Impact of Globalization

Any time there are changes, there are winners and losers. Is there an anti-globalization trend? 

On today’s show we are talking about globalization. We have experienced nearly five decades of globalization. Commodities like oil, wood and minerals have long trades globally. The most visible signs of the globalization trend was the rise of Japanese cars in global markets in the 1970’s. At the time, made in Japan was synonymous with cheap and poor quality. But Japanese industry embraced the work of Edwards Deming, a graduate of Yale university who pioneered many of the concepts that form the foundation of modern quality management.

Japanese cars came to symbolize higher quality and lower cost than the domestic counterparts. The barrier to overseas production was broken and companies all over the world embraced the idea that the combination of low cost labour and quality control systems would unlock the key to global competitive advantage.

Years later, labour cost in Japan are too high and many Japanese products are manufactured in lower cost geographical areas.

I’m not here to argue for or against globalization. We live in a globalized world. But we have experienced some of fragility that has been built into these incredibly long and complex supply chains. We have seen major vertically integrated companies unable to ship products to market due to disruptions in supply chains.

Business has responded with the only short term fix possible. Build inventory of just about everything in the entire supply chain from raw materials to finished products. Faced with the choice of higher inventory carrying cost or being unable to ship products, companies chose to build inventory.

But what about now? Are some companies opening local manufacturing?

We are not here to comment on whether the experiment in globalization has been successful or not. Any time there is a change of any kind there will be winners and losers. The name of the game is to pay attention to what is happening and capitalize on the trends as they emerge.

If a company is in need of long term logistics space, can you solve that problem for them? If a company is in need of manufacturing facilities locally, can you solve that problem for them?

If a major manufacturer sets up shop in town, they will fund their primary facility. But what else do they need? Do they need supporting businesses? Do they need services like cleaners, accountants, equipment maintenance, local transportation, corporate housing, hotels? What do they need?

Do those new residents require additional services? Do they need more storage? Do they need more medical office? Do they need more car washes? When the line at the car wash is 45 minutes long for most of the weekend, would another car wash make sense? In a globalized world, a portion of your shopping can arrive on your doorstep. But your storage facility, your dentist, your hair stylist, your neighborhood restaurant, still needs to be in the neighborhood.