At a time where recessionary forces are at work, many questions are being asked about how businesses have evolved their management practices and how this has affected their many stakeholders. The extent and depth of the recession has surprised many, and expansion of the ranks of the unemployed has hampered demand, seriously affecting patterns of demand and the economic performance of businesses in all industries around the globe. For the U.S. with its consumption dominated gross domestic product, this has had a devastating effect on economic conditions.
The competition for lower cost, higher profit margins, and supply chain efficiency has resulted in a continuous shifting of production and service resources from geographic region to geographic region throughout the globe. The economic theory is that as these jobs and resources move, the existing regional resources are moved to their next highest and best use. And in this context, the global economic welfare and economic performance is maximized. But the emerging evidence is that while this may be true, it does not necessarily imply that everyone benefits long-term from such an approach. There are regional winners as losers as the global economic dance continues. Building global economic and business growth may have many winners and losers at different moments in time. Structural and frictional unemployment, reductions in household income as workers and resources move to lower compensated jobs and industries, reduction in availability of healthcare as a result of the relative cost of health insurance, and reduced retirement program availability are all factors that are challenging workers and whole economies and their long-term goals.
One has to ask the extent to which the supply chain strategies that have been adopted to optimize the performance of companies that have evolved from regional and national companies to global companies – outsourcing production and services, continuously pursuing more efficient and lower cost locations – may have contributed to a pattern of shift of economic wellbeing across geopolitical boundaries. Do companies have any obligation to the welfare of the communities and geopolitical entities upon whose resources they draw, or is it a relationship solely of a “transactional” nature? Is unbridled pursuit of efficient supply chain development in the long-term economic interest of the countries affected, or does it simply pass the economic baton from one region of the world to another?
These are challenging issues in these challenging times. The long-term prospects for the many regions of the world, the economic welfare of their populations, the sharing of economic wealth, and the interests of the companies operating within these regions are all mixed in the evolving and ever-changing economic brew. And a key driver of these forces is the supply chain and how it is managed and developed by the companies serving their investors and stakeholders.
What do you think?