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One of Thailand's biggest electronics sectors is hard disk drive production. Last year's flood wreaked havoc on the industry's supply chain, especially in the case of top-tier players like {complink 4842|Seagate Technology LLC} and {complink 6308|Western Digital Corp. (WD)}.
In a previous blog, I highlighted some of the problems high-tech companies face in Thailand as a result of last year's flooding. (See: Thailand: When the Water Rushes In.) Seagate was not on the list of companies I visited during a media tour hosted this month by Thailand's Board of Investment. But I wanted to get the company's take on the flood, ask about lessons learned and the company's general impressions about doing business in this emerging Southeast Asian market. In an interview, Seagate's Dave Mosley, executive vice president of operations, discussed the disaster and his company's response.
Mosley also talked about Seagate's continued commitment to exploring business opportunities in emerging economies and expressed the conviction that many countries in Asia and South America will continue to drive growth for the entire electronics industry, hence his company's long-term investments in these regions. Here are excerpts from that discussion:
Baljko: Following the flooding, did Seagate consider relocating its facilities to less flood-prone areas of Thailand or to another country where you have existing operations?
Mosley: Seagate's pre-flood disaster planning processes and strategically placed facilities enabled the company to minimize disruption of product deliveries to our customers. While we are re-architecting and streamlining our global supply chain operations, we have no plans at this time to change the location of our major manufacturing facilities around the world.
In addition, we have taken a number of steps to further protect our facilities from potential future disasters. Couple this with the proactive planning that is ongoing with both our 3PL partners and our material suppliers, and we believe that Seagate will be well positioned to respond to future disruptive occurrences.
Baljko: Generally speaking, what are some of the challenges and opportunities of doing business in emerging markets?
Mosley: Seagate has a global leadership presence in the information storage industry. We are a major participant in all geographies. With the rapid expansion of the Asian economies, especially China and India, there is an enhanced focus on that part of the world. But the same can be said for other fast expanding economies such as in Brazil, Russia, and the Middle East.
Each of these geographic regions presents its own special issues that need to be addressed. Oftentimes, there are legal or customs issues that may be unique to a region. Again, in those cases we ask our partners to help us find the most optimal solution to the problem at hand. We also see that in faster growing economies, more so than in the more mature ones, changes in demand are more frequent and lead times may be shorter. That may require us to use more airfreight to satisfy customer demand requirements. At the same time, we see that in the more established markets demand is more predictable, making it amenable to alternative methods of product movement.
Ultimately, we have found that no one solution is appropriate for any region and that a full battery of logistics offerings must be available to our company at all times. That is why we are constantly focused on improving on what we call our “fast execution network,” involving our customers and our logistics partners in evolutionary and revolutionary fulfillment change.
Baljko: Specifically regarding Thailand, what are the challenges and opportunities of doing business here?
Mosley: There are a number of reasons to locate some portion of our Asian manufacturing footprint in Thailand. In addition to a very dedicated workforce, along with the co-location of many suppliers, there is also the ease of moving freight into and out of the country. Both from a customs clearance perspective as well as from a cost perspective, there are many advantages to having Thailand be a major center of manufacturing expertise.
Also, as we saw last year, the Thai people are very resilient. They were able to overcome the negative effects of the flooding much faster than had been anticipated. Couple this with a government that is interested in improving the country's infrastructure and the productivity of its workforce, and you have an environment where common objectives can be focused on and realized.
” Seagate's continued commitment to exploring business opportunities in emerging economies “
There are a lot of opportunities in the emerging markets that manufacturers can still explore. It makes sense that Seagate as a global leader, want to expend its business to other emerging economies.
Mosley cites the government's commitment to playing a role in the recovery of the electronics sector there. This type of strategy has led to success in the growth of high-tech in the Pacific rim and will no doubt further Thailand's recovery.
The big companies needs confidence of government and dedicated labor force to actually setup any manufacturing footprint in emerging markets. They also look for the complete Eco system of different suppliers to simplify the supply chain management. Mosley has said it right and surely they try to establish themselves in India during next three years.
Emerging regions have problems of their own. But its not easy for the manufactrer to shift its base all of a sudden. After all lot of money and time has gone in building up the infrastructure in these regions. Like in India what happened to Tata's when their SIngur plant was forced to be shifted due to political influences or what happened to Maruti Suzuki plant in Gurgaon due to labor violence. Its a tough situation but I guess then none of the manufacturer would like to move away. They rather would like to face the sitaution and win over.
I agree with your assertion but every region on earth faces with challenges of different forms – so also all make the world grow better and develop. Be it recession, poverty/austerity, natural disasters are challenges world is facing.
Sounds an interesting idea Douglas, good to see an article like this appearing on EBN. Positive ideas like this can really make a difference and supply chain specialists can make a huge contribution in cleaning up supply chains in a economic way.
Efforts have been made to tag minerals from certain mines and areas but still have a long way to go to being effective enough. Plus there has been some misuse of the taging process which maybe your idea could stop.
Great work keep the ideas coming!
@R.J. Thank you for the positive comments. I have been listening to lectures on microfluidics and since the costly part of DNA tech is the lab expense, I am interested in examining the advances that would reduce the cost and time for DNA analysis and authentication. Lab on a Chip technologies are moving towards desktop and eventually hand-held equipment that will run a DNA or fluid analysis at low cost and very quickly. We may see common deployments of DNA authenticating equipment in 3-5 years. If you compare Moores Law in microelectronics to the advances in microfluidics, then we should have home genome sequencing kits by 2020. Long before that, we should have do it yourself medical diagnostic kits for what now fuels much of the escalating cost in healthcare…to wit, non-emergency visits to emergency rooms. Imagine taking a blood or urine sample at home, running the diagnostics and seeing a list of possible pathogens or simple remedies for what ails you. I don't want to oversimplify the prospects, but we are moving in that direction and whether it is 5 years or 50 years, we will get there. How long has microfluidics been around? There are projects now dedicated to nanofluidics. We'll get there for sure.
That's a great idea for an application of the DNA technology. Right now, I believe the verification that minerals are conflict-free comes from a human and technology based audit process. Embedding something in the ore right out of the mine would be a step in the right direction.
I recently read that western companies are planning to cut offshore manufacturing due to complex supply chain, increasing labor cost and political pressure. Tata's case is different as this is limited to one region only. I would rather see Tata's case as an example of how manufacturing will shift from one region to another if there is not enough policy and political support.
It's apparent Seagate is undeterred by Thailand's flood disaster which affected the company last year. Seagate like many other technological and manufacturing industries has realized business potentials and growth in this region and are willing to forge ahead despite challenges. Good on them.
Not up on the last developments Barbara and Douglas but i know H C Starck and BGR were working on mineral fingerprinting. Which maybe the Dna marking could be a complementary technology for. Maybe what's needed is a kind of smart water for minerals that DNA marking could bring.
http://en.wikipedia.org/wiki/smartwater
http://www.bgr.bund.de/en/themen/min_rohstoffe/ctc/downloads/newsletter_01_2012.pdf?__blob=publicationfile&v=2
http://www.bgr.bund.de/en/themen/min_rohstoffe/ctc/home/ctc_node_en.html
http://www.bgr.bund.de/en/themen/min_rohstoffe/ctc/approach/analytical-fingerprint/fingerprint_inhalt_en.html?nn=1572662
http://www.bgr.bund.de/en/themen/min_rohstoffe/ctc/downloads/afp_update.pdf?__blob=publicationfile&v=2
@ stochastic,I agree. This sort of strategy coupled with the government backing will sure aid Thailand's recovery and will economically benefit Seagate too.
Any method that can help solve conflict-mineral challenge is praise-worthy and should be encouraged. But we can't expect that to be the solution to all the problem. Also people should be trained in order to avoid that the method being miseused.
@R.J.Matthews,
Are there shortcomings to DNA use for mineral fingerprinting that may prevent its reliability? Also can the method be “hacked” ?
Anna:
Attitude is what matters the most for manufacturing concerns. You should be prepared and willing to move forward after a disaster and that is what differentiates good companies from the rest. Seagate is doing a great job in trying to expand business in this region and their attitude is commendable.
elctrnx_lyf:
There are many factors that are considered before actually setting up a manufacturing unit. Economic, political and infrastructural factors are always taken into consideration. Apart from these factors any other incentives from the Government like tax breaks etc further help to convince the manufacturer to come to a certain region.
Wale:
There will be challenges any where you go in the world. The thing is some of them will be foreseen and others will be unforeseen. The firms can mitigate risks that are foreseen while the unforeseen ones like floods, earthquakes etc cannot be mitigated unless they actually occur. Yes, you can plan for safety precautions and instill practices that will yield a minimum loss to the firm but there will be some kind of impact because of natural disasters. The key point is to get going again once you hit a roadblock!
The DNA marking of minerals looks to be the promsing technology to prevent the minerals from conflict areas getting into supply chain as long as the DNA marking does not get wiped out or tampered with in the transit process.
For it to be successful, DNA marking technology has to be fool-proof, easy to validate and cheaper to implement.
Probably Douglas is the best person to answer that Hospice but any one measure on it own is going to be vulnerable to being gotten round in some way. In this case say you had a mineral bath at mine giving each shipment a unique id that could not be altered that would not on its on be foolproof.
People at the mine could be bribed to bath minerals from other areas that were not conflict free then fiddle the production figures from the mine or mines. To do that would probably be hader though than getting around some present tagging programs.
Whatever happens you are still going to need smelters to come on board as they form a natural pinch point in the supply chain and spot check at that stage can spot illicit minerals sneaked in with clean sources.
http://www.enoughproject.org/blogs/tin-tungsten-gold-smelters-time-go-conflict-free
With Dodd Frank there is now a lot more pressure on those smelters who have not signed up to the program to do so.
Is there any specific method to apply DNA marking such that it does not get damaged or it cannot be copied. Dipping or spraing DNA might not be enough as DNA can get damaged at high heat or extreme conditions.
@ Syedzunair, you're spot on. Seagate' strategy to cope after the disaster is what separates the wheat from the chaff so to say.
Thanks Anna. Lets just hope they continue with the current tradition and forget any natural disasters or calamities that have struck them in the past.
@wale, I understand your point. In effect it confirms this song by Kelly Clarkson- “what doesn't kill you makes you stronger” Isn't? I suppose it's the right thing for Seagate to do – planning, streamlining and strategy to cope and forge ahead despite its challenges.
I am curious if Seagate builds any backup facilities in other parts of Thailand or other parts of Asia ?
Douglas, Aware of you interest, “… in examining the advances that would reduce the cost and time for DNA analysis and authentication.” I thought you should be aware of the following press release:
Bode Technology Offers First Rapid DNA Service Delivering a DNA Profile from Evidentiary Samples in Under 90 Minutes
Released 8/27/12 and available at:
http://www.ipscelltherapy.net/dna/bode-technology-offers-first-rapid-dna-service-delivering-a-dna-profile-from-evidentiary-samples-in-under-90-minutes.php
@Owen, the time for authentication will soon be under an hour so stock verification/ authentication can be performed while the stockroom is on their lunch break. They come back to their computer to find the lot has passed inspection and then it can be moved to WIP or inventory. I think we are looking at a very strong anti-counterfeiting technology. We share the same interests.