The recent earthquake impacting Myanmar and Thailand, with a tragic loss of life exceeding 2,000, has brought before us the reality of how vulnerable supply chains and trade networks like all economic activity, are to natural disasters. While Thailand’s core global supply chains have shown relative resilience and the impact has not been as massive as compared to the magnitude of the seismic graph, the event raises a significant concern for Indian industries reliant on trade with both nations.
Immediate Impacts on Trade:
Indian traders, especially those in Gujarat, maintaining substantial commercial ties with Thailand and Myanmar, face immediate challenges. The annual apparel and grey fabric exports, valued at ₹600 crores, and pharmaceutical exports, totaling ₹2,100 crores, are threatened by payment delays and shipment disruptions. Infrastructure damage and communication breakdowns resulting from the earthquake have directly impeded logistical operations. Furthermore, Myanmar, a key timber and wood supplier to India, has suffered significant damage in Mandalay, disrupting procurement and supply chains. In response, the Gujarat business community is advocating for government intervention to implement relief measures and stabilize trade flows.
Reports from Western China suggest that the 7.7-magnitude quake had a major impact in the region, which is the country’s main wafer-producing region, accounting for about 50% of total capacity. Major wafer manufacturers have suspended production due to equipment failures, which can temporarily affect import of modules into India.
Earthquake And Supply Chain Interruption: A Widened View:
Natural disasters of any kind range from floods to earthquakes are seen to disrupt global supply chains. The earthquake that shook Thailand, even when it occurred in an area not prone to seismic activities, illustrates this risk. The disruption within the export-driven economy of Thailand’s electronics and automotive as well as agricultural sectors paints a picture of the entire world of trade. The temporary halts to ports and infrastructural shortcomings to transport both hinder the inflow and outflow for business, literally.
Thailand’s responsive measures curbed some of the damage, but the event’s ripple effects have extended across regional supply chains, impacting economies beyond Thailand and Myanmar. This underscores the inherent risks associated with reliance on complex, geographically dispersed supply networks.
Seismic Shockwaves: How Earthquakes Disrupt Global Supply Chains
Earthquakes, with their devastating power, are more than just natural disasters; they are potent disruptors of global supply chains. The immediate destruction they inflict on infrastructure and production facilities can trigger a cascade of consequences that ripple across continents, impacting industries and consumers alike.
The Immediate Impact: A Shattered Foundation
The primary jolt from seismic activity has the potential to cause profound destruction to:
- Infrastructure: Industrial ports and airports, essential for transferring goods, can be damaged beyond repair. This leads to delays in the transportation of raw materials and finished goods.
- Manufacturing Facilities: Structural damage or the complete collapse of factories, warehouses, and distribution centers within the impacted region will lead to a standstill in production, inventory control, and result in manufacturing delays.
- Utilities: Severe disruption of services makes the already existing operational challenges even more daunting.
- Labor Force: Earthquake related injuries and deaths lead to real time shortage of available workers which disrupts the entire production schedule.
Case Studies: Real-World Examples
Some devastating supply chain impacting events in history include:
• 2011 Tohoku Earthquake and Tsunami (Japan): The disaster impacted the worldwide supply chains for automotive parts, semiconductors, and other electronic components. This makes clear the reliance of certain industries on geographically concentrated specialized suppliers.
• 1999 Izmit Earthquake (Turkey): Above all, the earthquake impacted the industrial zones, halting the production of textiles and automotive parts, which were considered on a global scale.
• 2016 Kumamoto Earthquakes (Japan): The earthquake adversely affected the semiconductor factories, which were critical in the manufacturing of sensors and a wide array of electronic components employed across multiple industries.
The Ripple Effect: A Cascade of Consequences
The consequences of an earthquake’s damage could sets off a chain reaction, with the ability to substantially affect people and economies:
• Raw Material Scarcity: When production and transportation are disrupted, a supply of raw materials and components are bound to be scarce. Even industries that are far detached from the epicenter of the earthquake may be subjected to this shortage.
• Price Instability: Increased demand and reduced supply leads to uncontrolled and increased inflation which worsens the predisposed condition of stress on the economy.
• Late Delivery: Companies farther down the supply chain are forced to deal with late delivery as a core element of their goods simply cannot be sourced, which leads to damages worth thousands.
• Logistics Challenges: Companies are obliged to find new and sometimes more costly and intricate methods to move goods due to the interruption of transportation networks. This leads to greater costs for logistics and longer delivery periods.
• Increased Lead Times: The disruption overall has a cumulative effect, and the availability of goods increases lead times, thus causing delay in the delivery of products to consumers.• Dependence on single source locations: If an item or component originates from a single place, it renders the entire supply chain very fragile.
Building Resilience: A Post-Pandemic Imperative:
The pandemic the world experienced has amplified the need to focus on resilience. This refers to the ability in global logistics and supply chains to withstand and because of technology, immense planning frameworks, and extensive work within the supply chains systems themselves. The earthquake that impacted this region of the world alongside the pandemic shocks mandates the region to adapt to change in a more proactive manner to lessen devastation. By prioritizing resilience, nations and businesses can better navigate the inevitable uncertainties of the global marketplace, ensuring the stability and continuity of critical trade flows.
