Global Logistics: Asia Pacific’s challenges and opportunities in market integration
September 01, 2012 - LM Editorial
Look before you leap
Given the recent history of supply chain disruption in the region, U.S. shippers seeking to enter the Asia Pacific markets are advised to proceed with caution. Just when automobile factories had begun to recover from the Japanese tsunami in 2011, the high-tech sector took a huge hit when Thailand was dealing with catastrophic flooding.
This year it was India—Asia’s third largest economy—that gained the spotlight and added scrutiny of risk mitigation analysts. That nation’s massive power outage this past summer should serve as “wake up call” for many multinationals, says analysts.
“The power grid failure can have a ‘domino effect’ on businesses, communications and IT systems,” says Linda Conrad, director of strategic business risk management for Zurich Services. “Furthermore, this will weaken supply chain infrastructures including all forms of transportation, which could have a major affect on multiple industries.”
With emergency workers and energy professionals still searching for clues to India’s electricity grid collapse, logistics managers should consider risk mitigation strategies now, says Conrad. “As we learned from natural disasters in Japan and Thailand, the ripple effect can be devastating on second- and third-tier suppliers,” she says. “Companies that are over-exposed in India now might consider some supply chain alternatives for 2013.”
Conrad notes that many countries including the U.S. outsource call centers and IT services to countries like India. She says an outage like this can cause serious damage to businesses that rely on those services such as hotel chains and technical support. “It should also give us pause to consider what might happen if a similar shutdown occurred if there was a terrorist attack on India’s power grid. The situation might be even worse.”
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