Do You Know the Definition of `Monopsony?'

By H. Randall Goldsmith | THE JOURNAL RECORD, July 10, 2000 | Go to article overview

Do You Know the Definition of `Monopsony?'


H. Randall Goldsmith, THE JOURNAL RECORD


Conventional wisdom has always said that wealth comes from selling products harvested, sucked (or dug) from the ground or manufactured. In e-commerce, the newest producer of wealth, the product is knowledge.

I want to address manufacturing and what it means for Oklahoma, a subject probably not at the forefront of our consciousness but one that is important to all of us nonetheless.

Manufacturing is undergoing a quiet revolution driven by technology. One new, whiz bang technology reduced the operational cost of Honda's production line by 87 percent. Honda reduced its automobile welding assembly line cost from $35 million per year to $4.3 million per year using a prototype manufacturing system based on biological concepts.

Rather than rely on Henry Ford's progressive assembly line, the new technology is similar to cells in the blood stream. As they course through our veins, red blood cells link up with nutrients, iron and oxygen in doing what red blood cells do. Similarly, the new International Intelligent Manufacturing System project employs intelligent mobile robots that link up with an automobile body mounted on an automatic guided vehicle.

When the robot and guided vehicle dock, the welder performs hundreds of welds as the vehicle moves through its complex assembly operation.

This "biological" manufacturing is only one of many changes taking place on the manufacturing factory floor. GE and Cisco Systems are creating an information network system that finally links the factory floor with the front office, supply chain and customers.

This technology will shift real time decision making via Internet technology to the worker on the shop floor.

Great idea, but tempered by the American Management Association report that 40 percent of all job applicants, tested by large companies last year, failed to meet minimum skill requirements. That figure is an increase from 35 percent in 1998 and 23 percent in 1997.

Another recent and radical change in the supply chain is called trade exchanges, a term you will hear more about in the press and from Wall Street. A trade exchange is created by the major competitors in an industry.

For example, GM, Ford and DaimlerChrysler have created a purchasing network where every standard automotive product from lug nuts to transmissions is purchased through a business-to-business Internet trade exchange.

Using this approach, the big three ca makers will buy standard products for the same price. …

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