Several weeks ago, the Mississippi Economic Council held its annual meeting in Jackson. As we have come to expect from Blake Wilson and friends, the affair was meaningful, well organized and well attended.
The keynote speaker was Fred Smith, FedEx founder and CEO. In his
remarks, Mr. Smith identified four macro economic trends that he believes are changing, and will continue to change, the business landscape significantly.
Not surprisingly, he identified the proliferation of technology as a major influence on the way business is being conducted. From a broad perspective, the increasing use of technology means fewer workers and more efficient operations. Improvements in communication has virtually decimated the ranks of middle management. This was largely the driving force behind the era of downsizing we experienced over the last decade.
Every new technological invention quickly finds its way into practical applications that impact every business in America. More specifically, Mr. Smith cited the increase of high-tech and high value-added products as a percentage of overall economic activity as a critical trend for Mississippi’s economic future.
The second macro trend is related to the first. Fast-cycle logistics such as “just in time” inventory management means that manufacturers keep a minimal stock of materials on hand. Suppliers assume the responsibility for keeping the material flow to the manufacturer steady and flexible so that operations will not be shutdown for lack of widgets. Manufacturers no longer maintain vast warehouses of materials since suppliers are required to respond immediately to the fluctuations in production schedules. This shifting of responsibility for material flow to the supplier means that suppliers and their manufacturing customers must maintain a close relationship. In fact, the supplier becomes more like a partner in the manufacturing process rather than merely a seller of goods.
The rush toward globalization is another major trend that is changing the way business is done all over the world. The need to trade between countries has forced adoption of some basic rules of commerce that allows companies to conduct business across national borders with relative ease. The varying standards of living in different countries provides opportunities to exploit cheap labor in some countries in order to lower the overall cost of production. We have witnessed first hand the impact of manufacturing jobs leaving Mississippi for cheaper environments in Mexico, Latin America and Asia. The garment industry in Mississippi is practically nonexistent. Many automotive assembly jobs, which were moved here from the higher-priced North, have now been relocated to other countries that offer abundant, cheap labor.
The flip side of the coin is that we now export more products to less developed countries that buy our stuff with dollars generated from selling cheap labor. The theory of NAFTA was that the increase in exports would provide more jobs than the anticipated loss of lower paying jobs to Mexico. The jury is still out with respect to how successful NAFTA has been at job creation compared to the job loss it caused. I doubt that it has achieved the results that were projected; however, I also think the migration of jobs was inevitable. Consumers are unwilling to pay more for a product just because it was made with expensive American labor. Sad to say, but it’s true.
Finally, the onslaught of e-commerce is just beginning. It will grow quickly and increasingly impact how business is conducted. Initially, it was consumers who enthusiastically embraced Internet shopping. Buying sweaters and books online is still a growing market, but it will be dwarfed by the use businesses will make transacting business on the Web. New ways to improve business efficiency utilizing the Internet is being developed, literally, everyday. In the near future, not having access to an Internet-connected computer will render consumers and businesses helpless as more and more of life’s routine business is transacted on-line. For us “e-dinosaurs,” all these changes are scary and intimidating.
The way we live life is changing at an ever faster pace. Since “going back” is not an option, we really have no choice but to commit to life-long learning and trudge on. It is helpful to have a real visionary like Fred Smith to alert us to what lies ahead.
Thought for the Moment — Do not be misled: Bad company corrupts good character.
— 1 Corinthians 15:33
Joe D. Jones, CPA, is publisher of the Mississippi Business Journal. Contact him at firstname.lastname@example.org.