Killing oneself slowly?
Damage done to Thailand's international supply chains
from recent airport closures
By Jon Fernquest
In today's Bangkok Post business section a supply chain expert assesses the damage
to Thailand's agricultural supply chains from the recent airport
closures. Thailand's international supply chains have taken decades to build and only one week to destroy.
National security clearly should also consist of:
1. Securing vital supply chains.
2. Supplying hospitals with lifesaving drugs.
3. Ensuring unbroken flow of goods in and out of the country.
2. Supplying hospitals with lifesaving drugs.
3. Ensuring unbroken flow of goods in and out of the country.
The airport closures may have ripple effects in the future such as:
1. Bankrupt farmers who
cannot pay back loans.
2. Export market share lost to other countries.
2. Export market share lost to other countries.
How can the damage to Thailand's reputation and perceived reliability in commerce be repaired?
a supply chain - the
steps in different firms and locations needed to produce a final good
from raw materials and intermediate
goods, ending with final assembly and distribution of goods in
consumer stores (See Wikipedia)
assess the damage - inspecting to see how much damage has been done after an accident or disaster
security - measures and actions taken to protect a place
national security - policies and actions taken to protect a whole country
securing - taking steps to protect from harm
ensuring unbroken flow - making sure goods can be transported through the normal routes
ripple effects - effects after the initial effect, secondary effects
bankrupt farmers - farmers that do not have enough money to continue doing business
market share - the percentage of all customers in a market that your company has
reputation - what people believe about (good reputation, bad reputation)
reliability - can be certain that the system will work the way you expect
commerce - the activity of buying and selling goods
assess the damage - inspecting to see how much damage has been done after an accident or disaster
security - measures and actions taken to protect a place
national security - policies and actions taken to protect a whole country
securing - taking steps to protect from harm
ensuring unbroken flow - making sure goods can be transported through the normal routes
ripple effects - effects after the initial effect, secondary effects
bankrupt farmers - farmers that do not have enough money to continue doing business
market share - the percentage of all customers in a market that your company has
reputation - what people believe about (good reputation, bad reputation)
reliability - can be certain that the system will work the way you expect
commerce - the activity of buying and selling goods
Here is the column in full:
THE WEEKLY Link
The Perfect Storm
CHRIS CATTO-SMITHWednesday December 03, 2008
The events leading up to the blockade of Suvarnabhumi and Don Mueang airports underline how bizarre it is that a national economy, import and export supply chains and their trade partners can be so willfully damaged for the sake of political (and personal) ideologies and power.
The damage done: International news media have documented the posturing and occasional violence of the warring political mobs exhaustively, but what is now emerging is the deep and possibly irreparable damage done to the reputation and economic future of Thailand. From my view (as a normally discreet "guest" living in Thailand), the crippling of air (and now sea) cargo imports has and will continue to felt by the millions of Thais who depend on maintaining safe and reliable trading links with the world.
blockade - preventing
people from entering or leaving an area
underline - emphasize
bizarre - strange
a supply chain - the steps in different firms and locations needed to produce a final good from raw materials and intermediate goods, ending with final assembly and distribution of the goods in consumer stores (See Wikipedia)
trade partners - companies in other countries that you are doing business with
willfully - planning to do someone harm, intending to harm someone
for the sake of Y - done for reason Y or to help Y
ideologies - a set of political beliefs that people base their actions on
underline - emphasize
bizarre - strange
a supply chain - the steps in different firms and locations needed to produce a final good from raw materials and intermediate goods, ending with final assembly and distribution of the goods in consumer stores (See Wikipedia)
trade partners - companies in other countries that you are doing business with
willfully - planning to do someone harm, intending to harm someone
for the sake of Y - done for reason Y or to help Y
ideologies - a set of political beliefs that people base their actions on
The perfect storm: The combination of a global economic downturn, adverse weather curbing farm activities, diminishing confidence in Thailand's logistics credentials, the airport blockade and now the Customs import lockdown of fresh produce by sea (more on that later) has created the conditions for a Perfect Storm of economic destruction.
the perfect storm -
the simultaneous occurrence of weather events which, taken
individually, would be far less powerful than the storm resulting of
their chance combination, originated from teh popular movie The Perfect Storm
(See Wikipedia)
adverse weather - bad weather (destroy crops or limits amount produced)
curbing farm activities - stopping or reducing farming by large amounts
logistics - organising the transportation, storage, and proper handling of goods (See Wikipedia)
credentials - previous achievements and background, qualifications, and proof such as diplomas, certificates, letters of reference
lockdown - everything has been stopped (locked down or locked up), secured, and not functioning as normal
customs import lockdown of fresh produce by sea - the government was not allowing vegetables to be shipped by sea as normal
adverse weather - bad weather (destroy crops or limits amount produced)
curbing farm activities - stopping or reducing farming by large amounts
logistics - organising the transportation, storage, and proper handling of goods (See Wikipedia)
credentials - previous achievements and background, qualifications, and proof such as diplomas, certificates, letters of reference
lockdown - everything has been stopped (locked down or locked up), secured, and not functioning as normal
customs import lockdown of fresh produce by sea - the government was not allowing vegetables to be shipped by sea as normal
Vital link now broken: When a vital link in any complex supply chain is broken (as is the case now) things cannot return to normal. It is not a case of easily recovering lost cashflow of the many businesses being forced into bankruptcy. No matter how quickly the political impasse can be rectified or how soon the airports are reopened, a vital trade link is broken and the internal capabilities and goodwill required to fix things have disappeared.
vital - very
important, necessary for continued life
a vital link - a connection necessary for life
lost cashflow - money that didn't come into the business (but should have)
bankruptcy - have lost too much money and cannot continue in business
impasse - in a difficult position, impossible to make progress and move forwards
rectified - corrected, made to operate normally again
internal capabilities - people with expert knowledge and ability to carry out tasks inside the country
goodwill - the good reputation and relationships that a company has with its customers
a vital link - a connection necessary for life
lost cashflow - money that didn't come into the business (but should have)
bankruptcy - have lost too much money and cannot continue in business
impasse - in a difficult position, impossible to make progress and move forwards
rectified - corrected, made to operate normally again
internal capabilities - people with expert knowledge and ability to carry out tasks inside the country
goodwill - the good reputation and relationships that a company has with its customers
Blind to what is happening? Given the fierce global competition, it seems that recent governments have been oblivious to what has to be done to organise, develop and protect the fragile economic future of this country. The viability of the precious agro- and horticultural export supply chains that contribute so importantly to the economy are not decided by governments. It takes years to build a high-quality supply chain in the food industry - and only a week to destroy it. I know - it has also happened to my business.
Little confidence or cashflow to continue: I have spoken with several retail agronomists based in Thailand by their respective European supermarket employers, and they have painted an even more bleak picture for the future. This should have been a month of peak trading for Thai exporters into Europe.
oblivious - not
knowing or noticing something at all
fragile - easily broken
viability - ability to continue living (and doing business)
painted an even more bleak picture for the future - described an unpleasant future
fragile - easily broken
viability - ability to continue living (and doing business)
painted an even more bleak picture for the future - described an unpleasant future
Thailand normally exports more than 300 tonnes of fresh produce daily as air cargo - including highly acclaimed Thai asparagus and baby corn - primarily to the lucrative UK and European markets. Thai orchids are normally sold in huge quantities prior to Christmas at starting prices of 300 baht per stem or more. The industry estimates it makes 30% of its yearly sales in December.
This month one UK supermarket had ordered more than 100,000 stems per week on an ongoing basis. The orchids are now flowering and being left unpicked. Having suffered over three months of failed crops, an economic downturn and rejected exports last week many farmers don't have the confidence or the cashflow to replant their fields for next month's harvest.
In the meantime, retail buyers who had just placed their high-volume orders with Thailand have been forced to switch to the likes of Ethiopia, Ghana and India. Once these new contracts are in place, it will be difficult to go back to sourcing from an "unreliable" Thailand.
fresh produce -
fresh vegetables
air cargo - good sent by airplane
highly accaimed Y - many people have praised Y
asparagus - a long thin green vegetable (See Wikipedia)
lucrative - profitable, can make money by doing it
100,000 stems - a way of measuring flowers, 100,000 orchids (the green stick-like part of the plant that the leaves and flowers grow on)
cashflow - money coming into and leaving a business
sourcing - locating good companies to buy things from
unreliable - cannot be certain it will work the way you expect
air cargo - good sent by airplane
highly accaimed Y - many people have praised Y
asparagus - a long thin green vegetable (See Wikipedia)
lucrative - profitable, can make money by doing it
100,000 stems - a way of measuring flowers, 100,000 orchids (the green stick-like part of the plant that the leaves and flowers grow on)
cashflow - money coming into and leaving a business
sourcing - locating good companies to buy things from
unreliable - cannot be certain it will work the way you expect
Bureaucratic inertia and unrespsonsiveness to emergency situations
Sea freight imports also blocked: Another vital supply chain link has been broken by the action of the airport blockade. Under the free trade agreement with China, Thailand imports temperate fresh produce not normally grown here. A vital step is that a Certificate of Origin Form E must be certified by Royal Thai Customs before clearance to gain exemption from duties and taxes of up to 40% (unsustainable for many retailers).Thai Customs had located this vital process at Suvarnabhumi Airport and the person responsible has not been at work since last week. For one retail importer alone, 23 full containers (more than 400 tonnes) of time- and temperature-sensitive fresh produce are rotting at Laem Chabang port with no one available at Suvarnabhumi to endorse the vital Form E. Sad but true!
bureaucratic inertia - when
it takes government officials a long time to act
unresponsiveness - do not respond to a problem quickly or appropriately
a supply chain link - the business done between a supplier and someone who needs their product
supply chain link has been broken - the end of this business
temperate - a place that is neither very hot not very cold
temperate fresh produce - fresh vegetables from places that are neither very hot nor very cold
certificate of origin - an official document that proves where your good come from
clearance - official permission to go ahead, to continue (after a check that everything is ok)
exemption - official permission not to follow a rule
clearance to gain exemption from duties - got official permission not to pay high taxes on imports
unsustainable - cannot be continued for a long time
unresponsiveness - do not respond to a problem quickly or appropriately
a supply chain link - the business done between a supplier and someone who needs their product
supply chain link has been broken - the end of this business
temperate - a place that is neither very hot not very cold
temperate fresh produce - fresh vegetables from places that are neither very hot nor very cold
certificate of origin - an official document that proves where your good come from
clearance - official permission to go ahead, to continue (after a check that everything is ok)
exemption - official permission not to follow a rule
clearance to gain exemption from duties - got official permission not to pay high taxes on imports
unsustainable - cannot be continued for a long time
Hospitals without life-saving drugs
Pharmaceuticals and health care at risk: Also little publicised are the daily shipments of critical medicines, vaccines and biomedical products that support the health-care and pharmaceutical industries. Every day shipments of time- and temperature-sensitive medicines and raw materials come into the airport - the products are expensive and easily ruined even if exposed to slight changes in temperature or if they exceed their shelf life. So far more than 50 tonnes of critical biopharma products have been held up, threatening manufacturing lines and hospital drug inventories.little publicised - not
much information has been made available to the public
critical - important
critical medicines - medicines important for health or saving life
vaccines - injections to prevent a disease
exposed to slight changes in temperature - in a room or outside in a place where the temperature has changed in a damaging way
exceed their shelf life - passed the amount of time the product can sit on a store shelf (and still be safe)
biopharma products - products used to treat people with diseases or medical conditions
manufacturing lines, assembly lines - the series of steps used in building a product in a factory
critical - important
critical medicines - medicines important for health or saving life
vaccines - injections to prevent a disease
exposed to slight changes in temperature - in a room or outside in a place where the temperature has changed in a damaging way
exceed their shelf life - passed the amount of time the product can sit on a store shelf (and still be safe)
biopharma products - products used to treat people with diseases or medical conditions
manufacturing lines, assembly lines - the series of steps used in building a product in a factory
My own story: Two years ago I set up a value-added logistics service (http://www.freshport.asia) to help Thai exporters reduce costs and prevent damage due to poor handling and lack of temperature control for fresh produce. Over the last week several of my key customers (shippers) now face extreme financial challenges - they have contracts with farmers to buy products that can't be sold. Not only do they lack a method to get their products to market, their importers are turning elsewhere.
I am lucky, I diversified into a new business line two months ago - the demand for interim and turnaround logistics consultants is high now and we have more work than ever. The millions of Thais involved in the export industries that have been damaged by the latest events have not been as fortunate.
value-added - the
value added to a good in one step during the production of that good
(the rice farmer, the rice mill, the shipping company, and the stores,
all add value to the final rice product sold in stores)
poor handling - when moving goods did not follow standards or rules (so goods were damaged)
key customers - important customers
importers are turning elsewhere - companies that once imported Thai products are looking for reliable companies in other countries
diversified - adding variety (usually to reduce risk, if one thing goes bad thenm another might succeed)
a business line - a set of related products sold by the company
diversified into a new business line - added a new type of product to diversify business
interim - used until something permanent can be established
a turnaround - taking a failing business and making it successful again
logistics - organising the transportation, storage, and proper handling of goods
poor handling - when moving goods did not follow standards or rules (so goods were damaged)
key customers - important customers
importers are turning elsewhere - companies that once imported Thai products are looking for reliable companies in other countries
diversified - adding variety (usually to reduce risk, if one thing goes bad thenm another might succeed)
a business line - a set of related products sold by the company
diversified into a new business line - added a new type of product to diversify business
interim - used until something permanent can be established
a turnaround - taking a failing business and making it successful again
logistics - organising the transportation, storage, and proper handling of goods
Weekly Link is co-ordinated by Barry Elliott and Chris Catto-Smith CMC of the Institute of Management Consultants Thailand. It is intended to be an interactive forum for industry professionals; we welcome all input, questions, feedback and news at:
bjelliott@abf1consulting.com
cattoc@cmcthailand.org
