That’s the final sentence and essential conclusion in a special report that FM Global commissioned to study what would happen if international supply chains are disrupted by a natural disaster in China, similar to the Japanese tsunami.
What would happen is that a lot of supply chains would be broken. Complacency then could kill any business that did not plan – well in advance – to have new supply sources or alternative arrangements ready at a moment’s notice, so the chain of inventory could be restored with little delay.
Steve Zenofsky, assistant vice president and public relations manager for FM Global, told Providence Business News recently that his firm commissioned the study to help its customers, the public and businesses in general realize what a disaster it would be if China were hit as hard as Japan was last year by a catastrophe such as a tsunami or earthquake.
Some estimates say damage from the Japan tsunami and earthquake was as high as $300 billion worldwide, FM Global said in a Dec. 5 news release, and no one knows yet how much devastation the recent severe flooding in Thailand will cause to the global economy.
“The Japan earthquake and tsunami of March 2011 was a close call and a call to action for many global companies with supply chains in China,” said the report, conducted by the global market-research firm TNS in England. “Financial executives now seem to realize that if a similar earthquake and tsunami occurred off the coast of China, the worldwide impact to supply chains could be much worse.”
Vinod Singhal, professor of operations management at the Georgia Institute of Technology’s College of Management, said the global economy would be slowed because China is both an exporter and importer of goods, causing “shortages in many consumer and industrial products that could lead to inflation and devastate the share price of companies.”
Even businesses that rely on domestic supply sources would be affected.
Consider Vibco Vibrators Inc. in Richmond. Karl Wadensten, owner, and Linda Kleineberg, marketing chief, said company supplies come from North America, but a disruption in China would result in higher prices and greater demand.
Vibco would expect suppliers to “command top dollar,” Wadensten said, especially from new customers in a jam who usually take their business elsewhere. He hopes that his domestic suppliers would reward the longtime loyalty of customers like Vibco.