Thoughts about the “Low Cost Country” business model

March 31, 2007

I’ve been thinking recently about the trend for companies in “High Cost Countries” (notably North American and Central European countries — you know who you are…) or HCC (er, not to be confused with the “High Cadre Children” of post-Cultural Revolution Communist China, as described in Qui Xiaolong’s novel “Death of a Red Heroine“) to source raw-materials, components, sub-assemblies and complete finished goods from “Low Cost Countries” or LCC.

In addition to being a source of goods, some of the LCCs are also widely used for outsourcing of services (e.g. telemarketing, customer service, technical support, engineering, data processing, etc — even preparation of tax returns has been off-shored) that can readily be provided via various telecommunications paths — telephone, e-mail, internet chat/IM, WANs and VPNs, etc.

Now, the conventional wisdom (ooh, there’s that phrase…) on LCCs says that They Are A Good Thing For All The Parties Involved. The reasoning, at least as I understand it (see disclaimer below), goes something like this:

  • Raw material and labour costs in LCCs are low enough to more than offset the cost of transporting and importing the goods to the HCC, so that the net cost is less than the same goods sourced within the HCC.
  • The lower costs will result in lower prices to the consumer, giving companies using LCCs a competitive advantage in the marketplace.
  • The money flowing to the LCC is A Good Thing For The People There, who would otherwise be much poorer.
  • Jobs lost locally in the HCC to the LCC will be replaced by higher paying “value added” jobs.

The supposed advantages of LCCs over HCCs, from a cost perspective are:

  • Lower labour and social program costs in “undeveloped” countries; a result of the lower standard of living and people’s expectations there.
  • Less stringent safety and ecological impact regulations; no need to spend money on improving safety or reducing pollution, with few consequences for accidents or long-term health hazards.
  • Large pool of available labour compared to work; high levels of un- or under-employment keep labour rates depressed and allow workers to be exploited (and labour laws are generally lax in comparison with the HCC’s).

OK so far (although you’ll note perhaps just a hint of cynicism in my commentaries), but let’s think about this a moment. Time’s up. Here’s the Unconventional Wisdom on LCCs:

  • Transportation costs: have you looked at the price of Dead Dinosaur Juice (a.k.a. petroleum products) lately? And it’s not going to go down, either — demand is increasing (ahem… the fastest growing consumer of oil these days? One of those LCCs… a bit ironic, no?) and supply is not growing (it’s essentially finite, people… no matter how many holes we drill or tar sands we mine it will run out). Simple economics (even the kind doled out to the likes of me in Engineering School) tells you what happens in a case like this — the price continues to rise. So at some point, probably sooner rather than later, the cost of transporting goods from LCCs to HCCs is going to reduce and then eliminate any cost advantage.
  • Security of supply: this is partly related to transportation, partly to growing economies in LCCs (with two effects from each of these). If you have to transport goods a long distance by ship (because of the location of many of the LCCs relative to the HCCs, air transportation is too costly) you have issues due to: a) severe weather leading to loss of the goods at sea; and b) timing of arrival of the goods, which can be impacted by normal weather, and may adversely affect production and delivery scheduling. The growing economies in LCCs can cause issues because: a) in some LCCs private, for-profit businesses are A Very New Thing and they haven’t quite got the hang of things yet, so a supplier may just suddenly disappear due to bankruptcy (hmm… maybe they need to figure out that you have to sell at a higher price than your costs in order to make a profit. And they will, once they get over the heady exuberance of Just Selling A Lot Of Stuff.); and b) they compete with off-shore demand for the same things, raw materials and labour. Now, if you have two customers, one who’s two doors down and can easily come looking for you and the goods you agreed to deliver; the other who’s in another country somewhere across the ocean and several time-zones away — who do you think is going to get their goods first if there’s not enough to go around? My money’s on the neighbour…
  • Now this one’s not necessarily a LCC risk, and sort of falls under security of supply too — purchasing policies being driven by economy of scale, which lead to single-sourcing of critical goods. It does often go hand in hand with the LCC strategy, along with other Purchasing Department WMDs like reverse-auctions. Single-sourcing, in my experience, can be A Very Bad Thing, unless you have absolute security of supply. Now for commodities, it may not be critical, provided there is a ready over-supply in the marketplace or at least the capability of other suppliers to rapidly increase production in response to a loss of a supply source. But if not, then you become vulnerable to cost increases (if you have no alternatives for supply and you need the product to be able to continue to sell to your customers… well, think of what a junkie will do for a fix…) and in the worst case, you suffer a total loss (you single-sourced for that economy of scale, remember?) of supply and eventually run out of finished goods to sell. And your competitors? Perhaps they didn’t put all their eggs in one basket, paying a little more for the security of multiple suppliers (can you say “Insurance Policy Premiums”? I bet you can…) and they’re now taking your customers and eating your lunch.
  • The assumption, at least in most developed Western nations, is that the people of the LCCs will remain content with their standard of living and undeveloped status. Riiiight. Very short term viewpoint (and at its roots, harks back to the colonial impulses that the developed nations seem to have never quite gotten over). The two fastest growing economies in the world, if I’ve remembered recent news reports correctly, are both LCCs — the People’s Republic of China and India. And despite some government controls on access to information in China, in neither case are they living in a vacuum. They have internet and can see The Grass Is Greener On The Other Side Of The Fence. So why would Western countries expect that they wouldn’t want a piece of the pie too? And there are a lot of smart, hard working people in the LCCs (despite some Western stereotypes to the contrary) — there’s absolutely no reason why they can’t become as developed as any Western nation; perhaps even more advanced. With comparable standards of living and corresponding costs for labour and social programs. They’re going to want similar protections too: labour laws protecting them from abuses, better environmental conditions and so on. In addition, all this new prosperity brings with it increased internal demands for goods and services. Supply and demand — we all understand their effect on price, right?

So, the Unconventional Wisdom on Low Cost Countries is: look out the front window, that may be the next LCC you’re seeing.  Don’t they say “turnabout is fair play”?  And those higher paying, “value added” jobs?  Could they end up moving to the future crop of HCCs; you know who I mean, those current LCCs once they become developed?

Disclaimer time: Your Mileage May Vary. I’m not an economist, nor do I have an MBA (I occasionally regret not having found the time over the years to go back to school and get an MBA; not because I think it would have made me any smarter but principally for the career juju it seems to impart to people…) so the above is strictly based on years of observation of How Business Gets Done and much personal thought on the subject, rather than on any specialized education in the field.

So, if you have any well-reasoned thoughts or opinions — either for or against my propositions above — on the subject that you’d like to share, please leave them in the comments.

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Curriculum Vitae – Professional vs Personal Experience

March 29, 2007

I’ve been wondering how best to present the divergence (that may not be the right term, but I’m not sure how else to express it — suggestions welcomed, once you’ve read the post and see what I mean) between my personal and professional experience in my CV.

What I’m referring to is the fairly extensive personal experience I have with a lot of internet related technologies:

  • Web development, HTML and so on: right from hand-coding my wife’s first blog — back in the “dark ages” when blogging first climbed out of the primordial internet soup, before the appearance of the manifold blogging tools & hosted services — through to fine-tuning the look and feel of her current TypePad-hosted blogs using CSS.
  • Website management: uploading web pages, images and so on; managing files on hosted blogs.
  • Computer Graphics: bitmap/photo editing, vector drawings and so on in the production of logos, buttons and whatnots for the aforementioned blogs and web pages.  This is in addition to my professional experience with typical business graphics tools: MS Powerpoint, Visio, etc in the “Office” world, plus CAD drawing tools (CATIA 3D, AutoCad, etc) in the engineering world.
  • Podcasting: setting up a PC-based home recording system, which required researching & selecting appropriate hardware and software, purchasing and configuring everything, figuring out how to get good quality recordings and then teaching Katherine how to use it all to produce her podcasts.  I’ve developed some decent skills at editing the recorded audio and have become pretty knowledgeable about things like RSS feeds, XML and iTunes in the process.  You can check out the results at Katherine’s podcast and blog pages; links to them are in the sidebar under the “Wabi Sabi Universe” heading.  I can’t take credit for the writing, soothing voice or eclectic choice of music that seem to attract her listeners (that’s all to her credit), but the technical aspects of the sound quality, consistency in using the ID3 tags, and managing all the files and feeds — that’s me.
  • Blogging: hmm, come to think of it, there’s this blog.  And now I have some experience with WordPress, in addition to being very familiar with TypePad.  Perhaps it helps demonstrate my communications skills…

Of course, there are plenty of other areas of my personal experience that might be useful in some position — but how do you catalogue it all, without overloading the CV?

So, any thoughts or comments on your own experience with presenting personal experience in a professional CV will be welcomed.


More on Craig’s Jefferson Airplane podcast (subtitle: Care and “Feeding” of Podcasts)

March 28, 2007

Well, it seems that although Craig managed to get his Jefferson Airplane podcast’s feed “off the ground” (so to speak 😉 ) and he now has some subscribers being reported by FeedBurner, there’s still a little problem that needs to be sorted out.

It seems that when he first asked people (not me…) about how to go about publicizing his podcast they told him to use FeedBurner to maximize the reach, but I think they failed to make it clear how the whole RSS feed thing works.

As a result, he’s ended up “burning” (creating — “burning” is their cute marketing term for it) multiple feeds on FeedBurner all linked to the source feed on his WordPress blog (you can find the link to his podcast over in the sidebar).  Apparently no one explained to him that once you create a FeedBurner feed that’s linked to a source feed, it will automagically be updated any time something new is added to the blog.

So the challenge now is to figure out how to consolidate the three FeedBurner feeds (he burned one for each episode that he’s put out so far) into a single one, without losing any of his subscribers.

I’ll let you know how it all works out…

In the mean time, if you’re a fan of the Jefferson Airplane, or of late-60’s rock in general, go check out his podcast.


CV posted

March 27, 2007

As part of my job hunting strategy, I’ve posted my CV as a page on the blog — there, you’ll find a text version of it as well as a link to download it in PDF format.

If you know of a suitable position (for example as a Manager of Customer Service in a manufacturing company that’s located in the Greater Toronto Area or south-western Ontario), please contact me by leaving a comment — I’ll be notified by e-mail that a comment has been posted.

Also, if you think someone you know might be aware of a suitable position, you can forward them a copy of the CV or direct them to it on the web.

Thanks,

Rob


What the heck? There’s someone out there reading this stuff?

March 26, 2007

Busted… looks like a few people have discovered my blogging efforts (according to the visitor stats WordPress supplies anyway), probably through Katherine’s knitting blog (where she mentioned this, um, thingy here), or maybe also from Craig’s Jefferson Airplane podcast site.

One thing to remember about my blog: it’ll always be worth just what you’ve paid for it. 😉

Still finding the editing page of WordPress a bit quirky, like how the backspace key seems to take out the space preceding a word when you make a correction by backspacing over the word. Not a bug, per se, just something that takes getting used to (BTW in case you haven’t figured it out by now, I’m really picky about human interface and user experience design — comes from having done software development In Another Life; you can bet that I made sure that I ironed out any quirkiness — or worked around as best I could any quirks inherent in the underlying system — before turning any code loose on the users).

Time to go for today. Started reading Sun Tzu‘s The Art of War, as an adjunct to my job hunting knowledge and I’d like to get back to it. I have recently picked up some useful job hunting stuff from The Smart Interviewer by “industrial psychologist” Bradford D. Smart; that’s what prompted me to read The Art of War (which is a notable omission from my knowledge base anyway, and is now being rectified).

If the connection’s not immediately clear to you, don’t worry… it has to do with knowing both your adversary and yourself, as counselled by Master Sun; time to find out what other tactics and strategies I can apply to the job hunt.

BTW I’d suggest it’s just a canny nom de plume to tie in neatly with the book title, but it seems he has a brother, Geoffrey H. Smart, who’s a Psychologist To The CEOs — they market stuff together under the topgrading® banner; no endorsement implied as I have some philosophical differences with some of the methods described in The Smart Interviewer, but it’s useful to know what you may be up against in an interview — so I suppose they really are a couple of Smart cookies…

I’m also reading Guerrilla Marketing for Job Hunters by Jay Conrad Levinson and David E. Perry, which was sent to me by a friend (thanks, Ted!) who works for a company that does employment counselling (erm, I think I have that right?).

Anyway, from it I’ve picked up some good pointers that have helped me refine my résumé a bit, and there are some other tactics that may be useful. It’s definitely not a “one size fits all” book, though, but then I think that it’s not meant to be — it’s intended as a toolkit and you need to select the right tool for your situation. (PS to Ted, I still owe you some more thoughts on the book, take this as a down-payment…)

I’m finding that a lot of the tools don’t really apply to me, or my situation, or to the current hiring landscape — companies are relying more and more on internet-based application systems that seem to do an effective job of filtering out the best candidates (based on some feedback I’ve heard from some managers), and just getting the attention of a real live human being to even read that well crafted résumé is about as likely as winning the lottery…

Sigh… just when exactly did they decide to take the Human out of Human Resources? Oh, right, it was about the same time that Shareholder Value became the New Mantra of Business.

Sorry, did that last bit sound just a bit cranky? Um, but isn’t that why you came here in the first place 😉

OK, so now I’m really outta here for tonight…


What this is all about

March 26, 2007

Welcome. You’ve probably just stumbled across this blog. More than likely by accident; perhaps a link to it has turned up unexpectedly in a search you’ve just done for something unrelated.

In any case, a few words by way of introduction (I won’t say explanation as I think that this is a case of “for those who understand, no explanation is necessary; for those who don’t, no explanation is possible”):

I was urged (goaded, cajoled, prodded…) into starting a blog by, amongst others, my wife. She’s been blogging for some time, and in fact I have been involved in her adventures in blogging and, more recently, podcasting from the beginning.  You’ll find links to some of her efforts over in the sidebar under the rubric “Wabi Sabi Universe”.

Very occasionally as a contributor of written or spoken words, but more usually behind the scenes: hand coding the HTML for her first blogging efforts (back in the Dark Ages, before blogging was mainstream and the panoply of tools now available had even begun to be thought of), then monkeying around with TypePad advanced templates to give her blog the look-and-feel she wanted that the standard templates just didn’t have.

She was an early adopter of TypePad, one of the beta-test subscribers (“Member since 07/2003“), and back then the only way to get fancy with TypePad was to get under the hood and tinker with Advanced Templates; as TypePad has evolved, I can now make her blogs — yes, there are several on the go now — have the desired LAF with a few simple tweaks in the Custom CSS template. By staying away from the advanced templates, maintenance becomes so much easier and when TypePad introduces new features they integrate (pretty much) seamlessly; neither was the case when using advanced templates.

So, from this mainly behind the scenes experience with blogging, I’ve finally started a blog of my own. But why on WordPress? The TypePad account we have allows an unlimited number of blogs, so I could blog there (although it gets a bit tricky what with there only being one “About” page, profile and so on… I end up being set up as a “guest author”) and in fact I had started to re-purpose one of our disused TypePad blogs (www.toutes-directions.com, in case you’re interested…) to do just that.

Then I ran into Craig the Airplane man on the FeedBurner support forums. He was having problems getting his Jefferson Airplane podcast off the ground (so to speak…) and was frustrated by the unhelpful answers he had been getting from various sources. His podcast’s site is a WordPress.com blog, craigtheairplaneman.wordpress.com, so when I offered to help him solve the problems he was having with getting the RSS feed set up and accepted by the podcast directories, I realized I needed to know a bit more about the workings of a WordPress blog.

Since WordPress.com offers free blogs, I signed up for one; this is it. I tinkered a bit to give it a LAF I’m comfortable with, and I am getting used to the editing features (some of which I find annoying, but overall it seems to work well — mainly it’s the differences from what I’m used to on TypePad that cause me some grief from time to time, and I must say that WP does have some nifty things that TP lacks; the semi-static Pages for instance — I can fake them in TP but it’s a bit of work).

Having got it set up, I was able to look at the XML behind the RSS feed and diagnose Craig’s problem. I told him what appeared to be breaking the feed (a space in the MP3 filename that prevented the enclosure tag from being generated, if you’re curious) and causing it to be rejected by the ‘cast directories; he was able to implement the fix himself and successfully create a FeedBurner feed that was accepted by the directories (Bravo, Craig!).

Having gone to the trouble of setting up this blog, I suppose I really should keep using it.

As for the name, Unconventional Wisdom, and the sub-title ‘Thinking outside the tesseract — please leave “common knowledge” at the entrance.‘ — I have found that when someone starts out an explanation of why they believe something with “conventional wisdom says” or the close relative “it’s common knowledge”, it is usually something based on convenience to the believer rather than being the result of careful consideration.

A kind of mental crutch then, to avoid having to put any effort into reaching a conclusion; thus do conventional wisdom and common knowledge spring forth, fully formed, from nothing more than the fervent desire of the believer that it be so.

The distinguishing characteristic of conventional wisdom and common knowledge is the uncanny way they always support and justify the believer’s actions. After all, why would anyone bother making the effort to go beyond the convenient, conventional wisdom to potentially arrive at a conclusion that’s contrary to what they desire?

Now, I’m probably as lazy as the next homo sapiens, but I just don’t believe it’s right to not make the effort to look at all the sides of an issue, to carefully and rationally consider the effects on others as well as myself. So, even though it sometimes leads me to reach a conclusion that’s not as beneficial to me as accepting the conventional wisdom or common knowledge on the subject, I do try to make the effort.

And a tesseract? It’s also known as a hypercube, a four-dimensional analogue of a cube — it’s my way of encouraging you to think really outside the box…

But I’ve gone on far too long. More another day.


The Secret

March 24, 2007

OK, so I’ve been watching (somewhat bemusedly I must confess) this latest social phenomenon that is “The Secret“.

And I’ve decided that what I’m going to wish for is that the Universe (or whatever is the delivery mechanism behind “The Secret“) give me a free copy of the book and DVD.

There we go.  I’ll let you know when it all arrives…

BTW Katherine, my wife (you can check out her knitting blog & podcast, or her movie podcast — they’re listed in the sidebar under the “Wabi Sabi Universe” category), pointed out to me something called “Cosmic Ordering” that pre-dates “The Secret“.  Looks like “The Secret” is “Cosmic Ordering meets Solution Selling Techniques”.

Sigh.  Whatever happened to just working damned hard for what you wanted… without expecting it to be handed to you just because you want it (mentally insert sound of foot stamping and whining voice saying “But I’m entitled to it!”).