When the editor of EBN approached me to author this column, I objected, saying, “Wait a minute. I don’t know nothin’ about supply chains,” to which he replied that his readers are eager for variety and would be happy if I wrote about “anything BUT supply chains.”
And so I have. But I have to admit that, as it keeps popping up in the news, supply-chain stuff kind of fascinates me. For example, I know that the invention of the container ship was a big deal for the supply chain, because it expanded the capacity of a single ship while automating the loading and unloading process so drastically that the word "stevedore" has slipped from the vernacular.
This vast streamlining of the trans-oceanic part of the supply chain has resulted in some amazing stories. One that received a lot of attention during the presidential election, because it involved Bain Capital (Mitt Romney’s alma mater), was the shift of a sensor manufacturer named Sensata from a little plant in Freeport, Ill., to a new location somewhere in China. Bain Capital, an owner of Sensata, got a lot of bad press because it flew a crew of Chinese workers to Freeport, where the American employees — all of whom were being laid off — were compelled to train the untrained, low-wage Communists who were taking their jobs.
All this publicity, however, overlooked the terrific logistical aspects of this offshoring saga. Not only were about 100 jobs moved overseas; every important component of the manufacturing process, including machines, test equipment, office furniture — the works — were rolled into containers, trucked to the West Coast, stacked onto container ships and transported more than 7,000 miles. This is a feat once unthinkable and certainly too costly to accomplish in a past era that didn’t have a supply chain so efficient as today’s.
One has to simply stand back, look objectively past the human tragedy of Sensata and say, “Far out!”
Even more remarkable is that many customers for Sensata’s sensors, which go into cars, RVs, airplanes, heating and air conditioning systems and mobile phone networks live right here in the U.S.A. Before its operations were moved to China, a Sensata truck driver could climb into a Dodge van and haul a half-ton of automotive sensors, switches and control devices from Freeport to the Chrysler plant over in Belvidere, Ill., in about 50 minutes — most of the trip on legendary US Route 20.
As of next year, that same shipment — now from Shanghai to Belvidere — will take… well, not being well-versed in supply-chain stuff, I really don’t know how long it might take. But more than 50 minutes, I bet.
Short of a robust regulatory regime, expecting moral behavior from a corporation is naive. A corporation is an amoral tool designed for one purpose: to extract value for the shareholders. Which is not to say that corporations don't have a purpose in the broader context of society; they simply need to be regulated to fit that purpose.
Those espousing "deregulation" or "ethical business practices" are either fools or liars: there can be no such thing.
The jobs which require human inputs which can be reasonably faithfully reproduced after the first time will always find its way to the cheapest part of the world where it can be done. It's all about realizing cost cutting by volume. It works whatever others might feel with most of the rest of the world living of about a dollar a day it works mightily and will for many more years to come. A strategic shift is the only answer and companies which utilize that means will not need to offshore but are there any so far..
And what Foxconn may do for Apple in the U.S. as well? :)
I enjoyed this article. It gives food for thought on why things are done the way they are, how and why trends develop, and how long they last. It only takes one company to realize there might be a better way or place to build a mousetrap, and the whole thing comes to a screeching halt and changes direction.
Maybe that would be a good EETimes contest: design an improved digital mousetrap. What components will you use? What country will you build it in (hopefully a country with a large mouse population)?
True.I can`t imagine a US site that would allow a plant full of aluminum dust that explodes.Didn`t I read that the owners of that plant in China when confrounted by the local government,packed up the factory on trucks and moved it a couple hundred miles to another jurisdiction.
Thing about robots seems to be that the companys that are getting the jump on this are those that are flush with cash and orders. We sent our fabs overseas to shave costs.This next round we might just plain be behind the curve.
"Companies HAVE to operate that way, in order to stay afloat"
I agree. The very structure of corporations requires that they be both traitors and sociopaths. That is why we need to watch them like a hawk and regulate them every which way to Sunday.
The differences between management and front-line workers is that for managers, there are lots more opportunities to loot the company at investor's expense. What can I do as a grunt worker? Steal a few pens? I certainly can't pump my bonus by a few million by fudging some numbers and hiding the risks I am taking.
I am sure that when you read Wealth of Nations, you noted how dead-set Adam Smith was against the very idea of joint-stock corporations, precisely because of the large amount of moral hazard that corporate executives embody. Indeed, that is why Britain banned corporations for many decades.
You are right. Macro is the government's job. And that usually means holding corporations and their bad behaviors in check.
"Macro is government's job."
I agree with that, yet I'm guessing the OP's intent was to highlight that free markets don't optimize for societal well being as many on the right proclaim. Free markets optimize profit, anything else they do is purely collateral.
Companies HAVE to operate that way, in order to stay afloat. So the trick is for governments to carefully fine-tune their tax policies and regulations, including regs on pullution.
Managers have exactly the same motivations as anyone else in the work force (even though many are clueless about what they manage). They need to show results to their bosses, no different from what any other employee has to do.
"Society-wide optimization," aka macroeconomic considerations, cannot possibly be something your corporate managers can address, if they care to remain employed. At best, the top execs might utter nice-sounding platitudes along those lines, for the politicans' benefit.
Macro is government's job.
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