Thailand Floods in 2011 and Effects on the Global Supply Chain

We often receive questions at Recorded Future about how historical events were covered in the media while they happened. While recently examining risks to the global supply chain, the destructive and deadly flooding in Thailand during October 2011 appeared as an important event to review given its effect on lives and businesses globally.

What we’ll do here is analyze the history of this event and try to tease out any leading indicators available in open source media. This retrospective proves important for future scenario planning by identifying and evaluating: how events related to the supply chain played out, key media sources and blindspots, failures in recognizing risks, and the responses to this type of disaster scenario.

We’ll use Recorded Future to analyze online media coverage of the 2011 flooding in Thailand from several angles:

• How did industry voices and the media forecast the severity of flooding and potential market disruption?
• When did officials and companies start warning that floods would disrupt the supply chain?
• How were the supply chains and production for different companies affected?
• What long term (6-18 months out) effects were being forecast in the aftermath?

Predictions made prior to and during 2011 monsoon season

We started by rewinding the clock using Recorded Future to see what was reported between July 2011 and December 2011 warning of risks from heavy rains and flooding.

We find some indications of unusual conditions as early as August 7 when the Bangkok Post warned of the risk posed by rising waters in the Chao Phraya River that flows through Bangkok. Not until the first week of October do we find early warnings about how badly the region might be affected as the Sydney Morning Herald and other outlets wrote that the floods “have reached a ‘crisis level’ and threaten to swamp the capital, Bangkok, next week” (October 9 – October 15).

As the floods worsened during October we found more and more warning about increasingly dangerous conditions – “high tides in the Gulf of Thailand scheduled for tomorrow and Saturday pose a particular risk” – as well as early reports on the expected impact to industrial and agricultural output including a shortage of computer hard drives and rising price of rice in December.

Impact on the Global Supply Chain

One of the major pain points that manufacturers felt when facilities flooded was a shortage of components for electronics, vehicles, and other commercial manufacturing. Was anyone talking about the threat of this prior to the onset of an emergency state?

We find that there was little in the way of media coverage signaling fear or concern about long term disruption of the supply chain. In the next graph, we can see the periods when disruptions were reported – the timeline shows companies facing shortages of parts and components – during October, November, and December of 2011.

The callouts on the timeline show select highlights, but you can see the breadth of the damage was by reviewing the table and side panel; the floods affected major global corporations from Apple to Toyota to Intel as well as local operations. While some companies faced a reduced supply of parts, others took the brunt of the storm by physically shutting down facilities or operations while floodwaters subsided and damage was repaired. The treemap below shows organizations that were forced to suspend operations:

The Aftermath and Recovery

When the flooding subsided and life and business began returning to normal the biggest questions was how long would it take to recover. There answer varied by analyst, industry, and location, but below we can look at the forecasts for 2012 and 2013 made during the three months after the flooding (here’s a live view, but be patient as the dense visualization loads).

Forecasts for the computer industry were wide ranging with some analysts expecting companies to be impacted only into the first quarter of 2012 while companies like HP reported in their earnings call that they would be affected by hard drive shortages until Q2 of 2012. Worst case scenarios had hardware providers experience adverse effects until into 2013 and semiconductor companies expecting revenues to be lower for a year.

Local infrastructure was expected to take months to recover including the reopening of industrial parks and commercial flights to Bangkok’s Don Mueang international airport delayed until at least March of 2012. Auto manufacturers were hit with a similar timeline of months for recovery with Thailand’s government going so far as to allow tariff free import of foreign assembled vehicles by Honda through June of 2012.

Final Thoughts

There are so many moving parts during a disaster scenario like the flooding in Thailand during 2011 that it can be difficult to keep track of what’s happening on the ground much less look forward. The web contains valuable information and commentary during a crisis so long as the relevant signals can be captured and meaningfully organized. The above examples show how Recorded Future can be used by analysts to monitor a developing disaster scenario, identify signals related to specific locations and time windows, and plot out how stakeholders are or expected to be affected by major supply chain disruption.