The World Really is Getting Flat

WorldisflatA couple of years ago, there was a book written by Thomas L. Friedman called “The World is Flat” which made the case that businesses and organizations are becoming more and more integrated across physical locations and national boundaries. His point was that in the future, the various different functions and processes of any enterprise will increasingly be done in different parts of the world by the most efficient and effective individuals regardless of where they happen to be or who their employer is. It will no longer be necessary to have all of the people working on a project to be co-located; they can be practically anywhere in the world and actually be members of multiple different departments or totally separate organizations.

Although Friedman did recognize the impact of companies’ supply chains becoming ever more efficient and expansive in this process (‘Supply Chaining” was one of his 10 basic forces), he focused mainly on the ramifications of the increased power and availability of the internet as the driving force behind this increasing integration. For sure, it’s true that over time the ubiquitous nature of the web will continue to profoundly shape the way people in different parts of the world share information, and as a result increase each others’ creativity and productivity. But the impact of developments in supply chain management will also have a huge impact on the way people in different parts of the world think of each other, interact and inter-relate.
This was reinforced to me by the recent news that workers at the Volkswagen plant in Chattanooga recently voted against allowing the UAW union to represent them. This is the latest evidence that relatively un-skilled production workers in the US are finding themselves in direct competition with workers in India, China, Korea, and Europe. The workers at Volkswagen realized that they had to send a message world-wide to prospective employers that Tennessee was a “business-friendly” location. If somehow they were viewed negatively, then companies because of their super-efficient supply chains will seek out lower wage locations for their production.

When Volkswagen opened their Chattanooga plant in 2011, the starting wage for assembly-line workers was $14.50 per hour. This is roughly half of what traditional, unionized personnel at GM and Ford make. With benefits, this salary comes to about $27 per hour. The ‘funny-sad’ thing is that Volkswagen personnel in Germany make roughly $67 per hour. So in effect Volkswagen exported those German jobs from their high-wage home country to the low-wage United States. It’s a similar story when General Electric started up a new line at their Louisville Ky. Factory in 2012. There, the starting rate for line workers was $13.50 which comes out to less than $30,000 per year.

Essentially, low or un-skilled manufacturing workers in the U.S. are in a race to the bottom (though what the bottom looks like is a function of the industry). The only way for these workers in improve their living standard is through increased training, education and flexibility. I’m not saying that everybody should go to college… not at all. After all, I’m college educated and nobody in their right mind would want as an industrial welder. It would be a scary thing to see me with a blow torch. And my wife has already prohibited me from going near the electrical system in our house. But learning specific skills and trades such as CNC Machine Programmer, skilled mechanic, CAD technician, electrician etc. will distinguish non-college educated workers from their competition. These are the skills that are valuable to employers and are in short supply, and will allow the U.S. blue-collar labor force to insure that they are not competing with other low-skilled workers in far off places in the world.

About John Hughes

John Hughes has led the implementation of production scheduling models at such clients as Rohm and Haas, Hercules Chemicals, Bridgestone Firestone, and Exxon Chemicals.

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