In countries that are recovering only sluggishly from the Great Recession, many of society's major challenges have been blamed on globalization. According to a popular view, the lowering of trade barriers in global markets and the increased flow of goods and labor across national borders have caused wage stagnation, fewer job opportunities, and widening income inequality, among other problems. Resistance to globalization has spawned a backlash in developed economies, with the United Kingdom's "Brexit" vote to leave the European Union and the outcome of the U.S. presidential election being two major recent examples. This is not a new phenomenon, however, and one does not have to look far to find other examples. The North American Free Trade Agreement (NAFTA) of the 1990s faced fierce opposition, epitomized by the presidential candidate Ross Perot's 1992 declaration that if it were enacted "there will be a giant sucking sound going south." Meetings of the World Bank, World Trade Organization, and International Monetary Fund were all marked by fierce anti-globalization protests throughout the 1990s and early 2000s.
Historically, a country's popular sentiment around globalization has varied in proportion to the health of its economy. The Great Depression of 1929-1939 presents a clear example; as the U.S. economy's performance worsened, legislators embarked on a program of increased protectionism that included the Smoot-Hawley tariffs, which were countered by tariffs raised by other countries. This type of trade war is widely regarded as having exacerbated the Depression.
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[Figure 1] Real U.S. mean household income by quintileEnlarge this image
Support for globalization is currently at another low point. In the United States, presidential candidates of both major parties were opposed to the Trans-Pacific Partnership (TPP), while one went further, labeling NAFTA the "worst trade deal in history" and making reducing immigration a major campaign plank. The unsatisfying pace of the economic recovery since the Great Recession, which ended in June 2009, and the displacement of workers due to the development of new technologies have caused stewing economic anxieties for many in the country, amplifying anti-globalist attitudes. The Great Recession was brutal for many middle- and lower-income households, and many middle-class families were forced into a lower standard of living during the recession and the subsequent anemic recovery. (See Figure 1.)
Things are finally starting to improve for many American households. In 2015 household income made a comeback, gaining 5.2 percent—the largest one-year increase on record, and the first statistically significant increase since 2007 (standing only 1.6 percent below its 2007 level). Real median household income has not yet regained its pre-recession peak, but we expect it to surpass its 2007 level next year. (See Figure 2.)
Americans have not been alone in their angst. Many in the U.K.'s middle class, especially in rural areas, saw their standard of living slip as well. The resulting backlash in that country has occurred alongside a corresponding increase in anti-immigrant sentiment. Indeed, resentment over high rates of immigration was a major factor in the outcome of the vote to separate from the European Union.
Brexit and political uncertainty in Europe have clouded Europe's economic outlook. There are elections scheduled for 2017 in the Netherlands (March), France (April/May), and Germany (around September). Moreover, Italy's prime minister resigned in early December, and new elections potentially could be called next year. Now the recent U.S. election has added to those risks. The outcome of the U.S. election could not only embolden right-wing populist parties in Europe, but it could also make the Brexit negotiations more complicated.
The perils of protectionism
Resistance to globalization is spreading and gaining attention, but it is highly misguided. Although freer trade and immigration do produce "winners" and "losers," their net effects have been unambiguously positive for developed economies. Six years after NAFTA's signing in 1994, the U.S. economy was booming, and the unemployment rate reached 3.8 percent—its lowest point in 30 years. NAFTA probably helped, and it certainly didn't hurt. Similarly, immigrants almost always provide a net benefit to a host economy. Although this is particularly true of high-skilled immigrants—a group that disproportionately creates businesses, earns doctorates in science and engineering, files patents, and wins Nobel Prizes—it is also true of low-skilled immigrants. These workers typically do not cause lower wages or outcompete the native-born for jobs. Instead, they take jobs native workers do not want, such as those in the agricultural and cleaning industries.
The effects of technological growth on a developed economy are virtually identical to those of globalization—but they occur on a much larger scale. On balance, both forces destroy jobs but create more than they eliminate. The effect is asymmetrical, however. Workers with lower levels of skills, education, and mobility tend to lose out, while higher-skilled workers generally benefit. However, all consumers, especially the poor, benefit from the better product quality and lower prices that result.
Because the costs of these effects in the form of lost jobs are easier to spot than diffuse increases in purchasing power and economic performance, it can be politically convenient to oppose free trade and immigration. But efforts to limit globalization—through such means as protectionist tariffs—both raise prices and damage the competitiveness of domestic industries that import raw materials. Instead of focusing on globalization itself, attention would be better spent on helping those hurt by globalization and technological advancement. There are plenty of ways to do it: increasing access to higher education and job training, growing wage insurance programs, and expanding negative income taxes (such as the U.S. earned-income tax credit), to name just a few. These types of policies produce much more socially beneficial results than attempting to halt globalization or technological growth.
The election of Donald Trump as the next president of the United States has the potential to upend the global status quo and to alter the economic outlook. In part, the degree of disruption will depend on the extent to which his protectionist talk carries through to his policies. If the Trump administration's actions mirror some of its more extreme campaign rhetoric—if it places significant barriers on trade or carries out mass deportations—then gross domestic product (GDP) growth and growth in trade will likely both diminish even as inflation increases, a condition known as "stagflation." On the other hand, if he pursues more pragmatic, "pro-growth" policies, then economic growth, interest rates, and inflation will all be higher. This latter outcome would benefit most, but not all, of the countries around the world.
We may be living in a world full of technology, but strategy and focus remain the top priorities when it comes to managing a business and its supply chains. So says Roberto Isaias, executive vice president and chief supply chain officer for toy manufacturing and entertainment company Mattel.
Isaias emphasized the point during his keynote presentation on day two of EDGE 2024, a supply chain conference sponsored by the Council of Supply Chain Management Professionals (CSCMP), being held in Nashville this week. He described Mattel’s journey to transform its business and its supply chain amid surging demand for Barbie-branded items following the success of the Barbie movie last year.
Isaias discussed the transformation on two fronts: Commercially, through the revitalization of its brands that began years ago, and logistically, through a supply chain strategy focused on effectiveness and cost leadership.
Today, Mattel makes millions of toys and is steadily moving beyond the toy aisle with its franchise mindset, becoming a major entertainment company as well. Isaias told the audience Mattel currently has two films in production and 14 others in development, and its television studios business has 13 series’ in production with more than 35 in development.
And as for those supply chain gains? The company has saved millions, increased productivity, and improved profit margins—even amid cost increases and inflation. For the full story on Mattel’s transformation, see our feature story from this past summer.
And Isaias left the EDGE audience with five lessons he learned from his experience in leading change:
The business is our boss;
Don’t delegate complexity;
Take bad news well;
Be fair and take care of people;
Lead the execution.
CSCMP’s EDGE 2024 conference runs through Wednesday, October 2, at Nashville’s Gaylord Opryland Hotel & Convention Center.
Confronted with the closed ports, most companies can either route their imports to standard East Coast destinations and wait for the strike to clear, or else re-route those containers to West Coast sites, incurring a three week delay for extra sailing time plus another week required to truck those goods back east, Ron said in an interview at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
However, Uber Freight says its latest platform updates offer a series of mitigation options, including alternative routings, pre-booked allocation and volume during peak season, and providing daily visibility reports on shipments impacted by routings via U.S. east and gulf coast ports. And Ron said the company can also leverage its pool of some 2.3 million truck drivers who have downloaded its smartphone app, targeting them with freight hauling opportunities in the affected regions by pricing those loads “appropriately” through its surge-pricing model.
“If this [strike] continues a month, we will see severe disruptions,” Ron said. “So we can offer them alternatives. We say, if one door is closed, we can open another door? But even with that, there are no magic solutions.”
Turning around a failing warehouse operation demands a similar methodology to how emergency room doctors triage troubled patients at the hospital, a speaker said today in a session at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
There are many reasons that a warehouse might start to miss its targets, such as a sudden volume increase or a new IT system implementation gone wrong, said Adri McCaskill, general manager for iPlan’s Warehouse Management business unit. But whatever the cause, the basic rescue strategy is the same: “Just like medicine, you do triage,” she said. “The most life-threatening problem we try to solve first. And only then, once we’ve stopped the bleeding, we can move on.”
In McCaskill’s comparison, just as a doctor might have to break some ribs through energetic CPR to get a patient’s heart beating again, a failing warehouse might need to recover by “breaking some ribs” in a business sense, such as making management changes or stock write-downs.
Once the business has made some stopgap solutions to “stop the bleeding,” it can proceed to a disciplined recovery, she said. And to reach their final goal, managers can use the classic tools of people, process, and technology to improve what she called the three most important key performance indicators (KPIs): on time in full (OTIF), inventory accuracy, and staff turnover.
CSCMP EDGE attendees gathered Tuesday afternoon for an update and outlook on the truckload (TL) market, which is on the upswing following the longest down cycle in recorded history. Kevin Adamik of RXO (formerly Coyote Logistics), offered an overview of truckload market cycles, highlighting major trends from the recent freight recession and providing an update on where the TL cycle is now.
EDGE 2024, sponsored by the Council of Supply Chain Management Professionals (CSCMP), is taking place this week in Nashville.
Citing data from the Coyote Curve index (which measures year-over-year changes in spot market rates) and other sources, Adamik outlined the dynamics of the TL market. He explained that the last cycle—which lasted from about 2019 to 2024—was longer than the typical three to four-year market cycle, marked by volatile conditions spurred by the Covid-19 pandemic. That cycle is behind us now, he said, adding that the market has reached equilibrium and is headed toward an inflationary environment.
Adamik also told attendees that he expects the new TL cycle to be marked by far less volatility, with a return to more typical conditions. And he offered a slate of supply and demand trends to note as the industry moves into the new cycle.
Supply trends include:
Carrier operating authorities are declining;
Employment in the trucking industry is declining;
Private fleets have expanded, but the expansion has stopped;
Truckload orders are falling.
Demand trends include:
Consumer spending is stable, but is still more service-centric and less goods-intensive;
After a steep decline, imports are on the rise;
Freight volumes have been sluggish but are showing signs of life.
CSCMP EDGE runs through Wednesday, October 2, at Nashville’s Gaylord Opryland Hotel & Resort.
The relationship between shippers and third-party logistics services providers (3PLs) is at the core of successful supply chain management—so getting that relationship right is vital. A panel of industry experts from both sides of the aisle weighed in on what it takes to create strong 3PL/shipper partnerships on day two of the CSCMP EDGE conference, being held this week in Nashville.
Trust, empathy, and transparency ranked high on the list of key elements required for success in all aspects of the partnership, but there are some specifics for each step of the journey. The panel recommended a handful of actions that should take place early on, including:
Establish relationships.
For 3PLs, understand and get to the heart of the shipper’s data.
Also for 3PLs: Understand the shipper’s reason for outsourcing to a 3PL, along with the shipper’s ultimate goals.
Understand company cultures and be sure they align.
Nurture long-term relationships with good communication.
For shippers, be transparent so that the 3PL fully understands your business.
And there are also some “non-negotiables” when it comes to managing the relationship:
3PLs must demonstrate their commitment to engaging with the shipper’s personnel.
3PLs must also demonstrate their commitment to process discipline, continuous improvement, and innovation.
Shippers should ensure that they understand the 3PL’s demonstrated implementation capabilities—ask to visit established clients.
Trust—which takes longer to establish than both sides may expect.
EDGE 2024 is sponsored by the Council of Supply Chain Management Professionals (CSCMP) and runs through Wednesday, October 2, at the Gaylord Opryland Resort & Convention Center in Nashville.