Joe Bunya and Christopher TangTeaching Case UCLA Anderson Faculty of Administration
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January 2013
Resilient Response and Restoration at Western Digital:
After the Thai Flood1
As raging floodwater rushed by means of numerous damaged spots alongside the dike on the Bang Pa-in (BPI)
industrial property, which is positioned roughly 40 miles north of Bangkok and 5 miles south of
Ayutthaya within the Chao Phraya River basin, the BPI property flood-fighting group needed to retreat for
their very own security on October 15, 2011. All through the night time, heavy rain continued to fall and
sturdy floodwater saved rising. All factories inside the BPI property turned flooded.
At dawn on October 16, Joe Bunya (SVP, Onerous Disk Operations Asia, WD (a Western
Digital firm) and his administration group toured their inundated onerous disk drive (HDD)
manufacturing facility on the BPI property (BPI plant briefly) on a ship. Their hearts sank as they noticed that sure
essential gear (some weighing greater than 5 tons) for producing sliders positioned on the bottom
flooring was utterly submerged underneath 6 toes of corrosive floodwater.2
Recognizing that the
whole manufacturing facility was contaminated and that essential gear on the bottom flooring couldn’t be
changed for a lot of months, Joe and his administration group felt the instant want to avoid wasting their
manufacturing facility.
1 This case is collectively ready by Mr. Joe Bunya (Senior Vice President, Onerous Drive Operations Asia, WD (a Western
Digital firm)), and Christopher Tang (Edward Carter Professor of Enterprise Administration at UCLA Anderson
Faculty of Administration). This case is meant for MBA class dialogue. ©UCLA Anderson Faculty of Administration,
2013.
2 The slider is the physique of fabric that helps the precise drive head in a tough disk. The slider slides over the
floor of the disk, carrying the pinnacle at a constant peak above the disk for studying and writing.
Joe Bunya and Christopher TangTeaching Case UCLA Anderson Faculty of Administration
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As a strategy to maintain prospects and buyers knowledgeable of the state of affairs, Western Digital Company
(issued the next press launch on October 17: “WDC right now introduced that it has prolonged
the suspension of its operations in Thailand. Over the weekend, rising water penetrated the Bang
Pa-in Industrial Park flood defenses, inundating the corporate’s manufacturing amenities there
and submerging some gear….. All WD staff in Thailand stay secure.” On the similar
time, the favored press (Wall Road Journal, New York Occasions, Computerworld, and so forth.) speculated
that it might take a number of quarters for WD to revive its operations in Thailand.three
With a resilient response and restoration and the perseverance of all WD staff in Thailand,
President and CEO John Coyne formally re-opened the plant at BPI on November 30, 2011 –
solely 46 days after its closure. Coyne remarked that, “Whereas a lot work stays to be executed over
the following a number of quarters to succeed in our pre-flood manufacturing capabilities, the progress so far
is considerably forward of our unique expectations and is a tribute to the devoted and efficient
actions of our staff, contractors and Thai authorities businesses, the efforts of our provide
companions and the Help of our prospects.” four
On January 13, 2012, the BPI plant produced the primary slider unit after the flood, exceeding
inner and exterior expectations. Sampan Silapanad (VP, Magnetic Head Operations)
attributed this speedy restoration (one week forward of WD’s inner schedule) in his comment: “The
restoration has confirmed that WD staff have distinctive ardour and perseverance. We did
all the pieces to make the plant equal or higher than the pre-flood situation.”5
three See http://www.techcycle3.com/information/Thailand_flooding_impact_on_HDD_supplies_12aNov2011_2_.pdf for a
compilation of assorted commentaries from the press. four Supply: “Western Digital: Flood Response and Restoration,” Journal of the American Chamber of Commerce in
Thailand, Vol. 1, 2012.
5 Supply: Sabayjai, S., “WD credit employees for turnaround after floods,” The Nation, April 23, 2012.
Joe Bunya and Christopher TangTeaching Case UCLA Anderson Faculty of Administration
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Thailand Floods in 2011
Thailand is liable to seasonal floods that are likely to happen within the North and unfold down the Chao
Phraya River by means of the central plains. Through the years, the Thai authorities has developed
numerous flood management methods equivalent to dams, canals, drainage tunnels, and so forth. Sadly, rainfall
over northern Thailand from March to July in 2011 was over 300% above the conventional stage. As
the speed of incoming stream of rainwater was increased than the discharging charges at numerous dams in
the northern a part of Thailand, most dams had been nearly full by the start of October in 2011.
As floodwaters had been transferring south alongside the Chao Phraya River, main cities equivalent to Ayutthaya
and Bangkok had been dealing with an imminent flood.
Regardless of the efforts of the Thai authorities and numerous worldwide organizations such because the
United Nations, floodwaters inundated northern elements of the capital metropolis of Bangkok. Flooding
persevered in some areas till mid-January 2012, finally inflicting over 800 deaths and affecting
over 13 million folks. With 65 out of 77 provinces declared flood catastrophe zones, over 7,700
sq. miles of farmland was severely broken. In keeping with the Federation of Thai Industries,
the estimated harm was not less than 185 billion Baht (1 US$ = 30 Thai Baht). This consists of 95
billion Baht harm on Thai , 25 billion Baht harm on Thai agriculture, and 65 billion
Baht harm on residential properties.
The flood in 2011 disrupted the availability chain operations in sure key industries in Thailand.
Apart from the truth that Thailand accounts for 30% of world commerce in rice, over 40% of the world’s
onerous disk drives had been produced in Thailand and most of them had been concentrated within the BangkokAyutthaya hall. Additionally, along with tourism, Thailand is a significant automotive elements producer
for a lot of Japanese automobile corporations equivalent to Toyota and Honda, and a significant producer for a lot of
Japanese digital digital camera corporations equivalent to Canon, Nikon, and Sony. As such, the 2011 flood in
Thailand created main world provide chain disruptions within the automotive (on account of a
scarcity of elements) and the pc (on account of a scarcity of onerous disks). The World Financial institution
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estimated 1.5 trillion Baht (US$50 billion) in financial damages and losses because of the 2011
flood in Thailand.
Western Digital in Thailand
Because the market turned saturated and extremely aggressive, numerous onerous disk drive corporations such
as Hitachi, Maxtor, and Samsung had been acquired by giants equivalent to Western Digital and Seagate.
After a collection of mergers and acquisitions, there have been solely three key HDD corporations left by the
finish of 2011 (Exhibit 1): Toshiba captures 15% of the market, and the remainder of the market is
equally divided between Western Digital and Seagate.
Headquartered in Irvine, California, Western Digital Company (www.westerndigital.com) is a
world supplier of onerous disk drives, networking gear and residential leisure merchandise
underneath the WD, HGST and G-Know-how manufacturers. Western Digital is the biggest producer of
HDDs on the planet, with roughly US$16 billion in annual income as of the third calendar
quarter of 2012.
By a collection of overseas and home investments that started within the 1980s, Thailand turned
a significant producer of onerous disks by 2010. To attain value synergies (by lowering freight prices)
and provide chain effectivity (shorter cycle time, higher coordination, and decrease stock),
Thailand has developed a cluster of industries related to onerous disk drives manufacturing.
Particularly, this cluster consists of onerous disk element elements manufacturing (equivalent to motors,
suspensions, disk media, disk heads (sliders), and so forth.) in addition to onerous disk meeting operations.
To leverage expert labor at low value and to leverage the Thai authorities’s tax incentives, WD
established two HDD crops in Thailand (on the Bang Pa-in and Navanakorn industrial estates
positioned in Ayutthaya Province and Pathum Thani Province, respectively) in 2003.6
By the tip
of 2011, WD was using over 38,000 folks (together with 2,000 engineers and scientists) and
had turn out to be the biggest overseas employer in Thailand. The nation was producing 60% of all of
WD’s onerous disks. The remaining 40% had been produced within the different plant positioned in Kuala
Lumpur, Malaysia. As a result of the BPI plant produced sliders (magnetic heads for studying and
writing on the disk floor) for various kinds of HDDs for pocket book PCs, desktop PCs, different
client digital merchandise and exterior storage units, the BPI plant inundation affected the
manufacturing of most lessons of HDDs. Along with the closure of each crops in Thailand that
carried out onerous disk meeting operations, there have been critical issues about shortages of assorted
mechanical onerous disk elements as a result of lots of WD’s elements suppliers in Thailand had been
inundated.7
6 Seagate’s HDD plant positioned in Korat (northern a part of Thailand) was not affected by the 2011 Thai flood.
7 Supply: Western Digital Updates —
http://www.wdc.com/en/firm/thailandupdates/ThailandFloods2011FAQ.pdf
Joe Bunya and Christopher TangTeaching Case UCLA Anderson Faculty of Administration
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Earlier than the Flood – Figuring out, Assessing, and Mitigating Dangers
In keeping with the Centre for Analysis on the Epidemiology of Disasters in Belgium
(www.emdat.be), the variety of floods in Asia has been rising at an exponential price, as
indicated by 1910-2010 statistics. Not like earthquakes, floods are extra predictable by way of
timing and site, and corporations can develop plans for higher preparedness and mitigation.
Understanding Thailand to be flood-prone, WD has developed its Enterprise Continuity Plan (BCP)
to safeguard its staff and amenities (along with the plans developed by the Thai
authorities and by the BPI property).
Whereas the BPI had constructed a dike to encompass its 750-acre property, WD’s 7-acre BPI plant additionally had a
designated BCP group that carried out the next duties earlier than the flood:
1. Monitor and assess dangers. Monitored the rain forecast, floodwater stage, situations of
dams and dikes in surrounding areas and areas, and assessed the chance of the flood
and the potential affect on the plant and WD’s suppliers in Thailand.
2. Proactive measures. Ready the plant in opposition to floodwater coming into it, together with
sandbags, water pumps, mills, first-aid kits, and important meals. As well as, the
group ready evacuation plans that included the detailed mapping of bus routes.
three. Mitigation plans. Developed mitigation and contingency plans by transferring inventories
and a few gear from the bottom flooring to increased flooring to keep away from potential harm
from floodwaters.eight
As well as, the group labored with administration in Thailand,
Malaysia, and the US to develop contingency plans in case manufacturing on the
BPI plant was disrupted. Particularly, WD ready a plan to shift a lot of its
manufacturing to Malaysia ought to the BPI plant shut down.
four. Communication plans. Develop communication plans with all staff, all key
suppliers, and all different WD items all through the corporate.
Throughout the Flood – Resilient Response
Because the BCP group continued to watch the flood state of affairs, they discovered that the knowledge
obtained from numerous sources, together with authorities authorities, gave the impression to be inconsistent.9
On the similar time, after the property flood-fighting group’s unsuccessful efforts in repairing numerous
breaks (together with a 60-foot-long one) on the dike surrounding the BPI property, sturdy floodwater
was gushing by means of numerous locations and coming into the BPI plant. Regardless of piles of sandbags and
eight WD was unable to maneuver a few of the heavy gear (weighing greater than 5 tons) to increased flooring.
9 Regardless of the Thai authorities’s efforts in establishing the Emergency Operations Middle for Flood, Storm and
Landslide in August 2012 that was meant to coordinate warning and reduction efforts, the federal government has been
criticized for giving combined or conflicting info. Some overseas corporations additionally thought there was an absence of
correct and well timed info supplied in English, stopping them from being higher ready. Prime Minister
Yingluck Shinawatra instantly responded to the press that the Thai authorities will put money into water
administration to make sure that such flooding doesn’t occur once more (supply: cnbc.com).
Joe Bunya and Christopher TangTeaching Case UCLA Anderson Faculty of Administration
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water pumps, the floodwater continued to rise. To make sure security, all WD staff had been requested
to evacuate the ability and a safety group was appointed instantly to safe the corporate’s
property.
On the similar time, the WD administration group assembled at Sofitel Resort in Bangkok and
deployed numerous contingency plans. These included:
• Making certain staff’ security and well-being. To make sure staff’ security, strict security
requirements and protocols had been enforced by a devoted EHS (Surroundings, Well being and
Security) group. Earlier than beginning any work, the group received collectively and deliberate the method
with security because the primary precedence. Throughout the cleanup, employees had been required to
put on U.S. industry-standard protecting gear. The EHS group would carry out frequent
audits to make sure strict compliance to the agreed upon course of. Each worker and
employee was urged to take the security situation severely. Despite the fact that each crops in Thailand
had been closed, the WD administration group didn’t wish to overburden staff’
livelihood, particularly when their properties had been additionally flooded. So to construct belief and loyalty,
WD determined to maintain all 38,000 staff on the payroll at 75% pay in the course of the restoration
interval.10
• Minimizing provide chain disruption. Understanding that WD’s prospects sometimes had about
two weeks of stock readily available and distributors had a couple of four-week provide, WD
determined to cut back the affect on its prospects by shifting manufacturing from Thailand to
Malaysia in the course of the restoration interval. To perform this, WD instantly ramped up
the Malaysian amenities to full capability.11
• Decreasing restoration time by saving submerged gear. Recognizing that some essential
and heavy gear was in 6-foot-deep floodwater and understanding that this
gear couldn’t get replaced shortly and cheaply, WD managed to get divers to
retrieve that submerged gear. Nevertheless, as a result of the gear was extraordinarily
heavy, these divers needed to unbolt the submersed equipment, dissemble it into totally different
items (kits) underneath water, after which transfer the kits to increased flooring.12
• Sustaining constant communication. WD developed a plan to speak
info in a constant and well timed method to all staff, all key suppliers, and all
WD items. A short lived small command heart was initially arrange on the Sofitel Resort in
Bangkok, which was unaffected by the flood in the beginning. In a while, with Help
from one in every of WD’s enterprise companions, Siam Business Financial institution (SCB), WD moved its
command heart to SCB’s central workplace in Bangkok. This was the situation the place the
info from the frontline folks on the flood website was acquired and communicated to
headquarters every day. Administration additionally visited the positioning each few days to get
firsthand info and to offer Help to the bottom troops as wanted. SMS
messaging was used as a method to maintain your entire workforce knowledgeable of the restoration
progress. Additionally, WD headquarters in Irvine issued up to date information on its web site to make sure
that prospects and buyers had been totally knowledgeable of the state of affairs.
10 Sabayjai, S., “WD credit employees for turnaround after floods,” The Nation, April 23, 2012. 11 Supply: TechCentral, “WD shifts operations to Malaysia in wake of Thai floods,” October 25, 2011. 12 Supply: Romero, J., “The Classes of Thailand’s Flood,” November 2012, Spectrum, IEEE.
Joe Bunya and Christopher TangTeaching Case UCLA Anderson Faculty of Administration
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After the Flood – Speedy Restoration
To revive the inundated manufacturing facility on the BPI property and resume manufacturing operations as quickly
as potential, the short-term workplace on the SCB headquarters constructing in Bangkok was additionally used as a
command heart to handle the restoration operations in parallel. On the similar time, all key
staff commuted to work in the course of the restoration interval, regardless that their properties had been
flooded. Instantly after the flood receded on the BPI property, WD started restoration operations,
which concerned:
• Establishing a decontamination course of. After the floodwater was eliminated, WD began
the decontamination course of by spraying your entire inside of the ability with particular,
non-hazardous chemical compounds to take away movies of dust, mildew, mould, grime, and so forth., from the
ceilings, partitions, and air ducts previous to the demolition work.
• Restoration. Apart from restoring the principle energy, WD assessed these kits retrieved by the
divers earlier. By reassembling the kits to rebuild numerous refurbished machines, WD
managed to salvage 80% of the gear.
• Monitoring progress. SCB supplied WD with pc hardware, telephone traces, and
entry to the Web, albeit with restricted bandwidth. WD’s IT division established a
line of communication with Company utilizing “stay assembly.” The command heart
acquired each day, verbal stories from the frontline folks on the websites and was capable of maintain
Company knowledgeable of progress and the restoration plan.
• Coordination and communication. WD labored with its suppliers to ramp up manufacturing
in Malaysia to cut back the affect on prospects. Apart from continued communication with
totally different stakeholders, WD hosted a four-day seminar for over 20,000 staff at
Thammasat College (Rangsit campus) in Thailand to make sure that WD staff
acquired updates and the corporate’s restoration plans.
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The Solar Shines Once more
Sturdy management and well-executed contingency and restoration plans helped WD’s BPI plant to
be re-opened by President and CEO Coyne on November 30 simply 46 days after the plant closure.
That was weeks forward of the interior schedule. This speedy restoration may be seen as
phenomenal, particularly when contemplating that many corporations, together with Honda, took 6 months
to recuperate. To acknowledge the resilient response and speedy restoration on the BPI plant, all 2,500
WD Presidential Awards in 2011 got to varied WD staff in Thailand.
WD’s manufacturing capability had been affected considerably on the finish of 2011. As reported in IHS
iSuppli Analysis in February 2012, WD shipped 28.5 million HDDs within the fourth quarter of
2011, which was about half of the 52.2 million HDDs it shipped in the identical quarter the yr
earlier than. As such, WD slipped to the quantity two spot after Seagate on the finish of 2011. Even
although WD reported that the flood in 2011 value the corporate US$199 million, WD managed to
restart its slider manufacturing in January 23, 2012.
Whereas buyers had been involved concerning the earnings of WD, their issues had been lifted when the
worth of HDDs continued to rise as the availability of HDDs fell in 2011. The underlying cause was
that, regardless that Seagate’s manufacturing facility in Thailand was not affected, there was a scarcity within the
provide of the elements for onerous disk manufacturing as a result of many onerous disk elements
suppliers in Thailand had been additionally flooded. In consequence, there was a 29% discount within the variety of
HDDs produced in Thailand within the fourth quarter of 2011. As the availability of HDDs fell, the
common HDD worth elevated from US$51 to US$66: a 30% improve in the identical quarter. As
reported by IHS iSuppli in June 2012, the worth of HDDs will stay excessive till 2014.
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WD recovered quicker than analysts anticipated. By the tip September 2012, WD’s
operations in Thailand had been restored to the pre-flood stage. This nice information has main potential
results. Firstly, shipments would improve as extra prospects have stronger confidence in WD.
Secondly, because the promoting worth of HDDs is “sticky,” WD’s income and revenue would proceed to
rise. Furthermore, within the second quarter of 2012, WD had accomplished the acquisition of Hitachi’s
onerous disk division. WD additionally set a brand new document by transport greater than 71 million HDDs with over
US$four.eight billion in income and earned a document revenue of US$745 million (Exhibit 2).
Moreover, as buyers regained confidence about WD, the corporate’s inventory worth bounced
again to the pre-flood stage regardless of drops in inventory costs in the course of the flood interval.
After affected by critical flood harm in Thailand in October 2011, it’s exceptional that WD
reclaimed the primary spot within the HDD market by the tip of the second quarter of 2012.
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Upon reflection, WD’s SVP Bunya remarked: “The resilient response and speedy restoration on the
WD plant in Thailand is a robust reflection of the core values fashioned and nurtured by President
and CEO John Coyne: Ardour, Motion, Productiveness, Perseverance, Innovation, Integrity and
Teamwork – PAPPII TWO (Collectively We Outperform). These values had been the muse of
WD’s profitable restoration from the 2011 flood.” 13
Wanting forward, WD is questioning concerning the following points:
1. Whereas the response and restoration had been profitable in combating the flood, is there one thing
WD can do to enhance its Enterprise Continuity Plan?
2. Ought to WD rely solely on the Thai authorities and the BPI property to regulate flooding? If
no, then what shall WD do?
three. Understanding that Thailand is liable to floods, ought to WD take into account shifting its manufacturing
elsewhere?
13 Supply: “Western Digital: Flood Response and Restoration,” Journal of the American Chamber of Commerce in
Thailand, Vol. 1, 2012.
Joe Bunya and Christopher TangTeaching Case UCLA Anderson Faculty of Administration
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Exhibit 1. Current mergers and acquisitions within the HDD .
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Exhibit 2. Revenue Assertion of WDC (as of September 2012)
Supply: Investing Enterprise Week Analysis, accessed December 2012.
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Joe Bunya and Christopher Tang Educating Case UCLA Anderson Faculty of Administration 1 | Web page
January 2013
Resilient Response and Restoration at Western Digital:
After the Thai Flood1
As raging floodwater rushed by means of numerous damaged spots alongside the dike on the Bang Pa-in (BPI)
industrial property, which is positioned roughly 40 miles north of Bangkok and 5 miles south of
Ayutthaya within the Chao Phraya River basin, the BPI property flood-fighting group needed to retreat for
their very own security on October 15, 2011. All through the night time, heavy rain continued to fall and
sturdy floodwater saved rising. All factories inside the BPI property turned flooded.
At dawn on October 16, Joe Bunya (SVP, Onerous Disk Operations Asia, WD (a Western
Digital firm) and his administration group toured their
