The trend in the United States is to an economy based more upon services and less upon manufacturing. Many blame this trend upon globalization or the movement of manufacturing to “low wage” parts of the world. Certainly to a certain extent this is true. However, another factor is the significant improvement in manufacturing productivity and the shift from an emphasis on low skill manual labor to automated machinery requiring fewer, technically skilled technicians to maintain and operate. I watched a show last night on the Discovery Channel – “How Things are Made”. I was fascinated by the automation demonstrated in the manufacture of everything from batteries, to tin cans, to camera lenses.
The combination of low cost imported goods (when was the last time anyone purchased a piece of clothing made in the USA??) and high manufacturing productivity has resulted in unprecedented high level standard of living for those who are able to compete. I suggest that rather than a detriment, the world has greatly benefited from globalization.
Take Away Thought: We in the developed economies must share the global economic pie with those who have a lot less. Even with the huge growth in its economy, the Chinese still have a huge population living at a very low subsistence level.
Globalization has been defined as requirements seeking the most efficient resource. We tend to conceptualize this as a nation to nation exchange or in terms of monetary measurement. I suggest that every time baseball players are brought in from the Dominican Republic, an orchestra conductor from Venezuela (Gustavo Dudamel will lead the Los Angeles Philharmonic), etc. … this exchange should be considered as globalization. These exchanges are made to improve the overall performance of the products offer (e.g. better baseball team, better orchestra, …).
Take away thought: The Internet has significantly enabled efficient resources, physically located anywhere, to have the exposure to a wider potential market. Better products should result.
In today’s Wall Street Journal, there is an article about the new version of the Amazon Kindle. This very popular e-book product incorporates a unique display technology which is supplied by a company based in Taiwan. In this case, global sourcing was necessary to obtain the technology and volume manufacturing capacity for a very critical component of this e-book product.
Take away thought: BRIC … Brazil, Russia, India, China have been identified as the rapidly emerging economies. Each has developed technical expertise in specific disciplines which are competitive in the global market … for example, the USA will probably have to depend upon Russia to deliver our astronauts to the International Space Station for the near future, India has developed a reputation for providing IT support personnel, … The global market is more than lower labor costs, engineering design and development resources may have a more significant long term impact … develop relationships that can be expanded to incorporate these higher level value added capabilities.
Tim C
Many of us have read various analysis of the cause of the current global financial crisis. I suspect that the fundamental culprit is essentially that the buyer depended upon the analysis of others to characterize the quality/ risk of what was being purchased (e.g. level of financial risk in this investment). The same situation occurs when a company sources a material component from an international resource. The initial risk associated with any new component is easily evaluated by requesting First Article samples and performing an engineering and a quality assurance evaluation. Long term consistent and reliable product quality is a slightly different issue. Large company procurement organizations depend upon site audits. Smaller companies, where the expense of periodic site audits can not be justified, must depend upon establishing strong business relationships with national distributors. A distributor will have a strong and long term business relationship with the international manufacturer. In addition, a distributor can become a strong member of the small company’s supply chain management structure.
Take away thought: For a small company, establishing a strong business relationship with a distributor with international resources can help to assure consistency of product quality and supply at attractive global prices.
Tim C
