The floods in Thailand have become this month's weird weather event. How does the economy of a major country, whose capital city, Bangkok, is one of the world's significant destinations fall prey to devastating floods? New Orleans? Well, ok, it's a tourist town that's been living on borrowed time for 200 years. But Bangkok? What's up with that?
Certainly there are superficial explanations: poor planning and government mismanagement, chaotic urban growth, unchecked development, corruption, insurgencies and budget woes. But we're only talking about this month's weird weather. Let's not forget the rest of the year: tornados, hurricanes, tsunamis, snowstorms, droughts, more floods. Each one bigger and more historic than the next. And let's not even start with earthquakes.
No, the meta-explanation is that climate change is upon us and business is starting to take notice. The Japanese earthquake and tsunami were the first to signal supply chain disruptions of critical parts. Earthquakes are not the result of human activity, as far as we know, but the planning decisions that led to siting of facilities, the design of roads and ports and the other ephemera of modern management were certainly impacted. And in turn, had an impact.
Now we see the Thai floods affected inventories of critical hard drives and other parts. We're dependent on Thailand? Who knew? Business is waking up to the liabilities and is factoring these disparate snippets into a more comprehensive whole. Energy and transportation prices, human costs and political risk are all being fed into the enterprise risk management calculations.
It may simply be that the globalization of the economy has become too risky and therefore too expensive in light of climate change impact. It is probably too early to reach a definitive conclusion, but we are already seeing companies talking about bringing production back to the US and Europe. Scenario planning experts are in great demand. But the fact is that we made the down payment on these outcomes decades ago. The bill is coming due and businesses are trying to keep the cost down however they can. JL
Marquisa Kirkland reports in Hyphenet:
Catastrophic floods in Thailand are causing a ripple effect in the hard drive world. While heavy rains and flooding isn’t exactly new in Thailand, a third of the country has been inundated by water and over 360 people have been killed due to the worst flooding in over 50 years.
As a result, Thailand-based hard-drive manufacturing facilities for Western Digital and Toshiba have been shut down. According to reports, some of the facilities have been flooded with water running up to 5 feet deep. The damage doesn’t stop there either.
Nidec, the company that supplies the small motor that spins the disk in hard disk drives, has also had to shut down two of its manufacturing plants due to the flooding. Nidec’s halt in production could have far greater consequences considering they supply the motors used in an estimated 70-80% of the world’s hard drives, including those produced by Western Digital, Toshiba, Seagate and Hitachi.
Although Western Digital and Toshiba have facilities based elsewhere – like the US and Malaysia – which they can utilize in order to continue producing hard drives, 60% of Western Digital’s hard drive production is located in Thailand, along with half of Toshiba’s production numbers. Either way, there will be a drop in the number of hard drives that both companies pump out.
As a value-added-reseller, we’re already starting to feel the sting of a hard drive shortage in the distribution chain as some hard drive prices have already rose or are now out of stock.
Hopefully the waters begin to recede so Western Digital and Toshiba can assess the damage, replace or repair damaged equipment and get things back up and running.
Until then, prepare to fork over more money for hard drives in stock or wait until they’re actually back in stock to begin with.
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