Productivity Through a Healthy Technology Infrastructure

Dec. 23, 2003
Cheap Labor is Not the Only Measure of Competitiveness

Competing on a global basis is not easy, but residence in North America confers certain advantages and recent productivity rates continue to prove it. Many of these advantages are related to "soft" issues such as shared cultural traits and work ethic, but North American workers have many other "hard" advantages related to our well-developed technology-based infrastructure.

 I spent more than three years in two countries overseas working for two US-based companies. My first assignment was in Saudi Arabia with a major engineering and construction firm, and the second was in Puerto Rico with a machine builder. Both experiences made me acutely aware of the value of a technology infrastructure.

One of the main tools used by virtually any enterprise on a daily basis is telecommunications. During the past decade, North American firms have invested massive amounts of capital in its telecommunications infrastructure, and the end result is incredibly cheap and very reliable voice and data communications.

Most Third World and many more economically-advanced countries simply do not have reliable and affordable phone service. Pretty much without exception a North American worker can pick up any phone at any time, get a dial tone and call whomever they want where they are for pennies per minute.

Most of us take this minimum level of service for granted, but don't discount it--it is a very real competitive advantage. There are few countries that can match this combination of low price and reliable service.

When I worked in Saudi Arabia, general phone access was tightly restricted because international calls cost dollars per minute. Vendor's representatives based in the country seldom had needed information and restricted phone access meant that my colleagues and I were hard-pressed to obtain even the most rudimentary product info in a timely fashion.

The phone service in Puerto Rico was cheaper, but totally unreliable. Dial tones were available only about 80% of the time, and the phone system always seemed to be down when I needed it most.

Many developing countries are bypassing fixed land lines and going directly to a cellular-based phone systems. This has increased reliability and eliminated lengthy waits for phone service, but costs still tend to be much higher compared to either cellular or land line service in North America.

Always-on broad-band Internet or e-mail access is even more of a problem than phone service in most countries outside of North America. This includes many European countries as well as most Third World nations. Most of us have enjoy high-speed Internet access at work, and similar access can be procured at home from a number of competing providers for $30 or less per month.

The Internet is becoming the preferred medium for information exchange and software commerce. The e-mail system is a ubiquitous tool used by many to accomplish daily work tasks. Reliable and low-cost high-speed Internet connections are a huge technical advantage for North American businesses and workers.

When was the last time you needed some item quickly and asked a colleague or vendor to "FedEx" it? We take that company's service so much for granted that "FedEx" has become a generic reference for overnight express shipping. Are you aware that next-day shipping services are still not available in many countries? FedEx has offices in Puerto Rico, but when I was there, we certainly could not count on next-day service. Instead, we grew accustomed to receiving our packages anywhere from 1--5 days later, with no rhyme or reason as to the variance.

If there is one essential item of industrial infrastructure, it is energy, specifically electric power. We North Americans just assume that the lights will come on and stay on. Outages are so rare that they make front-page news.

This is simply not the case in most developing countries. As recently reported in the international newsmagazine The Economist and covered in this issue, a chronic shortage of electric power is threatening to derail economic expansion in China.

According to The Economist, 200 steel, fertilizer, and other factories in coastal Jiangsu Province were simply closed down this past summer because there was no power to run them. The power shortage is so chronically bad that four-day work weeks have become common in power-starved provinces.

At least they could, to some extent, plan around availability. One of the most difficult aspects of a poor or neglected energy infrastructure is the sheer unpredictability of it all. Imagine having your entire workforce report for work at 8:00 am then only to have the power go out at 8:30. Everyone and everything sits idle for an hour or so until you finally give up and direct your supervisors to tell employees to go home at 10:00 because the power is still off. Everyone leaves only to have the power come back on at 10:30. Oh yeah, just pick up the phone and call--well, you get the idea. Even though the outage lasted only two hours, the entire day is lost.

What if a product with a batch cycle time of six hours is interrupted one hour prior to completion? How long will it take to remove material from a mixer or an extruder after hardening? Most processes need hours to recover from a power outage, and productivity losses can be enormous.

As a postscript, my former employer decided years ago to transfer manufacturing operations back to Southern California from Puerto Rico. Despite significantly lower wage costs the difference was never enough to overcome the costs generated by unreliable telecommunications and poor power quality and supply.

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