In today’s increasingly connected world, it almost seems that international trade could not be easier. Companies around the globe can conduct business via the internet, and transportation and logistics professionals ensure that products reach customers in an efficient and timely manner. However, some experts are saying that the modern market actually is not trending toward globalization but instead toward localization.
According to a recent article in The Wall Street Journal
, trade as a proportion of global gross domestic product still has not returned to the prerecession level. One reason for this is rising protectionism around the world. Trade-monitoring service Global Trade Alert reports that 350 regulations requiring local sourcing, hiring or operations have been instated since November 2008. In addition, another 466 regulations require companies to have some form of localization before they can bid on government contracts.
Another factor is that some developing countries, including India, China and Indonesia, are becoming stronger economic players and want global companies to invest locally and teach their workers skills. This means that these businesses have to move their work to their customers’ backyards in order to win local business.
According to article authors Ted Mann and Brian Spegele, GE has been shifting from its traditionally global strategy to a more localized one since 2008. The global industrial conglomerate still is a leader in maximum efficiencies of scale for a worldwide market, but it also is trading some of that for more face-to-face exposure in local markets. The company is joining forces with Indian Railways to build a $200 million locomotive factory in a small village in Bihar, India. When it opens next year, the facility will employ about 400 workers.
Currently, the site only is accessible via narrow, twisting roads, which means that it takes about three hours to reach the location from New Delhi, the nation’s capital. To save workers from this grueling commute, GE also is building 100 residential units next to the factory and working with local officials to widen and straighten the roads, which also will help with transporting materials and products.
The new site poses some environmental challenges as well. The property needed to be raised more than 11 feet to protect the facility from flooding and stabilized by 82 feet of below-ground concrete to minimize earthquake damage.
In exchange for these efforts, though, GE has earned a $2.5 billion order for 1,000 locomotives within the next 11 years. This marks the company’s largest transportation deal ever as well as its largest order from India. GE leaders note that this deal was possible because the company had started investing in the country four years earlier, which showed Indian leaders that the Boston-based company is serious about this Asian market.
GE also has established engineering and research centers in Poland, Mexico and Qatar and flexible factories in Brazil and India. These facilities are set up to easily switch production lines in the event of political issues or changes in market preferences. To foster growth in China, GE also is supporting the country’s One Belt, One Road initiative, which seeks to bolster trade routes. For GE, One Belt, One Road could boost business for its more than 30 local manufacturing sites in China.
All of these efforts help ensure GE’s survivability in this localizing market while also helping smaller markets grow.
A bonus to this market situation is that employees in developing regions now have even more opportunities to learn value-added skills from global experts such as GE. Consider the definition of skills-based compensation from the APICS Dictionary: “A method of employee compensation that bases the employee’s wage rate on the number of skills the employee is qualified to perform. People who are qualified to do a wider variety of skills are paid more.” By equipping workers with the abilities and know-how to serve their current and future employers, companies that are investing in worker training ultimately are improving employees’ earning potentials and qualities of life.
At APICS, we are dedicated to helping supply chain professionals around the world and even future supply chain professionals learn the skills they need to succeed. We’ve made it our goal to educate more than 100,000 students by 2020 through our Supply Chain STEM Educational Outreach Program. This initiative works to introduce students to the world of supply chain through age-specific activities. Teachers and volunteers guide students through the activities to help them learn more about different supply chains as well as science, technology, engineering and math. To learn more about this program, volunteer or donate, visit apics.org/stem