Climate Disruption & Supply Chains

Thailand Flood - Street View

There has already been significant media coverage of the losses Thailand’s flooding has created for multinational corporations. While the Thai government has pledged to prevent such disasters from occurring again, this single incident may now spur investors, particularly the Japanese, to reconsider their business strategies.

As Bloomberg reports, Japanese investors may move more production to countries such as Indonesia and Vietnam in an attempt to diversify their supply chains. Lakis Polycarpou, of the Earth Institute’s Columbia Water Center, takes the implications of the Thai floods a step further. He asks if the low inventory, cost saving “just-in-time" production method, heralded by Toyota, could be in jeopardy if climate disasters are on the rise:

It goes without saying that globalized supply chains are a hallmark of the globalized economy – but what happens when climate and water risks make those supply chains less tenable? To put it another way, is there a point at which the economic risks of globalized supply chains outweigh the benefits?

One solution is the less efficient path of increasing inventory. Another strategy, as Polycarpou points out, is to utilize evolving climate data and forecasting technology to better locate facilities and safeguard operations. Government and academic research institutions are at the forefront of this research, however, technology firms, such as Cisco, exemplify private sector opportunities to monitor and evaluate global environmental and climatic conditions.