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« On Leadership: Managing Transitions | Main | On Leadership: Hiring Leaders »


jesse Mobley

Interesting perspective, however, I think we have only seen the tip of the "Low Cost Sourcing" iceberg so far.

Many if not most of the jobs that have gone to China and places beyond will probably not come back to the U.S. unless the unskilled and semi-skilled American labor force is willing to accept such jobs. Wages in China will probably remain low for a very long time. The workforce age population is abundant, making the conditions an employer’s market.

Currently, the real driver behind globalization is too a goodly degree the political economy of international trade activity.

America's propensity to consume is increasingly representing a larger percentage of GDP. The real question about our economic future involves the non-consumption parts, what will happen to them as the steady increase in consumption squeezes them.

I, G, X, and M are getting smaller as C continues to grow.

I don't think energy costs; environmental costs, wage costs or security costs will alter the consumption habits of Americans significantly. Those components are already built into the cost of products.

As for the risk associated with sourcing supply, that will always be part of the mix, simply because few if any single manufacturing and/or service locations can provide all components from raw to finished. Even countries that are in over production stages still have to import some of their resources in order to complete some form of fabrication. All textiles used in the production of garments in China are not sourced in China. All equipment that is needed to run a commercial fish/shrimp farm in Vietnam is not sourced in Vietnam. The risk component in sourcing will always be present because the human element is present.

Sourcing options that are closer to the U.S. (Central and South America) are not as competitive as China and its up and coming neighbors. Frankly, Central and South America as a region are global economic laggards. The region lacks a good educational base; therefore as we can see, it also lacks a solid broad workforce of skilled personnel in many industries. (Its ironic that many managers of textile factories in the Caribbean and Central America are from Asia.) The regulatory and physical infrastructures are weak. Social stability is always in question to some degree. In the last few days, an airport in Bolivia was stormed by hundreds of locals who blocked an aircraft from departing to Miami, demanding that the airline pay a landing fee to them in cash! Unrest and protest are frequent in the region; poverty is widespread throughout the region and not being addressed. Work regulations are at best difficult if not clumsy. Can anyone explain how is it that South Korea has managed to surpass all of Latin America in terms of technological achievements, industrial development, and productivity measures? That’s impressive considering in the 1950s, Korea was as poor as many African nations. Yes, you can find low wages in Latin America; however, the level of productivity and quality is not yet there to the extent it could replace China, (to include Hong Kong) Singapore, South Korea, Vietnam Indonesia, Malaysia, and the Philippines as an aggregate group.

India is graduating five times as many engineers as the U.S. annually, and China is graduating twice as many as India annually. Where is Latin America on the education scale? The scope and scale of manufacturing in China, from FMCGs to durable goods to semiconductor chips will not be replaced by Central and South America overnight.

Logistics costs and service times from Latin America to the U.S., Canada and the E.U. are not as attractive as you depict them. One only has to read the recent speech by UPS Chairman and CEO,
Mike Eskew, as he pointed out what seems to be a never-ending story year after year by some different industry executive about the clumsy physical and administrative infrastructure in the region retarding economic progress.

Professional grade supply chains in Asia will probably materialize only after a significant number of workers in the region have gained sufficient experience to take on infrastructure upgrades. In addition, many ventures in China are coupled to Chinese firms which were/are SOEs as partners. This will take some time for state owned enterprises to develop into free market entities.

One reason for manufacturing in China is to allow the production cost per unit to be relative to the disposable incomes. Auto manufacturers are not exclusively setting up shop based on future projected disposable incomes.

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