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Reviving the submerged supply chain

Critical weeks still lie ahead as Bangkok faces a previously unimaginable inundation of floodwaters and last lines of defence are collapsing. The dynamics of supply and demand have been hit hard, as vital components of production, logistics and distribution infrastructure are being progressively submerged.

The few remaining retail logistics centres in Bang Na, Bang Pu and Lat Krabang that have so far escaped flooding are preparing for imminent closure. The majority of national retailers, from hypermarkets to convenience stores, have run out of key products, water and staple food items. Consumer goods suppliers are closing down production, can’t secure sufficient workers or make deliveries to distributors and retail outlets. Spare warehouse space for finished goods storage is almost unobtainable.

Of the retail logistics and distribution centres in the north of Bangkok such as Tesco, 7-Eleven, Big C that had sufficient time over the past two weeks to move valuable stock high up to avoid the floods now face a new problem. Hundreds of thousands of pallets of their consumer goods and food are now inaccessible above floodwater, while the shelves of stores are emptying. Rats forced out with rising flood water have also taken refuge in the high-bay racking of some distributors who are holding up to 50,000 pallets of produce, and along with humidity damage, much of it will soon be contaminated and potentially written off. Tesco Lotus has had to close 10% of its 800 nationwide stores, with 7-Eleven Thailand closing at least 270 stores through lack of supply.

Even the best business continuity (and disaster) plans have not been able to accommodate entire supply chains being wiped out. Among suppliers still in operation, the momentum of “business as usual” is evident as some companies are still planning promotions for products that are unlikely to be delivered to stores, let alone be considered as necessities. One beverage manufacturer is transporting finished goods from the factory by flat-bottom barge.

Much of the distribution of consumer goods in Thailand is undertaken by owner-drivers, often in small pickups, from suppliers to retailers. Many now have withdrawn their services for fear of losing their vehicles in unpredictable flood waters. Other drivers have had to stop work and return to prepare their families or recover their homes from flood damage.

Major suppliers see their only opportunity to get products to market is to utilise the army’s heavy transport vehicles. But much of the logistics infrastructure necessary to store and distribute these products has been lost to floods, making this a complex solution. Late yesterday, the vast unoccupied air cargo warehouses of Don Mueang airport were being prepared as emergency cross-dock centres and distribution points for water and other critical commodities vital for survival.

Of all the investment in advanced supply chain technology, sophisticated warehousing, modern trucks and lean manufacturing that has not yet been affected by floods, ongoing operation and relief efforts will depend on logistics staff _ many of whom can’t get to work or are seeking urgent leave to return home.

Many large distribution companies are operating with only 20-30% staffing levels. As a result, businesses will need to ensure their remaining staff and families are protected from potential risk.

Post-flood recovery: The recovery process will be daunting, painful and expensive. Rebuilding entire industrial parks, warehouses and transport fleets will be not only difficult technically but financially complex. Restoring investor confidence and spending to restore industrial infrastructure located in a known flood path (rather than relocating offshore) will be a national challenge.

There is also an impending skills gap with acute skill shortages predicted among plant maintenance engineers able to repair, refit and recommission innumerable factories and businesses. Spare parts for technical equipment, building management systems, machinery and electrical equipment will be in exceptional short supply as many of the factories that have traditionally made them have been wiped out.

Even more critical days lie ahead.

Source: Bangkok Post

ThaiVest Editorial Team

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