Thursday, March 12, 2015

How to be Globally Competitive?

This one deserves it's own post.  By the way, this is post #1000!!!!  Thank you for your participation in this experiment of mine !!!

John's comment
The key concepts of being efficient, effective and competitive in a global market are:
  • All capable citizens are actively learning, working, adding value, etc. Free Loaders on the system raise the cost of doing business in that country.
  • The society's "overhead" is optimized. (ie cost vs benefits of government, other society costs) Excessive "overhead" raises the cost of doing business in that country. 
  • The people are paid what the market values their services at. "Over Compensated" workers raise the cost of doing business in that country.
Same argument I have against minimum wages, government is arbitrarily raising the costs/burden for every citizen and business in America. Either directly or indirectly. This then makes American products and services too expensive for many foreign markets.
As Conservatives would say... Let's raise the minimum wage or union wage to $100/hr. Then let's see what we can export and how many jobs we have left.
Hiram's Comment
Isn't this an argument against any pay raise or price increase? Wouldn't business work a lot more optimally if employees would agree to work for free?
Sean's Comment
Does it? To go back to your favorite example, let's look at the American car industry. When they began bleeding market share, they lost it -- first -- to companies in Japan and Germany (and Western Europe).

Those are countries with universal health care, stronger labor protections, higher tax rates, and more wealth transfer.


Anonymous said...

One advantage foreign competitors have is that they don't have to pay for their employees health and pension plans. Nor do they have to support the high compensation of managers.


John said...

I think you ar underestimating exactly how many incredibly wealthy people there are in China. Somehow they are making these fortunes very very quickly.

Anonymous said...

I think what the Chinese might be underestimating is the debilitating effect of allowing gangsters to skim off their economy. In economic terms, China is a totalitarian kleptocracy.


John said...

Now them is some big words.
Wiki Kleptocracy
Wiki Totalitarianism

I am not sure one can call them "Gangsters" if what they are doing is legal. Though it is definitely a bit like the wild west.
Forbes Chinas Billionaires
China Millionaire Report

John said...

Mostly they lost it to Japan. Remember the early Hondas and Toyotas.

And that is because they embraced the Teachings of Deming since ~1950, whereas the US car companies rejected him and his Key Principles. They are all listed in the link.

However #5 seems especially relevant to this discussion. "5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs."

In fact the Toyota Production System is strongly based on Henry Ford and Deming.

"The main objectives of the TPS are to design out overburden (muri) and inconsistency (mura), and to eliminate waste (muda). The most significant effects on process value delivery are achieved by designing a process capable of delivering the required results smoothly; by designing out "mura" (inconsistency). It is also crucial to ensure that the process is as flexible as necessary without stress or "muri" (overburden) since this generates "muda" (waste). Finally the tactical improvements of waste reduction or the elimination of muda are very valuable. There are seven kinds of muda that are addressed in the TPS:[2]

1.Waste of over production (largest waste)
2.Waste of time on hand (waiting)
3.Waste of transportation
4.Waste of processing itself
5.Waste of stock at hand
6.Waste of movement
7.Waste of making defective products

The elimination of waste has come to dominate the thinking of many when they look at the effects of the TPS because it is the most familiar of the three to implement. In the TPS many initiatives are triggered by inconsistency or over-run reduction which drives out waste without specific focus on its reduction."

John said...

The good news for Ford and GM, in ~1980 they finally found humility and started to change very slowly.

Between management and the union resistance it was very very very slowly... GungHo clip

John said...

These are kind interesting, especially the second one. It is amazing that GM and the Union were as successful as they were for as long as they were.
GM History in Story Form

Anonymous said...

I am not sure one can call them "Gangsters" if what they are doing is legal

As with American politics what is most shocking is what is legal.


Sean said...

It's interesting to note that Deming's techniques -- specifically as applied at Ford -- included giving the union production workers more input and more responsibility, not treating them as disposable cogs.

jerrye92002 said...

Thanks, Sean. I think that goes a long way towards explaining how unionized Japan and unionized Germany still beat the socks off unionized US companies. It was the adversarial relationship with management, created by our unions and their highly-paid "leaders." Sure, back in the John L. Lewis days such a relationship was necessary. Now it's foolish.

By the way, I'm thinking of a US company that switched over to these manufacturing techniques. They went from 40% rejects to 2%, and tripled the output per day. What do you suppose that does to cost and quality for the customer? OH, the only other thing they had to do was get rid of the union, who did not want this to happen.

John said...

This a somewhat interesting article. It seems the German Unions are trying to pressure American citizens to be Unionized, even after they voted against it. It is interesting.
The Nation: Can Germany Reform America Labor relations

John said...

Forbes How Germany Builds Twice as many cars

John said...

For all the talk of German Unions, it looks like they are the minority and shrinking, just like in the USA.

"OECD figures showed that more than a quarter of workers in the German labour force belonged to a union in 1999.

By 2011, that number had decreased to 18 percent. To compare, in the UK, 30 percent of workers were members of a union in 1999. In 2011, union density stood at 25.6 percent."

Local DE Do German Unions have too Much Power

John said...

Given the number of German cars that are now built in the USA, Mexico, China, India, South America, etc, etc, etc.

VW Factory Locations

It seems to me they have learned that they can not be globally competitive while manufacturing in Germany and paying basic assemblers ~$70/hr.