One natural disaster in the far east has recently caused tremendous problems for supply-chain management. Since this past Fall, Thailand has been in crisis due to relentless monsoon rains which resulted in massive flooding. Many have said that it is the worst flooding in the country in 70 years.
Since the beginning of monsoon season this past August, rain waters have been unstoppable. Monsoon rains in the North have caused flooding further south even affecting areas of Bangkok. The disaster is blamed for several hundred deaths and more than 200 billion Baht (nearly 7 billion USD) in damage.
Flooding has also slowed Thailand’s growing economy. Although solutions are already being implemented, the Thai economy will feel the effects of the crisis in the next several months. Thailand is a major supplier of hard disk drives and automobiles. Reports have said 70% of Thai auto production has been affected and a Honda plant has been forced to shut down production until April 2012.
The apparel sector has also been hit as raw materials are hard to come by during the floods. The industry has lowered its growth projections for the year and is lobbying the government to lower tariffs on textile imports to aid in a reorganization of the supply-chain.
There are also things suppliers can do to help their own recovery. It’s important for factory owners to review their buyer contracts and see what their options are. If they’ve been affected, there may be clauses in their contracts that allow for halting production due to natural disasters, or allow for changes in the supply-chain to ease burden. Manufacturers should also look into government-run programs introduced to support affected businesses in relocating machinery and raw materials.
The government has established the Strategic Formulation Committee for Reconstruction and Future Development and the Strategic Formulation Committee for Water Resources Management to solve problems and restore confidence in Thailand’s ability to manage crises in the future. Not only are these programs intended to optimize Thailand’s recovery, but also to build the irrigation systems and economy back better than before the flood. Successful implementation of these new policies will be vital to restoring investment interest and confidence in the country.
Despite the losses, there is good economic news for the future. Even though floods have rocked local business, Thailand’s economy still grew in 2011 compared to 2010. The projected growth of 4% was lowered to 1.5% but it maintains Thailand’s steady upward path of recent years. Recovery in exports is expected by the second quarter of 2012 as the factories are predicted to have resumed production by then.
The Thai restoration will count on foreign support as well as infrastructural support. The government has made it clear in the past months that Thailand remains an economically robust country and will rebuild even stronger.