Thai flooding hurts Microsoft supply chain
January 16, 2012
Supply chain managers were no stranger to disruptions in 2011. Tornadoes, earthquakes, tsunamis and flooding were just a few of the factors that made it more difficult to source materials and underscored the need to make contingency plans.
Adding further proof to this was the news from Bloomberg that Microsoft Corporation took a hit to profits in the fourth quarter of 2011, largely due to the Thailand floods. The company said its supply was impacted by this disaster, with PC shipments dropping 1 percent over the financial period.
Thailand is home to many disk-drive factories, and with those facilities' operations coming to a halt, many PC and chip makers felt the effect. Bloomberg notes that Intel, the largest computer-chip manufacturer in the world, also had to scale back its revenue forecast for the fourth quarter, dropping it by $1 billion.
Many analysts also note that the suffering revenues will likely continue for a few more quarters.
"As the numbers come out, you'll likely see that number decline further as the impact has been felt faster than people had anticipated," said Bill Koefoed, the general manager of investor relations for Microsoft, as quoted by the news outlet.
The Wall Street Journal reports that this and similar situations "showed many multinational companies just how vulnerable" their lean, low-cost and global supply chains had grown.
Shortages for necessary parts affected many industries - from electronics to automotive - because many organizations had not adequately planned alternative suppliers that could lessen the impact of a disruption. However, even though more executives know that having vulnerable chains is not a sustainable business model, few are doing anything about it, the source notes.
Some are trying to pressure their suppliers to reinforce their own sources of materials, while others are adopting a "dual sourcing" policy, although this option also forces companies to balance the benefit of supply insurance with the cost of having sometimes unnecessary supplies. In addition, the WSJ says, some organizations are starting to refocus efforts on continuity planning, building up strategies for emergency response or planning in the event of a computer failure.
"I don't see any of us moving away from very disciplined supply-chain management," Lewis Booth, Ford Motor Company's finance chief, told the Journal. Yet he added that more executives would likely start making "targeted changes."
