chapter 7 continued
DESCRIPTION
Chapter 7 continued. Global trends in key manufacturing industries The trend towards flexible production systems and flexible labor. Washington State Manufacturing Employment and Output. Source: Washington State I/O Models. International Movement of U.S. Manufacturing. Rise of F.D.I. - PowerPoint PPT PresentationTRANSCRIPT
Chapter 7 continued
• Global trends in key manufacturing industries
• The trend towards flexible production systems and flexible labor
Washington State Manufacturing Employment and Output
Source: WashingtonState I/O Models
International Movement of U.S. Manufacturing
• Rise of F.D.I.• Shifting locations of F.D.I.
– 1945-1960 Canada & Latin America– 1950’s Western Europe– 1960’s onward – a global reach
• Cumulative employment abroad of 500 largest U.S. corporations equaled domestic employment
• Most investment in advanced economies
Global Employment of U.S. MNC’s
China?
Key Trends for U.S. Manufacturers• Large overseas markets pull U.S. manufacturers
into them• The growth of nontariff barriers are forcing
localization of production abroad• Regional trading blocs push investment
strategies and pull firms into these organizations to get benefits
• Shifting exchange rates are pushing firms to be flexible as to where they have capacity
• New manufacturing methods are reshaping the distribution of manufacturing capacity
• Large factories in low-skill labor regions are not sustainable
This table omits wagerates for most of the less developedcountries that havegarnered the majority of thegrowth in manufacturingemployment inrecent years - andwage rates in mostof these countriesare probably belowMexico
Globalization of Major Manufacturing Sectors
• Textiles & Garments: classic case of labor-cost deviation Figure 7.16
• Steel – Movement to rapidly industrializing countries (Figure 7.17)
• Automobiles (Figure 7.24, 7.25)• Electronics (Figure 7.27, 7.28)• S-Curves – Figure 7.15 – the concept is
drawn from the industrial design literature – File on line is from MIT Opencourseware site – www.ocw.mit.edu
Hourly Labor Costs in Clothing Manufacturing – A sector that has clearly illustrated Weber’s labor
cost deviation model
Global Textile Mfg. Employment
U.S.Dominance
Note theChange inscale from 1980 to 2008,with Chinanow hugeand theU.S. inthe 3rd categoryin the legend
1980
2008
SteelOutput,See Fig 7.19And Fig 7.20
Figure 7.22 – has theindustry really becomeand oligopoly? ThisFigure ignores the riseof foreign-basedmanufacturers in the U.S.
What about German and other foreign owned auto
manufacturers?
Global Auto Production
The pie chart indicates the U.S. with 4.7% of global output, but the text for Figure 7.24 indicates it to be 15%---which is probably correct
Electronic components – still dominantly in developed economies
A capital intensive sector, where workers in high-wage countries can still be competitive—but are losing ground to less developed countries - IPHONE
Television Assembly
Unlike electronic components, much more labor involved T.V. assembly, withmovement of production into low-cost labor platforms – includingprocessing zones as discussed on page 205.
Biotech Centers in U.S.
A bi-coastal pattern. A difficult industry to define. The employment data onthis map look very suspicious (high), but the shares are probably reasonable.The text cites 450,000 jobs in 2008, far below the sum of the data on this map
The Rise of Flexible Production Systems
• The historic development of manufacturing moving from fragmented small-scale facilities to vertically integrated corporations – The Fordist Paradigm
• The contemporary development of other paradigms – just-in-time; total-quality-control; flexible manufacturing systems – Fig. 7.30
• Consequences of these new developments on plant size and labor force skills
From Fordist to Flexible Production
The End of Fordism? The Flexibility Debate
• Are we not only entering a new long-wave, where IT is the driving force, but also a new long-wave in which the basic structure of productive relations is in massive shift?
• The Fordist paradigm - implicit in the oligoplistic model - but also linked to consumption and the regulation of society/consumption
• Limits to the flexibility argument – can all industry move in this direction? NO!
A new regime of accumulation?
(1) The emergence of clusters of small firms, including co-ops
(2) Flexibility related to new machines
(3) Labor’s new position
- functional flexibility (multiskilling)
- numeric flexibility
- financial flexibility
- more part-time, flex time, telecommuting
(4) Changes in market place conditions
- mass markets break down
- rise of niche (craft) markets
Fordism Post-FordismLow technological innovation Accelerated innovationFixed product lines, long runs High variety of product, short runsMass marketing Market diversification & nichingSteep hierarchy, vertical chains of command Flat hierarchy, more lateral communicationMechanistic organization Organismic organizationVertical and horizontal integration Autonomous profit centers; networkCentral planning Systems; internal markets within firm;
outsourcingbureaucracy Professionalism, entrepreneurialismMass unions, centralized wage-bargaining Localized bargaining, core and periphery;
workforce divided; no corporatismUnified class formations, dualistic politicalsystems
Pluralistic class formations; multi-partysystems
Institutionalized class compromises Fragmented political marketsStandardized forms of welfare Consumer choice in welfarePrescribed courses in education Credit transfer, modularity, self-guided
instruction, independent studyStandardized assessment (O level) Teacher-based assessment (GCSE) or self-
assessmentClass parties, nationwide Social Movements; multi-parties; regional
diversification
Emergence of Flexible Specialization
• Fragmentation of the Fordist firm - vertical disintegration (shedding non-central functions; outsourcing) and Market fragmentation (niche)• Adoption of new technologies, especially those dependent upon computers and telecommunications (CAD/CAM/FMS)• Labor force adjustments
– functional flexibility (multiskilling)– numeric flexibility (adjusting quantities by task)– financial flexibility (wage rate adjustment)– more part time, short-term, temporary work
Flexible specialization & new industrial spaces
• Piore & Sabel - The Second Industrial Divide - craft-based districts in Italy, Germany, Denmark• Clusters of high tech industry - Silicon Valley; Route 128; Austin• Wooden boats in Pt. Townsend WA; Log
homes in Bitterroot Valley MT• The movie industry
Debates over aspects of the flexibility thesis
Flexible Specialization and Regional Industrial
Agglomerations: The Case of the U.S. Motion Picture Industry
by Michael Storper & Susan Christopherson• Historically, an oligopoly of
– theaters– studio production facilities– actors/production specialists– spatially clustered in Southern California
• Vertical disintegration: 1950’s - 1970’s, with consequences in the 1980’s
Productions by Organization Type
0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%
1960 1965 1970 1975 1980
Independent
Major
Mini-major
151 190 207 243 222 Number ofproductionsper year
The Proliferation of Establishments
1966 1974 1981Production Companies 563 709 1473Rental Studios 13 24 67Properties 66 33 184Editing 4 31 113Lighting 2 16 23Recording/Sound 20 33 187Film Processing 43 76 55Film effects 10 27 42Market Research 3 5 24Artist representatives/talent agencies 242 359 344Total 966 1313 2512
Establishments in the Entertainment Industry 1968-
2010
1968 1974 1981Motion pictures except TV 666 1279 1023Motion picture & tape for TV 490 978 1420Services allied to motion picture production NA 716 1077Total 1156 2973 3520
2010
12564773220296
1997 data from U.S. County Business Patterns; in the 1987revision of the SIC code motion pictures was combined intoa single industry
The Decreasing Size Per Establishment
1969 1974 1981 1997Motion Pictures 23.2 11.2 25Television 21.2 20.8 24.1 7.4Allied Services NA 21.3 16.9 10.7
CombinedMotion Picturesand TV
2010 – Average sizewas 10.4 employeesper establishments
California’s domination of the industry - measured by jobs
Jobs 1968 1974 1981 1997California-pictures 15449 20329 40433 31791New York-pictures 6687 4596 8625 8169Others-pictures 3713 9753 10779 25578
California-allied services NA 9663 12205 125935New York-allied services NA 3110 3135 7897Others-allied services NA 2501 2829 41089
CBP Nonemployer CombinedU.S. 130401 60700 191101California 89190 20628 109818New York 13146 7203 20349Others 28065 32869 60934
2010
Structural Trends – Motion Pictures & Television
• Retention of core activities: TV & Major films & channels of distribution
• Forced divestiture of theater chains• Development of generic specialists
subcontracting with specific producers for a given film & narrow scope; linked to major studios; many part-time workers; “project orientation,” FLEXIBILITY
• Product diversification: TV, Video, Film• Establishments clustered in California,
while filming locations have dispersed
The Post-Fordist System is also more efficient
Role of IT withinand between firms;logistics revolution
Business Process Reengineering
• Division of labor rationalized• Employees are empowered to a greater degree• Tasks are harmonized in other than a linear
sequence• Processed batches have multiple versions,
allowing scale economies simultaneous with custom producton
• Work is undertaken where it makes most sense geographically (recall the 787 production system)
• Internal structures are simplified / more coordinated and more decentralized
Downsizing as a consequence
• The growing angst over outsourcing
• The debate over its magnitude
• The debate over what to do for workers impacted
• The debate over public policy towards it
• The expectation that IT will fuel dramatic restructuring, accompanied by logistical sophistication: Friedman’s “flatteners”
Spatial Reorganization within Large Business Organizations
•Dynamism in firm activities: their size, number, function, and geographic configuration
•Inherent flexibility of multiplant firms - either in-situ change or locational shift
IN SITU CHANGE LOCATIONAL SHIFTS
Relocation of entire plantand equipment
Expansionof existingcapitalstock
Replacement of existingcapitalstock
Reductionof existingcapital stock -partialdivestiture
Investmentat new location(s)opening ofbranch plant(s)
Acquisitionof plant(s)owned byanotherfirm
Divestmentof existingplant(s)closure ordisposal
Healey’s adjustment framework
Product AProduct BProduct C
Operating Plant OPlant Shut Down +Transfer of Production
1 23 4
SpecializationPartial concentrationat an existing site
Complete concentrationat a new site
Mixed
1 2
3 4+
1 2
3 4
+1 +2
+3 +4
1 +2
+3
Initial Conditions
Evolution of Global Corporations
Headquarters
• Production plant
o Sales subsidiary
+ Licensing arrangement
Acquisition
Exports
Stage I Stage II
Stage III
•••
• ••
• • ••
o1
2
3
12
3
4+
+
12
3
4
5
Evolution of Global Corporations
Headquarters
• Production plant
o Sales subsidiary
+ Licensing arrangement
Acquisition
Exports
••• ••
•
•
•
•
•
••
••
•
•• •12
3
4
56 7
8 9
o
•12
3
4
56 7
8 9
Stage V
Stage IV
Summary
• Global concentrations of manufacturing, but they are not static
• Capital moves from place to place in the search for profit
• Multinational corporations and processes of FDI have reshaped the geography of manufacturing
• Today Schumpeter’s process of “creative destruction” is fueled by IT, logistics, and the rise of new production regimes built around more flexible manufacturing systems