Economies of scale vs risk in concentrating hard drive production in Thailand

An article in the New York Times (Jan 20, 2012) describes the quandry faced by hard drive manufacturers in Thailand whose plants were deluged during the floods.  Slow recovery of manufacturing raises the benefit of concentration of this industry (40-45 % of world production by over 60 companies) in Thailand.  Should the benefit of economies of scale and the supply of skilled workes justify the risks of sourcing in one location ? Should hard drive firms create a portfolio of production sources, albeit at different cost levels, to enable sourcing flexibility ? How should the Thai government react to retain the hard drive industry and reassure manufacturers that the sourcing risk is manageable ?

About aviyer2010

Professor
This entry was posted in Global Contexts, Operations Management, Service Operations, Supply Chain Issues and tagged , , , , , , , . Bookmark the permalink.

One Response to Economies of scale vs risk in concentrating hard drive production in Thailand

  1. Kyle Harshbarger says:

    Isn’t this a similar problem faced by Taiwan with semiconductors? It is a high-risk game being played by electronics manufacturers: isolating manufacturing to a small geographic footprint to utilize specialization benefits. Due to global reliance on these products, small producers outside Thailand stand to act like monopolists if Thailand production falters. It seems like the risk measures need to be reevaluated.

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