The fragility of the automotive supply chain has been highlighted by natural disasters, particularly in Asia over the past 18 months. Carmakers are looking again at their supply chain strategies in the wake of the earthquake and tsunami in Japan and the massive floods in Thailand last year.

A new management report from just-auto.com, written by Interchange Europe, considers how fragile the supply chains of international manufacturing firms have become and the strategic responses now being formulated in response.

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Economic losses from the Thai floods were estimated by the World Bank at THB1.4 trillion (USD45.7bn), which makes the floods one of the top five costliest natural disaster events in modern history. Combined with the disaster in Japan, this demonstrates the inherent risks of narrow supply chains, says the report.

It added: “Thailand has become a major hub for the automotive, electronics and computer industries and around these major industries has grown a huge supplier community. Unfortunately many of these are in Ayutthaya, one of
the regions devastated by last October’s floods.

“Many were completely under water and what this meant was that supply lines to the major industries were cut, and not just to the factory lines in Thailand. Vital electronic components manufactured in disaster-hit northern Japan impacted on engine management systems globally, as well as other vital components made in and exported from Thailand.”

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The report adds that production losses related to the disasters in Japan and Thailand hit company profits, particularly those of the Japanese manufacturers, already struggling with a surge in the yen which has risen 15% against
the dollar in the past three years.

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The report contains interviews with executives from automotive companies in Thailand who reveal how they handled the disaster, how they got back to normal operations and how they are making contingency plans for the future.

See also: Thailand: a year after the floods