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Freight executive Kettivit Sittisoontornwong says Thai firms will have to plan logistics well ahead of time durig the flood recovery period
Kettivit Sittisoontornwong, vice president of the Thai International Freight Forwarders Association, says the “Just-in-Time” production system has faced a big challenge in Thailand and Japan recently.
In the case of Thailand, the massive flooding over the past two months, the worst in more five decades, has made it impossible to continue such a system at automotive or electronics plants.
For example, Toyota assembly plants in Thailand are not directly affected by the flooding because they are situated in Rayong and other provinces that are not flooded, but the automaker still had to suspend its production lines in Thailand and abroad due to the shutdown of parts suppliers in flooded Ayutthaya province.
Toyota say a vehicle has 10,000-20,000 parts and if even just one part is missing, the production system is affected.
When Japan was struck by an earthquake and tsunami in March this year, there was also a major global supply chain disruption in the automotive and electronic industries, says Kettivit.
“Previously, Just-in-Time was famous worldwide because it cut down on warehouse space requirements and saved logistics and other costs [since all parts and components are supposed to be delivered to assembly lines just in time for the production process to continue with no interruption],” he explains.
Such a system is not practical when there are global supply chain disruptions, so manufacturers now have to be more flexible about their inventories of raw materials, parts and components.
“Now, they see Just-in-Time as a big challenge. Even though your factories may not be affected by the flooding, you still cannot produce because there are supply chain disruptions caused by the shutdown of parts suppliers in other areas and countries.
“We will have to rethink how to cope with disasters of this scale anywhere in the world,” he says.
According to Kettivit, Thailand’s exports and imports have dropped 15-20 per cent in the past two months due to the massive flooding, with the auto and electronic industries among the worst hit.
Ayutthaya province alone accounts for 30 per cent of the country’s total production of electronic parts and 10 per cent of overall capacity for automotive parts.
In the electronic sector, the global supply chain has also been disrupted. For example, Western Digital’s factories in Ayutthaya earlier produced a significant share of the world’s hard disk drives, so its plant closure will affect the global supply and prices of hard disk drives.
On imports, he says, many importers have asked to postpone shipments due to the floods and the shutdown of Bangkok’s Klong Toey port.
“The Bangkok port earlier announced that importers have to clear their cargo as soon as possible because they cannot guarantee whether the port will be affected by the floods,” he says.
Kettivit also urges the government to ensure that Suvarnabhumi Airport and Lad Krabang inland container depot are not affected by the floods, especially in the wake of the opening of Klong Sam Wa Watergate near Lad Krabang district and Suvarnabhumi.
Now, cargoes are diverted from the Bangkok port to the ICD in Lad Krabang, which is linked to the Laem Chabang deep-sea port in Chonburi province.
“Suvarnabhumi is also very important for air freight, both imports and exports, as well as tourism and the international community’s confidence in Thailand,” he says.
Besides manufacturing industries, the flooding has also devastated agricultural crops, especially rice, as more than 30 provinces were inundated, resulting in a drop in rice and other farm exports.
On reconstruction, it is estimated that this will cost the government about Bt16 billion to repair roads and highways, while damaged factories may resume production in mid-December.
“I don’t think everyone can restart then because each company has faced different problems. Some may have to order new equipment and machinery, and that will take at least six months, while others, such as electronic firms, may move machinery to other countries such as China and Japan.
“Overall, it will take three to six months to resume production. By that time, the demand for transportation and logistics services will be very high, so exporters should book for services well in advance,” he says.
