Leading to Recovery: Part 3 of 3 - Opportunity

Leading to Recovery
Part 3 of 3
Opportunities

Let me share some thoughts that I hope will generate continued discussions and creative solutions in our own community.

The new realities are that business of every size is under enormous pressure to cut costs. Markets are radically changing and business must be able to react or they will cease to be in business. The world is in agreement about the reality and threat of global warming. People and business in particular are becoming more conscious of their own carbon footprint not only because of environmental correctness but also because of economic savings. The centers of outsourcing are losing their attractiveness due to decreasing labor arbitrage advantage, and increasing political instability.

So what does this mean for us?

It means that short supply chains could easily trump global supply chains. Why?

1. Reduced transportation costs throughout the supply chain. Currently many countries import raw materials to make (for instance) circuit boards and integrated circuits. These components then get shipped to (more often than not) to China for assembly. After that, the finished products are shipped around the world for distribution to the end customer.
2. Shorter chains are more responsive and have less inventory in process
3. Shorter chains are less complex and costly to manage
4. Geographically “close” suppliers likely operate in the same language, in the same legal system, and within a few time zones
5. Efficient manufacturing and engineering offset the decreasing advantage of low wage locations
6. Goodwill is generated by creating and keeping jobs at home. I am NOT advocating protectionism. I am suggesting that when the fully allocated costs (including carbon) of global supply chains are taken into account I believe there is a case to be made that short supply chains provide economic and competitive advantage.

Companies are desperate to find low cost, productive, easily accessible, areas with low turnover, political, and natural disaster risks, excellent transportation links, redundant high speed telecomm and data capabilities, an educated, English speaking workforce that will be easy to manage located within a few time zones and in the same legal system.

Sound like anyplace we know?

This presents large opportunities for communities like ours to present our value proposition. Notice that the word “presents” means that we must get the word out about our community’s potential. Just because we know it is here does NOT mean that people will be beating a path to our door. Just because you build it does NOT mean they will come.

To take advantage of the new realities we must bring new alternatives to business. We cannot wait for them to figure it out because most of them won’t and it is easier for them to continue as is with existing outsourcing relationships.

We must also assess as yet unwritten government policies to assure we take every advantage of them. We must be particularly vigilant to anticipate and leverage unintended consequences. For example:

Firms that have received government bailout funds have restrictions on hiring people with H-1B visas. This doesn’t sound so bad, but it doesn’t apply to the outsourcing vendors working for these firms. This can have the consequence of driving companies that had planned on keeping jobs onshore – even if partly done by H-1B vias holders – to take all the work offshore. This presents an opportunity for our community to capture this business.

I hope that this has been a thought provoking discussion. We have covered the need for and the qualities of leadership, examined what has changed, what reforms and investments need to be made, and shown that there are substantial opportunities available if we frame the new realities correctly.

In closing I would like to share a thought on how to reach out to those who have been impacted in so many ways by the recession. Although we can do more I think this would be a good start.

Here is Peter Drucker on the purpose of society: “For the individual there is no society unless he has social status and function. There must be a definite functional relationship between individual life and group life. For the individual without function and status, society is irrational, incalculable, and shapeless. The “rootless” individual, the outcast – for absence of social function and status casts a man from the society of his fellows – sees no society, He sees only demoniac forces, half sensible, half meaningless, half in light and half in darkness, but never predictable. They decide about his life and his livelihood without the possibility of interference on his part, indeed without the possibility of his understanding them. He is like a blindfolded man in a strange room playing a game of which he does not know the rules. Make time to reach out to a “rootless” person who may be unemployed or retired. Drop them a note of support or take them out to lunch.”