In just the past three years, tsunamis in Japan and floods in Thailand provoked shortage crises in the electronics industry. Now, the industry is learning how to plan for other natural disasters.
The often-stated irony of the electronics industry is that its supply chain is not nearly as high-tech as its products are. In many other industries, statistical models of supply risk have been in place for more than a decade, and advanced mapping of extreme weather changes are part of the usual analysis of supply efforts. (A suggestion: Take a look at soft drink supply schemes some day, or automobile spare parts.)
Electronics has lagged, but it's slowly coming around. Take predictive modeling. The idea isn't very complicated: By analyzing the possible outcomes of a supply situation, and comparing those to the probability of different sorts of interruptions, you can come to a pretty reliable sense of what you need to prepare for an unexpected event.
Those kinds of techniques are slowly making their way into the discussion. At Europe's High Tech Supply Chain Summit in Amsterdam, not just predictive modeling but two other IT-based advances — joint collaboration and global mapping — were under discussion.
The mapping technologies are perhaps the most relevant to semiconductor industry supply risks. The idea, once more, isn't so complicated — though the results are dazzling. Using ever-improving digital visualization technology, and marrying that to better capacity to assimilate mountains of data, a company can create a custom map showing the geologic, weather, political, and fuel price risks to its particular supply chain.
The maps are dynamic. If a typhoon forms in the Pacific, the map reflects the probability that a ship leaving Hong Kong might not arrive in Manila on time. The result is days more time to recalibrate supplies so that everything keeps humming.
But what happens when the event isn't visible, even from space? Events like Japan's horrific earthquake and tsunami disaster can only be predicted in the broadest terms — Japan is a seismic zone, we know, but when will it happen? In those cases, companies seem more and more inclined to collaborate and get through the crisis collectively, than let an entire industry collapse.
A study by Japan's Institute of Developing Economies compared the automotive industry to the electronics industry in Thailand, where floods wiped out much of the world's disc drive capacity in 2011. The study, published in March of this year, found that electronics companies had collaborated in Thailand when necessary, where the car makers were far less likely to help each other out.
“The difference between the automotive and electronics industries,” the study found, “…is the impact of competitive pressure on supply chain collaboration formation. Only firms in the electronics industry are encouraged to do so when they are under a competitive pressure enough to motivate them to be more innovative.”
Put more simply: When the pressure was on, the electronics firms worked together and kept the systems operating, covering each other's shortages (for a fee, naturally).
The idea that you'll know when a disaster is coming is counterintuitive. But it's more and more possible. The question is whether the electronics industry will adopt these new practices as much as others have — shoes and apparel is another.
If they don't, it will be an irony. It will also be a cost. Because we know one thing: What happened in Thailand in 2011 will happen again, somewhere. Probably sooner than we'd hope.