Globalisation as a phenomenon is no longer new. One wouldn’t be surprised if a neighbourhood shopkeeper in a developing economy uses the term in his/her day to day conversation. However, it is a phenomenon of mammoth proportions where the actual ground transactions defining this phenomenon are almost infinite in nature. This then makes it almost impossible for even the experts to be aware of all possible linkages and often the reaction is – oh! I didn’t know this was dependent on this.
I recently had such an experience. I was planning to go to Thailand to enjoy what is widely considered its competitive advantage – tourism. The plans, however, had to be aborted because of the flood situation which is still going worse. I understand that the airlines would be affected, hotels would be affected, and sellers of souvenirs would be affected and so on but I could not fathom that the sales of Honda cars in India would be affected because the Greater Noida plant in Uttar Pradesh sources some components from there.
For that matter I didn’t even know that Thailand has established itself as a reliable vendor of auto components and manufacturer of CBUs for global giants like Honda, Ford, Toyota, Isuzu, etc. Textiles competitiveness was known to me but for Thailand be an automotive base even when it doesn’t have any indigenous manufacturer was surprising for me. In fact further research showed to me that Thailand is a much bigger exporter of passenger cars than India. For that matter Thailand is the biggest exporter of passenger cars and race cars by value amongst all developing economies (see figure below).
Beyond the supply-chain disruptions induced by Thai floods, the Australian floods and cyclone (December 2010- January 2011) highlighted the critical role played by the country in the commodities industry, the Japanese earthquake and Tsunami made people aware of the deficits in the auto industry, the drought and fires that destroyed crops in Russia in 2010 had people worried about wheat prices, and now the drought in southern USA is worrying the markets about cotton prices.
While it would remain a big debate whether increasing globalisation is responsible for increasing natural disasters (if they are statistically increasing) the natural disasters today certainly serve as a barometer for the interconnectedness of the global economy.
The news of setting up of a particular supply chain across geographies by a corporation generally remains confined to the business media and annual reports, however, the news of a disruption in supply networks gets much more broadly covered. Also such news gets covered not just in the nation where the tragedy has struck but also in each such nation where the loss of production is having any impact.
While risk preparedness ensures that to a larger extent such events do not hurt much, (Disarming the value killers – Deloitte) such tragedies would continue to provide a not so comfortable route to understanding the global supply linkages.
