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Supply Chain Economy

Written By: Ann Grackin
Published On: September 6 2005

Introduction

Energy prices ... the Fed raising interest rates ... loss of manufacturing jobs ... addition of service jobs ... China ... changing demographics, etc.—these all play into the supply chain economic model.

We decided to have speakers at our annual event that could discuss these issues and put them in context. But last week the Bureau of Labor Statistics published their August numbers and we thought we should write something for this week's magazine.

Job count is up—but what kind of jobs? It turns out that the steady decline in manufacturing jobs continues.

And then Katrina! How much of the nation's logistics infrastructure will get deployed in the humanitarian needs (from a human perspective we hope a lot, but from a business perspective capacity issues will rise).

Long before this current crisis, we all have known that we were heading toward an energy crisis. Trips to Wal-Mart won't be in the family SUV anymore—how about a bicycle? Problem with the bicycle is that you can't carry too much loot out of Wal-Mart. And those every day low prices—will they stay that low with fuel costs going up?

No, it's not a perfect storm,' but the economic model of supply chain management (SCM) needs to be looked at.

The Labor Department reported an increase in jobs

The Labor Department reported an increase in jobs of 175,000 in June and 242,000 in July. But the manufacturing industry cut jobs for a third month in a row, reducing payrolls by 44,000. Other major industries added jobs. The construction industry added 25,000 jobs. (And we know that with the hurricane there should be a hundred thousand in the building and supply business coming soon.) The service-providing industry added 156,000 jobs. Within that category, the retail-trade industry added 12,000 jobs, getting ready for the back to school and then the Christmas ramp-up.

And how about Canada? Well, these days they've got something good going. Canada has always had a liberal immigration policy, and with today's innovative ideas landing from all over the word, innovation is up. But the word by several government studies is that immigrants are getting paid less—a lot less. Canada has consistently been a great tech launching pad, but the ideas have to move south to sell something!

And Japan. More patents per square inch than any other nation. And they will need them, with a dwindling population. Unlike the US, the Japanese seem to display a personal self discipline (if you catch our drift) with later marriage and all the implications associated with that. They too, though, totally rely on exporting' their ideas through innovative product launching.

Then Korea. Interestingly, this is now being talked about with some fear. Snoopy says it all. Who is Snoopy? An extremely cute clone, a product of the Korean biotech industry. And those Samsung phones with their seven megapixel cameras!

The facts are there! Labor costs in the US average approximately $16 (USD) per hour, with automotive (in US, Japan, and Germany) around $44 (USD). Labor rates, as a percent of a product, are reduced through better productivity and automation. But move your manufacturing, and you add time and transportation.

To date, this has been an affordable trade-off. But the more you move, the more the transportation pricing increases due to competition for capacity. And with $85 (USD) a barrel for oil looming ahead of us, the cost of energy as a factor is growing.

Energy is a global price. SO, THE COUNTRY THAT CAN MASTER THIS ECONOMIC FACTOR OF PRODUCTION CAN GAIN SOME ADVANTAGE. It may make the difference in losing your job to Vietnam or India.

We will show you the supply chain economy at Parallax Views 2005 in Banff:

  • Energy statistics as a percent of supply chain

  • Innovation stats on the global basis

  • What's happening with capital markets

  • What's happening with labor markets

  • India's largest industries and growth

  • The Hydrogen generation

  • The China syndrome—Telco east and Telco west (speakers from China and Europe)

  • How global technologies can enable a smarter world.


This article is from Parallax View, ChainLink Research's on-line magazine, read by over 150,000 supply chain and IT professionals each month. Thought-provoking and actionable articles from ChainLink's analysts, top industry executives, researchers, and fellow practitioners. To view the entire magazine, click here.

About the Author

For more than two decades, Ann Grackin, Chief Executive Officer, has been on the frontlines of the Supply Chain Management technology and e-commerce frontier, leading global strategy and technology implementations in the high technology, semiconductor, automotive, textile, and apparel industries.

ChainLink Research is a bold new supply chain research organization dedicated to helping executives improve business performance and competitiveness.

 
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