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Chapter 7 continued

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.

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Chapter 7 continued

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  1. Chapter 7 continued • Global trends in key manufacturing industries • The trend towards flexible production systems and flexible labor

  2. Washington State Manufacturing Employment and Output Source: Washington State I/O Models

  3. 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

  4. Global Employment of U.S. MNC’s China?

  5. 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

  6. This table omits wage rates for most of the less developed countries that have garnered the majority of the growth in manufacturing employment in recent years - and wage rates in most of these countries are probably below Mexico

  7. 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

  8. Hourly Labor Costs in Clothing Manufacturing – A sector that has clearly illustrated Weber’s labor cost deviation model

  9. Global Textile Mfg. Employment

  10. U.S. Dominance Note the Change in scale from 1980 to 2008, with China now huge and the U.S. in the 3rd category in the legend 1980 Steel Output, See Fig 7.19 And Fig 7.20 2008

  11. Figure 7.22 – has the industry really become and oligopoly? This Figure ignores the rise of foreign-based manufacturers in the U.S.

  12. What about German and other foreign owned auto manufacturers?

  13. 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

  14. 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

  15. Television Assembly Unlike electronic components, much more labor involved T.V. assembly, with movement of production into low-cost labor platforms – including processing zones as discussed on page 205.

  16. Biotech Centers in U.S. A bi-coastal pattern. A difficult industry to define. The employment data on this 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

  17. 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

  18. From Fordist to Flexible Production

  19. 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!

  20. 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

  21. 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

  22. 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

  23. 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

  24. Productions by Organization Type Number of productions per year 151 190 207 243 222

  25. The Proliferation of Establishments

  26. Establishments in the Entertainment Industry 1968-2010 2010 12564 7732 20296 1997 data from U.S. County Business Patterns; in the 1987 revision of the SIC code motion pictures was combined into a single industry

  27. The Decreasing Size Per Establishment Combined Motion Pictures and TV 2010 – Average size was 10.4 employees per establishments

  28. California’s domination of the industry - measured by jobs 2010

  29. 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

  30. The Post-Fordist System is also more efficient Role of IT within and between firms; logistics revolution

  31. 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

  32. 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”

  33. 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 Reduction of existing capital stock - partial divestiture Investment at new location(s) opening of branch plant(s) Divestment of existing plant(s) closure or disposal Relocation of entire plant and equipment Replacement of existing capital stock Expansion of existing capital stock Acquisition of plant(s) owned by another firm

  34. Healey’s adjustment framework 1 2 Operating Plant O Plant Shut Down + Transfer of Production Product A Product B Product C 3 4 Initial Conditions +2 2 +1 +2 2 1 1 1 + +3 +4 +3 3 4 3 4 Mixed Partial concentration at an existing site Complete concentration at a new site Specialization

  35. Evolution of Global Corporations Stage II Stage I • • • • 2  o  + • • 1 4 1 2 3 3  Headquarters •Production plant o Sales subsidiary + Licensing arrangement  Acquisition Exports Stage III 5 • •  • +  •  4 2 1  3

  36. Evolution of Global Corporations Stage IV   •  6 7 5 •   • • Stage V • •  • • •  • 4 • 2 1 • • o 5 7 6 • • 9 • 3 8  •  Headquarters •Production plant o Sales subsidiary + Licensing arrangement  Acquisition Exports 2 1 4 • • 9 8 3

  37. 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

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