You know the saying: "Those who
fail to learn from history are
doomed to repeat it."
disasters that buffeted the supply
chain in 2011 are now history,
albeit recent history. In March of
that year, a massive earthquake, subsequent tsunami,
and consequent nuclear disaster in northern
Japan severely disrupted both the electronics and
automotive supply chains. Then, in the fall, monsoons
led to severe flooding in Thailand, swamping
hundreds of factories, including several that
made critical hard-disk-drive components.
(This story was originally published as part of EDN's Top 25 Global Electronics Component Distributors special report.)
The big question two years later: Has the industry
learned its lessons? Would similar disasters
today have such dramatic impacts? The year 2012
was mild, with a lower than usual number of dramatic
weather events (with the notable exception
of Superstorm Sandy in the United States), so it's
easy to become complacent. But that's dangerous,
if studies of climate change that claim increasing
numbers and magnitude of violent weather events
The truth is, only time will tell whether the
supply chain is any better prepared today than in
2011. Some analysts say the events got the industry's
attention enough to initiate some changes. But at
least one analyst thinks the electronics industry is
doomed to repeat history.
After 2011, several of Technology Forecasters'
clients -- especially midsize OEMs and lower-tier
contract manufacturers -- "came to us and said,
'We've had disaster preparedness on our to-do list for years; now we need to put it into place,' " says
Pamela Gordon, president of the consultancy."
Bob Ferrari, managing director of Ferrari
Consulting and Research Group and founder and
executive editor of the blog Supply Chain Matters,
also thinks the supply chain has learned from the
2011 disasters. "It was like our 9/11," Ferrari says.
"Although supply-chain organizations used to talk
about the implications of a major supply-chain
disruption, we had never really seen one until
Consequently, companies are making some
changes, according to Gordon and Ferrari. Specifically,
at least some companies are doing the
Looking beyond Tier 1 suppliers
Japanese tsunami, in particular, exposed real
vulnerabilities in the lower tiers of the supply
chain. OEMs initially were reassured when they
learned that their first-tier suppliers weren't badly
impacted, only to suffer later when they realized
the disaster had wiped out some "40% of the
silicon wafer supply," says Ferrari. Today, companies
are looking deeper into their supply chains
to identify the components and materials that are
sole-sourced or where the supply is concentrated
in a certain geographic region (such as disk-drive
manufacturers in Thailand).
Emerging regulations and political pressures
are already pushing companies to get "full material
disclosures" [FMDs] from their suppliers, which
identify the countries of origin of materials and
components, says Gordon. Now companies are seeing how useful these disclosures can be in a disaster.
With FMDs, OEMs immediately know whether a given
area is a key source of certain parts or materials, and can
build alternative sources into their disaster planning, she
Improving communications plans
The 2011 events
exposed shortcomings in communication; it was more
complex and took much longer than companies anticipated,
says Gordon. Companies realized they needed
better plans for how to communicate (if lines were down
or power was out) and with whom they should be communicating,
says Ferrari. It was the start of a new awareness
"that social media can be a good alternative in communicating
during a crisis," he notes. Since 2011, more companies
have started to monitor media such as Facebook and
Twitter to get alerts when disasters happen, to get the word
out to employees or suppliers in harm's way, and to receive
information from the affected area when other means of
communication are unavailable.
Indeed, Ferrari monitors social media carefully himself.
In late March, for example, he saw a surge of reports on
Twitter that a major 6.1 magnitude earthquake had occurred
in central Taiwan. "Knowing that this area is the
epicenter for high tech and consumer electronics supply
chains, we immediately re-tweeted this news with hopes
that our readers would be on alert to both the event and the potential for disruption," he says.
Among the companies
in the area are TSMC (the world's largest semiconductor
manufacturer), United Microelectronics, Innolux,
and AU Optronics. Although two TSMC facilities were
reportedly evacuated, it turned out that there was minimal
damage. But it was a reminder of how vulnerable Taiwanese
facilities are. "They are all in that earthquake zone,” he
says. "We dodged a bullet."
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