Business lessons to be learned from the flood on how to reduce risk by putting factories in different locations.
In photo above the workers at Hana Microelectronics remove machineries and equipments from the factory at Hi-Tech Industrial Estate in Ayutthaya's Bang Pa-in district due to rising floodwaters.
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Better safe than sorry: The flood crisis has highlighted the desirability of diversifying operations across multiple locations by Umesh Pandey
The unexpectedly huge scale of the ongoing flood crisis has driven home the need for companies to diversify their operations base after many saw their entire production process shut down.
Total damage has yet to be figured, but already the potential price tag is sending shivers down the spine of companies that had their entire operation in a single location or even based in one country.
"Yes, we've learned a lesson from this natural disaster. We thought we were safe having diversified our production facilities to three different locations," said Richard Han, the chief executive of Hana Microelectronics Plc.
Hana had one facility completely inundated and lost nearly 35% of its production capacity despite efforts to salvage its equipment and set it up at headquarters.
"When a person drives a car, they have one spare tyre. And if one tyre goes flat, you have a spare to fix it with for a while, while the probability of two tyres going flat is very low," said Mr Han when asked if he was ready for future mishaps.
Hana has three facilities - two in Thailand and one in China - and is contemplating changes to its production process whereby it would produce each of its products at all three locations so as to avoid disruption to its customers.
Mr Han said customers are the key to business. Large companies have insurance to cover damage including revenue loss, but customers are unlikely to wait for products to arrive and may shift to new suppliers instead
"This is something we are aware of, and that is why our wool inventory is in Europe, where we sell most of our wool products," said Aloke Lohia, the chief executive of Indorama Ventures Plc (IVL).
IVL's smallest business line is wool, accounting for less than 1% of revenue. But Mr Lohia says his company attaches importance to customers, as it is not easy to get them back once they leave.
Wool may account for only a very small part of the business, but IVL will buy the raw material in the spot market, look for spinning mills and deliver the goods to the customers as per their requirements until the company's Lop Buri factory can get back on its feet in another 3-6 months.
IVL, the world's largest producer of PET polymers and one of the largest for PTA polymers, operates its PET, packaging and wool businesses from the Lop Buri plant.
"The PET business is not going to be affected, as we have shifted production to Rayong and will service our customers from there," said Mr Lohia.
He said IVL had a similar experience in the US when Hurricane Katrina forced its plant there to shut down for a short while, and once again having multiple plants in that country helped it to maintain its customer base.
"In Asia too we have a diversified portfolio, with production facilities in Thailand [Rayong and Lop Buri], China and Indonesia," he said, adding that this enables the company to maintain its customer base without any problem.
Other companies are in a similar situation. They have diversified their operations to minimise risk as well as capture business opportunities in other markets.
Polyplex (Thailand), a leading producer of film packing, said diversification is key to keeping its operations going and maintaining its customer base.
With plants in Thailand and in Turkey, it is very serious about diversifying production, which is why it has continuously expanded its manufacturing base in both countries over the years.
Although Polyplex is not in a flood zone in Thailand, it has felt a low single-digit (1-2%) impact, as its customers either directly or indirectly have been affected.
Only 15-18% of the company's production is sold in Thailand.
Other companies such as Thai Union Frozen Products Plc have also said that diversification means they would likely feel a very mild effect even in the worst-case scenario.
But not all companies in Thailand have been able to diversify, and many have been completely inundated, especially small and medium-sized enterprises with a single operating base.
Hana workers attempt to salvage equipment from its inundated factory. With two other factories in Thailand and China, total production capacity was cut by only 35.
(Source: Bangkok Post, Better safe than sorry, The flood crisis has highlighted the desirability of diversifying operations across multiple locations, 28/11/2011, Umesh Pandey, link)
Flood and Disaster Planning Vocabulary
contingency - a possibility, some event that might happen in the future and have an effect on your plans (example: they did not plan adequately for the contingency of a flood)
contingency planning - planning for all the things that could go wrong (unexpected things that could happen and ruin your plans)
redundant (adjective) - a system or device that will take over, if the main device or system fails ซ้ำซาก,ฟุ่มเฟือย,เหลือเฟือ,มากเกินไป
redundancy built into the system - meaning: if one part of the system fails, then another part will take over, so no failure (See fault tolerant computer system and fault tolerant design)
diversifying - creating a mix of many different kinds of things, others will succeed even if some fail (this helps reduce risk since the fortunes of these many different kinds are not likely to all move together) ความหลากหลาย
diversifying operations across multiple locations
the flood crisis has highlighted the desirability of diversifying operations across multiple locations
diversified - adding variety (usually to reduce risk, if one thing goes bad thenm another might succeed)
diversified our production facilities to three different locations
diversify - add variety to that you already have ทำให้หลากหลาย (See glossary)
diversification - 1. increasing the variety of something; 2. mixing a wide variety of investments within an investment portfolio, spreading out investments to reduce risks because the fluctuations of a single security have less impact on a diverse portfolio, diversification minimizes the risk from any one investment (See Wikipedia) ความหลากหลาย
better safe than sorry - meaning: if you are not "safe" then an accident will happen and then you will feel "sorry" (feel sad, wish you had been safe so it didn't happen)
crisis - an urgent, difficult or dangerous situation วิกฤตการณ์, วิกฤต
highlighted - emphasized, made more noticeable ที่เน้นย้ำ
X highlighted the desirability of Y
scale - size (relative size)
huge scale - very large size
ongoing - happening now; continuing ไม่หยุดยั้ง, ต่อเนื่อง
the unexpectedly huge scale of the ongoing flood crisis
base - a place from where an activity can be planned ฐานที่มั่น
driven home the need for companies to diversify their operations base
production base - the place where a company's factories are located
production process - the steps in making a good in a factory (the assembly line, production line)
shut down - stopped
process - a series of actions that you take in order to achieve a result แนวทางปฏิบัติ, กระบวน, วิธีการ
many saw their entire production process shut down.
total damage has yet to be figured - total damage has not been counted or calculated yet
potential - might happen in the future; possible or likely for event or situation to happen ความเป็นไปได้ ที่เป็นไปได้ ที่มีศักยภาพ
price tag - meaning: the price, the cost (the "price tag" is the little piece of paper with the price a good in a store)
shiver - shaking of the body การตัวสั่น, อาการสั่น
spine - backbone, the bone running down a person's back กระดูกสันหลัง
send shivers down the spine
the potential price tag is sending shivers down the spine of companies
entire operation - the running of their business, business operations (factories, administration, logistics, sales, etc)
based in - located in
based in one country - located in one country
had their entire operation in a single location or even based in one country.
natural - found in nature (not made in a factory by humans) ตามธรรมชาติ
disaster - something very bad that happens and causes a lot of damage or kills a lot of people ความหายนะ ภัยพิบัติ
natural disaster - when an event in nature such as an earthquake, tsunami, storm, floods, etc causes much damage and hurts many people
we've learned a lesson from this natural disaster.
facilities - the buildings, equipment and services provided for a particular purpose สิ่งอำนวยความสะดวก สถานที่และสิ่งอำนวยความสะดวก
facility - a building used for a particular purpose
inundated - flooded ถูกน้ำท่วม, จมลงใต้น้ำ
production capacity - the amount of goods that a company's factories can produce
salvage - save a damaged thing, so it can be used again (examples: salvaging an damaged machine by repairing it, so it can be used again) or salvaging valuable pieces from a sunken ship so they can be used again)
efforts - the work done towards achieving some goal; people trying to accomplish something, achieve a goal ความพยายาม
efforts to salvage its equipment - tried to save the equipment (so it could be used again)
production capacity - the amount of something that can be produced ความสามารถในการ (ผลิต)
headquarters - the place where an organisation or company has its main offices (where the president directs the company from) กองบัญชาการ สำนักงานใหญ่ กองบัญชาการ
Hana had one facility completely inundated and lost nearly 35% of its production capacity despite efforts to salvage its equipment and set it up at headquarters
spare tyre - the extra tyre in the back of a car
tyre goes flat - when the air goes out of a tyre
a spare tire to fix a flat tyre - replace the "flat tyre" with the "spare tyre" in the back of the car
the probability of two tyres going flat is very low - not likely that the two tyres will both go flat
ready for future mishaps - ready for things that could go wrong in the future .
contemplating changes to its production process - thinking about changes to its production process
disruption - prevent from operating normally; a situation in which something cannot continue because of a problem การขัดขวาง, การหยุดชะงัก
avoid disruption to its customers -
key - important คนสำคัญ
customers are the key to business - customers are the most important thing in to business (making them happy will make business successful)
insurance - making regular payments in exchange for a large payment to cover damage if a certain bad event happens (accident, sickness, fire, natural disaster) (See Wikipedia) การประกันภัย การประกันความเสี่ยง
revenue - income from taxes or business activities รายได้
shift - change, transfer; to move from one place to another เคลื่อนย้าย
large companies have insurance to cover damage including revenue loss, but customers are unlikely to wait for products to arrive and may shift to new suppliers instead
aware - knowing that something exists, or having knowledge or experience of a particular thing ทราบ
inventory - goods that a company has bought and stores for future use or sale (See Wikipedia) the products kept in a shop, warehouse, etc., in this case, unsold cars สินค้าที่จัดเก็บในสต๊อก
business line - on of the related kinds of products that a company sells
raw materials - materials in their natural state before being processed or used in manufacturing
spinning mills - a factory that turns wool into fabric or clothes (garments)
producer - a person who makes the practical and financial arrangements needed to make a film, play, television or radio programme ผู้อำนวยการสร้างภาพยนต์, ผู้ผลิต
packaging - the container or covering for a product while it is waiting to be sold in stores
maintain its customer base - keep repeat customers (not lose them)
risk - danger, how likely or possible it is for a bad event that causes harm and damage ความเสี่ยง
minimise - to reduce something harmful or unpleasant to the smallest amount or degree ลดให้เหลือน้อยที่สุด
minimise risk - reduce risk and danger to the smallest possible amount
opportunities - situations in which it is possible to do what you want or need to do
business opportunities - situations in which it is possible to do business and earn money (sell something that some customer needs)
capture business opportunities - find business opportunities and make money from them
digit - any one of the ten numbers 0 to 9 ตัวเลข (0 ถึง 9)
impact - an effect or influence ผลกระทบ
scenario - the way that a situation may develop in the future; a possible situation in the future
worst case scenario - the situation in which everything goes wrong and fails (must think of what this could be, so you can plan for it)
enterprises - companies
small and medium-sized enterprises - Same as SMEs
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