Tuesday, November 13, 2007

From integrated firms to orchestrated networks

... how value chains and supply chain disintegrations are changing the structure of global industry: What Does It Take to Compete in a Flat World?

...when the prosperity in the developed markets, like America and Europe, led to a situation where a lot of the young people were unwilling to take up blue-collar jobs in labor-intensive industries ...rationalization of manufacturing led to a situation where we needed to create the kinds of supply chains that oversaw the manufacturing of these labor intensive goods and eventually to bring them back to the markets of America and Western Europe, where they were consumed.

...Today we are responding to a very important consumer trend. There has been a tremendous fragmentation of consumer demand. Instead of serving one huge market that is basically uniform in demand, you are seeing pockets of niche markets...

...for a country to be participating in a global economy it no longer has to have vertical integration of the whole industry...They can actually be in a particular niche in a vertical. And indeed, they may be very specialized in a particular niche and then they can participate in different verticals.

This is an area where traditional trade statistics don't make any sense. If a product is manufactured in four countries, or six countries, what is the country of origin? I think this requires a fundamental change in the mental model that we have as to what is the country of origin because the original concept no longer makes sense...


Li & Fung is, today, one of the most powerful orchestrators in outsourced manufacturing & supply. Just ask any of India's apparel exporters to know how much. In this article, they exhibit a perspicuous understanding of changing global dynamics.
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