Who Supplied My Cheese? Supply Chain Management in the Global Economy: Innovations Have Profound Macroeconomic Effects
Siems, Thomas F., Business Economics
Today, with an Internet connection and some specialized skills, individuals and companies located in the remotest ends of the earth can compete and collaborate globally. This paradigm shift has occurred as technological forces, the fracturing of political barriers, and a relentless drive for greater efficiencies changed how we work and where we work, ushering in the age of globalization in ways never imagined previously. While many factors can influence macroeconomic variables--including better monetary and fiscal policies, freer trade, and fewer economic shocks--evidence is presented here that better global supply chain management and a more global economy should not be overlooked. On the one hand, these new practices have likely helped to keep inflation lower, reduce economic volatility, strengthen productivity growth, and improve living standards. On the other hand, these new practices cause greater uncertainties and calls for protectionist policies, as outsourcing and offshoring move work to lower cost providers with little regard for geopolitical boundaries.
Throughout history, innovation and the adoption of new technologies have led to productivity improvements that generate stronger economic growth and higher living standards. In business, much of the productivity-oriented focus of technological innovation over the past century has been in the design and manufacturing processes that occur largely within individual firms. But in many industries, physically moving raw materials, components, and products through the firm's supply chain can comprise an important portion of the total cost of goods. As a result, formalized transportation arrangements, telecommunications networks, and integrated information systems have significantly helped supply chain managers improve their ability to plan, order, monitor, and evaluate these processes. In particular, new information and communications technologies have helped transform supply chain operations from mass production to mass customization.
New technologies have also contributed to greater globalization as individuals and firms can compete and collaborate from anywhere on the planet. In recent years, many nations have reduced regulatory barriers and become more open and engaged in world trade. As a result, business supply chains now span the globe, connecting firms and individuals to markets and opportunities that could not have been imagined only a few decades ago.
The theme of the 2005 NABE Annual Meeting and Edmund A. Mennis Contributed Paper Competition was "Change and Competitiveness: Who Moved My Paradigm?" In this paper, I explore the impact of recent supply chain innovations and the effects of increased globalization on macroeconomic productivity. Spencer Johnson's (1998) classic book, Who Moved My Cheese? reveals profound truths about how to deal with change. This idea is adapted here to investigate global supply chains, i.e., "who supplied my cheese?"
Today's advanced performance-management information and communication systems connect retailers, warehouses, manufacturers, and suppliers instantaneously. Consequently, any activity that can be digitized--including virtually all information flows--can be cheaply moved to anywhere in the world in seconds. Thus, with an Internet connection and some specialized skills, individuals and companies located in the remotest ends of the earth can compete globally ... and in real-time.
This is a significant paradigm shift as both product markets and resource markets are expanded and companies around the world transform themselves to take advantage of this new era of technological change and increased global competition. The way goods and services are produced and delivered differs markedly from earlier supply chain eras. Indeed, the answer to the question "Who supplied my cheese?" is becoming increasingly complex, and the greater degree of openness and connectedness have profound economic implications for people everywhere. …