During 2011 the semiconductor and high tech industries witnessed natural disasters in Japan and Thailand cripple their supply chain, starting with the disruption to supplies of parts, to the subsequent shutdown of contract assembly and test facilities.  Consequently, risk management of future natural disasters and strategies to better plan for future supply disruptions have been the subject of much discussion among industry and business thought leaders. 

Two of the key lessons learned include:

1) The criticality of implementing a geographical, multi-sourcing strategy.  While reliance on a same region subcontractor based on ease of maintenance or volume favored pricing may provide convenience, the reality of disruptions due to natural disaster warrants the assessment of alternate sourcing locations.

2) The importance of diving deep in Tier 2, 3 or 4 suppliers' sourcing relationships, confirming that they also  diversify their suppliers' geography. Otherwise, supply disruptions caused by natural disasters occurring thousands of miles away from your lower tier vendor's location may unexpectedly whipsaw product availability or suspend subcontractor services altogether.

A parallel may be drawn here to the process of qualifying of cloud computing providers. Many Software-as-a-Service (SaaS) companies maintain relationships with single location or same region data centers to host their customers' data. Take, for example, an ERP SaaS company which maintains data centers located throughout California.  In the event of a catastrophic earthquake serious disruption of services to its customers may be inevitable. Regardless of the number of data center locations utilized and possible safeguards, the fact remains that dependence on a single geographic region greatly increases risk.

Be it a semiconductor company or SaaS provider, black swan events such as those from mother nature may be greatly minimized through a multi-geographic sourcing strategy.  And, like companies who depend on the semiconductor supply chain, companies who depend on SaaS providers would do well to include some inquiry into their data center sourcing strategies as part of a thorough due diligence process.