endpiece
A contrary view
Julian Keeling, CEOof Los Angeles-headquartered air cargowholesaler Consolidators International, has never been afraid to take up a position opposed to that of themajority view. As aman who has been part of the ocean and air freight business for the past 35 years, he laments the loss of the industrial base in FirstWorld countries to the trend of global outsourcing
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There are many business organisations in the United States – from the National
Association ofManufacturers to theArts&Crafts Council – who will endorse the process of outsourcing, particularly to China,where 60 percent of all outsourced manufacturing occurs. Outsourcingis the answer, they say, to lower costproduction and subsequently higher profit. Allowme to take a contrary view. Outsourcing, or to use its synonym, globalisation, has failed. It has failed on many levels: economic, social and political. It has unravelled relationships between peoples within nations and poisoned connections between countries. It has made a few people rich and many people poor. It has exacerbated the struggle between those who make things and thosewho finance and sell them.
When KarlMarx wrote Das Kapital in the BritishMuseum laying out his theory that the central driving force of capitalismlies inthe exploitationandalienationof labour, little did he realise that two centuries later the whole scenariowould go global. Globalisation has decimated industries that once were the bedrock of many nations’ economies and the great middle class, the basis for all First, Second andThirdWorld societies today, is in disarray – even in China, a nation benefiting the most fromoutsourcing. Survey after survey shows the middle class is declining in numbers, in strength, and in purchasing power.Theirwages have stagnated; their financial assets are declining and they are facing perhaps the bleakest future since the start of the Industrial Revolution. The singlemost important reason for outsourcing, given by its proponents, is the savings in labour costs. Yes, labour savings are substantial,but costs inChina and elsewhere are rising, thus narrowing the gap.
56 AIR LOGISTICSCHINA
Manufacturers are so hypnotised by the contrast in American and European workers’ wages vis-a-vis their ThirdWorldcounterparts, they forget thepriceof labour is only one part of their total costs. There are transportation costs, often difficult to predict in today’s economic climatewhen shipping rates fluctuate like a yo-yo. Then there are Customs duties and domestic transport costs,which can add significantly to the final bill.
Perhaps most importantly, the process period between placing an order and final delivery of the finished goods can take an inordinate length of time, particularly today when shipping lines are ordering‘slowsteaming’. During that time, tastes may change, fashions may alter, fickle consumers may tire of one product and attach themselves toanother.Averydifferent scenariooccurswhen the factory is in the next town. Orders can be placed and deliveriesmadewithin amatter of days. There is a definite shift in consumer thinking about outsourcing or globalisation. At first, consumers accepted andevenwelcomedit as away of reducingprices inmuch of the merchandise they buy. But consumers in America and Europe today are taking a far more critical view of outsourcing.
Will First World nations ever completely recover their industrial base? Probably not, but there are growing indications that companies in many different industries are taking a hard look at outsourcing. There are signs that some manufacturers are considering moving back parts of their production facilities. One swallow does not make a summer, but these are encouraging signs. I believe the massive trend toward outsourcing has ended and a reaction to its excesses and faults is growing.
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