Module 3

There are those words in the English language which create immediate reactions; one of those is outsourcing.  A somewhat related, yet I would argue less frequently used term, is offshoring.  Friedman describes outsourcing as, “taking some specific, but limited, function that your company was doing in-house – such as research, call centers, or accounts receivable – and having another company perform that exact same function for you and then reintegrating their work back into your overall operation.  Offshoring, by contrast, is when a company takes one of its factories that it is operating in Canton, Ohio, and moves the whole factory offshore to Canton, China.  There it produces the same product in the very same way, only with cheaper labor, lower taxes, subsidized energy, and lower health-care costs.” (Friedman, 2007, pp. 137-138) China joining the WTO took the world to a whole new level of offshoring just as Y2K boosted India’s prospects of outsourcing and made the country a relevant and dynamic player in the global workplace.

While reading the text, I gained a greater appreciation of the concept of offshoring when Friedman described China’s demographic of over 160 cities with a population over 1 million.  This concept alone allows companies to offshore factories and manufacturing as never before due to the sheer size of its workforce.  It is no wonder it seems that a large majority of products are “made in China”.

A great illustration from the book outlines the fact that companies must alter their vision and forget about competing with China and treating them as the enemy.  Instead, you should give a good internal look at your business model to determine which part of the business you would like to do in China, which part you would like to sell to China, and which part you want to buy from China. This just shows how flat the world has truly become since as China becomes a more important player due to offshoring, other similar countries emerge as potential offshoring destinations.

Another flattening topic introduced is that of logistical efficiencies.  A supply chain is the mechanism used to allow products to flow downstream from a manufacturer/supplier to customer.  Wal-Mart has used their supply chain to their advantage by driving a hard bargain with manufacturers, but also by creating a super-efficient process and technological web with the companies whose product they sale, and in turn with their own stores which are spread across the nation. In effect, Wal-Mart does not create any products.  However, they are such a dominant force in the retail world because of their expansive reach (in terms of store locations, products offered, and low costs) and overall efficiencies in technology (which allows them to quickly forecast and restock stores to ensure customer demand is fulfilled).  As noted in the text, the goal of an efficient supply chain is to be the overall lowest cost.  Not always, however, can you find a low cost leader that offers high quality products, delivery, and customer service in every facet.  So while price is important, the overall efficiency and low cost leader is what Wal-Mart has done to gain its competitive advantage.

One particular illustration in Wal-Mart’s case is its visibility into each store’s particular needs.  For example, if one particular store is overstocked, Wal-Mart can quickly have excess product orders redirected to stores that may be short on stock.  This ensures the company is not losing the product forecasting battle which often results in sales on excess products.  Wal-Mart in turn allows its suppliers to view how their products are selling through its central databases, all in an effort to have hyper-efficient, just-in-time, inventories and supply chains.

Google is another company that has revolutionized the playing field for businesses.  Google has flattened the information barrier by allowing anyone with an internet connection to search for and find the same overall research information on any given topic.  Google has affected business by allowing the process of “informing.”  Anyone can create the know-how to run a business, outsource, and have an efficient supply chain (through connectivity with globally established companies as Friedman describes in UPS’ case) by simply “googling” the information.  People want, and have, all the information they can digest at their fingertips.  No longer are people spending time searching for the material.  On the contrary, the information is readily available and business owners large and small can focus on ideas and innovation instead of utilizing resources on the information finding.