Reverse Thinking

There's a phrase making the rounds in conference presentations and the media which logistics professionals need to ban from their vocabulary. We must help the general business public understand “reverse globalization” is a faulty concept or, at least, a misnomer.

If you must persist, you might substitute commercial agoraphobia (a little redundant since agoraphobia literally translates to fear of the marketplace). Or, try isolationism or protectionist.

Or, just scrap the economic theories of the last 232 years. That's when Adam Smith described the supply chain. Smith's global view was primarily geared to commodities that were not available locally and thus had to be transported great distances.

He described, in “An Inquiry Into the Nature and Causes of the Wealth of Nations,” the role of the supply chain in producing the woolen coat on the back of a common day laborer as extending from the shepherd to the sorter of the wool, the wool comber or carder, dyer, scribbler, spinner, weaver, fuller and dresser. Then he noted a number of merchants and carriers are involved in the transport of the goods between these functions. He posed the question, how much commerce and navigation and, by extension, ship builders, sailors, sail makers and rope makers were involved in bringing the materials to the dyer so he could complete his job? What about the tools and commodities used by the others?

Smith described what we have retitled “lean manufacturing.” In large-scale production, Smith saw a division of labor necessary to complete the tasks that could not feasibly or economically be done by a single worker or a single set of skills or tools. “In those great manufactures … which are destined to supply the great wants of the great body of the people, every different branch of the work employs so great a number of workmen, that it is impossible to collect them all into the same workhouse.”

His view of mass production describes multiple workshops and implies outsourcing — but a more narrow form than today's standard because the economics of producing manufactured goods did not support separating those different production and assembly steps by any great distance.

Smith recognized a number of supply chains come together in the production of even a simple product like a woolen coat. He described a division of labor which, with fast, efficient and inexpensive transport does not require every task to be performed locally. He also knew that the total landed cost would determine the nature and structure of those various supply chains.

This difficult economy certainly requires a reexamination of how we produce and distribute goods and it will lead to reengineering supply chains. But as we go through those network optimization exercises to bring source closer to production or production closer to market, call it that: supply chain reengineering, network optimization or even near sourcing. But don't call it reverse globalization unless you want to go back to the hunter-gatherer days of our distant ancestors.

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