I finally got around this week to reading "The World is Flat," the bestselling book by New York Times columnist Thomas Friedman. It’s one of those books that at one level doesn’t tell us anything most of us in business don’t know, but puts things together in a way that still leaves you with a brand new perspective for what’s happening in the world – and how it will impact all of us, especially in supply chain.
The basic theme of Friedman’s book is that a confluence of powerful forces has dramatically reduced barriers in most of the world to commerce, information access and flow, and communications. As a result, counties and companies have access to talent, assets and markets unimaginable just a decade ago – and an equal number of potential threats to the status quo and current business models.
What Friedman calls “supply chaining” plays a key role in this flattening. He notes how logistics providers such as UPS and FedEx are able to leverage vast global infrastructures to enable small companies to tap into global markets and customers, which in turn enables larger companies to source materials and components from these companies with increasing ease.
Wal-Mart gets almost a full chapter’s worth of attention, the theme being the ability of the retailer to flow goods from across the globe into its stores with tremendous efficiency is one component of flattening. Wal-Mart’s drive into China certainly has helped accelerate trade between the U.S. and that country, though Friedman also notes Wal-Mart had to almost beg TV manufacturer Sanyo to keep a plant in Arkansas.
There’s a lot more, but I’ll just say this; if reading this book doesn’t cause you to at least for a few moments ponder what a flat world means for your company, your supply chain and your own career, you must really be skimming the thing. And it’s clearer than ever to me that those companies (and individuals) who proactively harness the power of these changes rather than react to them (often too late) will continue to thrive and prosper, while the rest take a beating.
Everything – repeat everything - has the potential to be outsourced. “Not flipping burgers at least!” you tell me – at least in the end we can fall back on employment at Wendy’s. Except part of burger flipping is being outsourced A McDonald’s franchisee in Missouri uses high speed connections, cameras and video monitors so that an offsite “call center” in Colorado actually services customers at the four of his restaurant’s drive-thru windows. While the cost per hour of the call center personnel is actually somewhat higher than an in-store employee, productivity (cars served per hour) is up almost two-fold, while errors have been significantly reduced. As you might imagine, McDonald’s corporate is watching from Illinois, Today, Colorado. Tomorrow Bangagore?
Friedman quotes the CEO of Infosys, the Indian technology and outsourcing giant, as saying that the Internet, communication infrastructure and the like has “created a platform where intellectual work, intellectual capital, could be delivered from anywhere. It could be disaggregated, delivered, distributed, produced and put back together again…” Sort of like a Star Trek transport system on steroids.
One only has to see what the high tech companies are doing to get a sense of this, as illustrated in a 2004 article in the New York Times on Hewlett-Packard’s global supply chain for a server product: new model idea developed in Singapore, approved in Houston, concept designed back in Singapore, engineering design in Taiwan, components sourced from all over the globe, final assembly in India, Australia, Singapore and China.
Winning companies will be those that tap into this vast world of talent and resources, and can coordinate the movement of materials and information better than the competition. It offers huge opportunities for logistic and supply chain professionals – but also risk. If computer design can be outsourced, why not inventory planning? I’m out of space for now – more on this aspect next week.
Note: In last week’s First Thoughts piece on “Building a World Class DC,” an editing error led us to misspell the last name of the author of the WERC book we referenced, Ken Miesemer from Hershey Foods. It is the best book we’ve seen on the subject.
Did you read “The World is Flat?” What was your reaction? What are the opportunities - and risks – from this revolution in the global economy? Is this the best time ever to be in supply chain and logistics? Let us know your thoughts. |
