Running a supply chain to support a global information technology enterprise is a stressful job under the best of circumstances. It becomes a potential mind-blower when disasters—natural or man-made—intervene.
For Dave Mosley, head of operations and supply chain for Cupertino, Calif.-based disk drive giant Seagate Technology, 2011 was one of those mind-blowers.
First was the March 11 earthquake off the coast of Japan that triggered a devastating tsunami. Then the nightmare scenario: severe flooding in Thailand from July through October that literally put much of the world's hard disk drive (HDD) and component production under water.
Mosley spent most of 2011 handling two jobs. The first was to pull Seagate out of the proverbial deep muddy once the floodwaters receded. The second was to harden its supply chain so the company could be as prepared as possible for future disasters.
In his current role, Mosley oversees a global network that employs more than 50,000 people, manages $8 billion in assets in 11 factories, and brings in 30 million parts each day. The Seagate supply chain involves about 300 component suppliers, 900 shipping lanes, and numerous warehouses, distribution centers, logistics partners, and service supply chain collection points worldwide.
Mosley recently spoke with DC Velocity Senior Editor Mark B. Solomon about Seagate's ability to recover from the flooding, its impact on Seagate's long-term supply chain transformation initiative, and the lessons all logisticians need to learn from a disaster that resulted in $45 billion in losses and has been categorized as the worst flood in history.
Q: What kind of shape was Seagate's supply chain in prior to the flooding, and a year later, where does the recovery stand?
A: Seagate's supply chain already was flexible and resilient. We prepare for risks such as this with buffer stock and inventory, which we were able to draw on to meet demand. We had multiple levels of challenges, and Seagate forged through them incredibly well. We had a number of employees affected by the floods, and they, along with incoming parts, weren't getting to the factories. As a result, we had to quickly adjust our builds and delivery commitments. As component factories recover, the supply-demand balance is normalizing and inventory levels are returning to pre-flood levels. The HDD industry itself will emerge stronger and healthier, but it will take some time to fully recover.
Q: Did you anticipate the Thai floods would do such widespread damage to hard drive production and cause such disruptions to the supply chain? And was the IT supply chain caught ill-prepared for the damage that ensued?
A: I think a lot of people outside the industry underestimated the impact of the floods on the business at first. Those inside the industry knew the serious ramifications of the supply disruption because so much of the component supply—along with final drives and assemblies—was concentrated in the area where the floods occurred. What happened is really a structural change to the industry. As a result of this event, the market is waking up to the fact that HDDs are not commodities, but complex, high-tech hardware solutions requiring sophisticated operations to design, make, and deliver them.
Seagate weathered the event very well compared to others because we had pre-planned to have supply, manufacturing, and assembly operations in diverse locations. Nonetheless, the event has created an opportunity to reassess our supply chain to make it even more agile and resilient to all kinds of risk, including natural disasters.
Q: Seagate is undergoing an enterprisewide supply chain transformation. What are the major components of this strategy, how far along are you, and was this initiative triggered by the floods and their aftermath?
A: The current operation has served Seagate and its customers well for the past 30 years. With optimistic growth projections for the storage industry, combined with relentless pressure on product prices and innovation in new markets such as the cloud and mobile devices, it's imperative that our supply chain adjust to these changing demands. The Thailand floods accelerated already-planned initiatives to make Seagate's supply chain more flexible, robust, resilient, and responsive to change.
Q: Following the floods, Seagate reduced the number of just-in-time (JIT) hubs its customers operate near their own delivery points. This enabled Seagate to "bypass" the JIT process and ship directly to OEM customers. While this would obviously reduce JIT hub costs, wouldn't it also cause supply disruptions if an event—natural or man-made—affected your factories?
A: No, quite the reverse. Reducing the number of JIT hubs, and consolidating them into fewer regionalized locations, gives us much greater flexibility, capability, and capacity to adjust to sudden shifts in demand. We can become more responsive by having the fuller capabilities to ship directly from our factories or from more strategically regionalized hubs that are closer to the point of consumption as well as through traditional JIT hubs.
Q: A number of big companies, such as IBM, P&G, Ford, Boeing, and Dell, have created "control towers" that allow their supply chain folks to oversee the flow of parts and products and make adjustments in times of crisis. Is this something Seagate is doing?
A: We are increasingly participating with our customers and our suppliers to have greater end-to-end visibility of their orders, from component supplies and finished products to final delivery. We're doing this through greater communication, co-planning, and collaborative execution software tools. We're also entering into more long-term service agreements with our major customers, which enable us to plan better for the future as a partner rather than just a vendor.
Q: One takeaway from the Thai floods and the Japanese earthquake/tsunami is the need for companies to have multi-tier suppliers strategically positioned to pick up the production slack in the event a location gets knocked out of commission. Is that commonplace throughout the supply chain? If not, should it be?
A: Supply chain leaders are recognizing the importance of balancing multi-tier supplier relationships with fewer core and trusted suppliers that consistently produce quality products. We look for suppliers that have a global footprint but also regionalized capabilities with value-added services, which allows us to be more flexible if supply or demand quickly shifts from one location to another.
Q: We live and work in a global "village" that can be capricious and perilous. What advice can you give your fellow supply chain professionals—regardless of their vertical—on how to protect their product flow, and fulfill their customers' needs, when disaster strikes?
A: Three things: Strong, trusted, and deep relationships with suppliers and customers; alignment around common objectives that benefit all parties; and end-to-end, aligned metrics for investors, customers, and employees. If supply chains can concentrate on these three priorities, everything else should fall into place in good times and bad.