

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