Globalization=Operations Efficiency: Are you worried about your future?

In recent decades, a growing and sometimes controversial trend in business has been moving or expanding operations to countries overseas. Businesses in the United States have sought to increase productivity and efficiency by opening plants, especially manufacturing plants, in countries such as China and Indonesia. Recently, big U.S. manufacturers have begun to expand research and development labs to Asian countries as manufacturing has shifted from domestic factories to foreign factories. As a result, job growth in the science and technology sectors has slowed. In a recent article in the Wall Street Journal, “U.S. Loses High-Tech Jobs As R&D Shifts Toward Asia,” James Hagerty writes that “in the six years through 2009, about 85% of the growth in R&D workers employed by U.S.-based multinational companies has been abroad.” He continues by citing that it isn’t that U.S. companies are necessarily closing domestic labs, but that their growth is focused on opening new labs overseas. These statistics are staggering and can be seen as troubling by many as the U.S. job market is trying to recover from the recent economic downturn.

 

Why are companies opening R&D labs in addition to manufacturing plants in foreign markets? Companies are seeking to streamline their production and manufacturing and to improve their operations. Product development can happen more quickly if research, testing, and manufacturing are done in closer proximity to each other. Additionally, costs related to product development can be decreased if the process is more efficient. Think about a project timeline. Let’s say a project timeline from start to finish, including R&D, testing, and production is six months, with R&D done in a domestic lab and manufacturing done in a foreign plant. A company that has an R&D lab close to their foreign lab could most likely decrease their project time by eliminating the lag time between R&D in the U.S., and testing and production in the foreign factory. If adjustments need to be made after testing, it would take longer to relay the project back to the lab in the U.S., only to send it back to the factory for testing. Logically, moving R&D closer to factories seems like a smart business move.

 

What does this mean for us, today’s college students relying on the assumption that we will be able to find a job after we earn our degrees? I believe it is hard to tell. It seems that this trend of shipping a large portion of operations to cheaper foreign markets will continue, as the price of doing business climbs and companies seek better efficiency. What do you think? What are the implications for the domestic labor market? As a college of commerce student, do you feel torn by the knowledge you have about business operations and the need to operate as efficiently as possible and the fear that you may not be able to find employment after you earn your degree?

 

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2 thoughts on “Globalization=Operations Efficiency: Are you worried about your future?

  1. Great post! I believe that we are forced by capitalism to continue down this path of packing up and shipping corps. abroad. It goes without saying that the masses would prefer a good or service that is cheaper and more available. Moving manufacturing and r&d abroad not only fulfills these needs but does away with the expense of the aging domestic workforce. As a college student we have been tasked with adapting to the changing work environment. While we are faced with the most trying times in the last 50 years in America’s history, we are the best prepared and highest educated generation in as many years. There is a light at the end of the tunnel and better days are ahead. Despite the fact that we will see fewer and fewer manufacturing plants on American soil at the end of the day the manority of these companies are still American by origin and the offices of managers and execs still remain here in addition to the individuals that fill them. We will adapt to global commerce, one way or another.

    1. We will adapt, as you said. I think in the future, we will be successful as long as we learn how the navigate and take advantage of the operations changes in the companies where we work. Perhaps the changes in operations will lead to different opportunities for growth and change in the job market here in the U.S. Efficient companies usually see higher profit margins, which may lead to more reinvestment and growth.

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