Taking a Global View

Jan. 1, 2005
Mention “global view” to an average American today, and two words will more than likely spring out—outsourcing and offshoring.

These topics demand so much attention that both “Business Week” and “The Economist” have just devoted special issues to the subject. This month Automation World weighs in with several analyses of the impacts and technologies of managing manufacturing in a global economy.

“Business Week” columnist Laura D’Andrea Tyson, dean of the London Business School, devotes her column published in the Dec. 6 issue to an analysis of offshoring. She makes a valiant attempt to expose the logic of the benefits arguments. In the process, what she says exposes one of the problems of analysis of these major economic situations. That problem is the paucity of reliable facts. The world’s economy is so large that determining the real facts of economic activity are nigh on to impossible.

The logic of offshoring goes something like this:

Sending jobs overseas can greatly reduce costs

The reduced costs allow companies to both increase profits and decrease prices

Decreased prices boost demand

Increased profits enable investment in new products and technologies

The increased investment will lead to new jobs [Caveat: Since the new jobs will require new skills, the economy requires a flexible job market, that is, one in which workers can move easily from job to job].

The McKinsey Global Institute estimates that for every dollar U.S. companies spend on offshoring to India, the American economy gains $1.14, while India gets 33 cents. Thus, a “win-win.” However, the study assumes that 69 percent of the displaced workers will find a job paying 96 percent of their former wages within a year. According to Tyson, recent studies from 2002-2003 suggest that this is optimistic. If re-employment is less, then the benefit of greater demand would not be realized (since they will not have the money to purchase, even at a lower price). Only shareholders of companies would benefit in that case. And I would suggest that even this would be a short-term benefit.

Happy New Year

This issue kicks off our second full year of publishing Automation World. We began in June 2003 dedicated to bringing you automation news with a focus on helping you make your business more successful. Your feedback indicates that we’ve hit the mark.

We have several additions planned for 2005. First, we want to put the “world” in Automation World with a series of special reports from Europe, Asia and Central and South America. Two experienced journalists will provide reports from their respective regions. Andrew Bond has a unique perspective on automation happenings in Europe, while Modesto Vazquez Coronel will provide expert commentary from Mexico. Look for other additions during the year.

We began this journey into the unknown with three contributing editors with extensive experience. Two are still with us—Kenna Amos and Rob Spiegel. Last year, Jim Koelsch, another former editor-in-chief of manufacturing magazines, joined our team. Commentary by the popular (or controversial, depending on your point of view) industry analyst Jim Pinto helped us set a tone, and his column will continue. We hope to add more commentators. Stay tuned.

We’re also pleased to add another experienced manufacturing journalist to help as we expand on a series of special reports during the year. Terry Costlow begins his association with us with a special software report. This month’s special report on collaborative software will be followed by special reports on intelligent sensing systems and our popular Process to Packaging report with our sister publication, Packaging World.

As always, send your praises or suggestions for improvement to me at gmintchell@automation world.com or post a comment on my Weblog at radio.weblogs.com/0133292/.

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