Written by Dave Alberts, Director of supply chain consultants Crimson & Co
We all know that the geography of the modern global supply chain and the concentration of manufacturing in specific areas make supplies of many components particularly vulnerable to disruption. For example, a quarter of the world’s hard drives come from a relatively concentrated area around Bangkok. Clearly there are disadvantages to sourcing products from countries that suffer from extreme weather conditions, especially when supply is so geographically focused.
The Tsunami in Japan wreaked havoc on businesses and supply chains alike, with widespread effects across the globe. The floods in Thailand caused two-thirds of the country to be affected causing major supply problems, driving global prices higher. Companies such as Western Digital and Honda Motor were forced to stop production and some Japanese car manufacturers such as Toyota and Nissan also experienced production disruptions. Sony temporarily closed its facility in Ayutthaya and Seagate Technology had its production of hard drives affected. These are the obvious disadvantages of ‘clustering’ but some studies have shown that similar businesses located together in business or industry clusters do demonstrate seemingly better results through:
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