Mr.
Creators: name: ANIKET YADAV
Publisher: name: Zenodo
Year: 2022
Subjects: EXPORT AD IMPORT
STARTEGIES OF COST REDUCTION

description: <strong>ABSTRACT</strong> Many unskilled labor-intensive production tasks began to be offshored by advanced country firms to developing countries, where low-cost but relatively unskilled labour imparted a comparative advantage, essentially in final assembly operations, combined with institutions that could absorb firm-specific technological know-how. This profitable international production fragmentation became feasible with the onset of the information and communications technology (ICT) revolution, which enabled the coordination of spatially dispersed complex tasks at a relatively low cost. The growth of global supply chains has changed the distribution of incomes across countries. Participation in these supply chains, initiated by the successful completion of low value-added manufacturing tasks, contributed to industrialization and high rates of economic growth in several Asian developing economies. The process of catch-up with developed economies is likely to get stronger as many of these countries seek to move up the value chain through their exposure to advanced technologies (made available by the offshoring process) and build up human capital. At the same time, the continued exclusion of several developing economies from global supply chains, such as those in Africa, means that the gap among countries in the developing world could widen. The international fragmentation of production has also affected the distribution of incomes within countries. In advanced economies, the direct, negative effect of production fragmentation on employment and wages for low and semi-skilled workers is the primary concern. In developing economies, production fragmentation is likely to create jobs for a large pool of unskilled labour. However, because a relatively unskilled activity in a developed economy may be a relatively skilled one in a developing economy, offshoring may increase the demand for (and returns on) skilled labour among developing economies. These distribution effects, both across and within countries, are likely to affect trade policy, and consequently, the evolution of supply chains. Changes in the structure of 20th century international industrial organisation that have incited research interest among economists have also driven a significant body of work in the business literature. Indeed, many of the factors driving the changing industrial structure are derived from business. Examples include the innovation and implementation of assembly lines, scientific management, modularisation, lean manufacturing, and just-intime production. While the economics literature has produced terminology such as “task trade”, “vertical specialisation”, and “production sharing”, the business literature tends to emphasise “supply chains”. This is in conjunction with terms from political economists and development theorists that include “value chains”, “global commodity chains”, and “global production networks”. Of these, the supply chain provides the most relevant perspective for the business practitioner. Networks of firms are viewed from a focal firm perspective, and the supply chain ontology adopts various dimensions to orient a firm with its network surroundings (for example, direct-extended-ultimate supply chains, horizontal tiers or degrees of separation, and vertical structures within each tier). Further functionalising the supply chain concept is the field of supply chain management (SCM). Born from multidisciplinary roots that include logistics, marketing, management, and sociology, SCM has developed into a distinct field of study over the past fifty years. SCM theory has only recently reached a state of maturation where it produces operationalisable concepts and tools, but progress is being made in advancing both the overarching field of SCM and the specific issues that fall under the SCM umbrella. This chapter will review the overarching field, while Part II and its chapters will address the specific issues. The shuffle of jobs offshore (or back onshore) has caught the attention and concerns of policy makers. The structural shifts in industrial structures are creating new winners and losers. Unskilled labour-intensive parts of the manufacturing production process have been increasingly offshored by advanced country firms to relatively unskilled labourabundant developing economies. This “offshoring” phenomenon is expected to reduce jobs for low- and semi-skilled workers in advanced economies while increasing them in developing economies. At the same time, resulting productivity increases in advanced economies can raise the demand for native workers – at least in complementary tasks. The empirical literature suggests that fears of job-losses due to offshoring in advanced economies are often exaggerated – restricted largely to the short-run. Policy makers can address these concerns through strengthening social safety nets in the short run and instituting skills-upgrading programmes to create a more flexible labour force in the long run. Greater challenges lie ahead for these policy makers, with an increasing number of services jobs being offshored from developed to developing economies. Even in developing economies, services offshoring can worsen inequality by raising skill premiums, thereby making investment in education equally crucial there. Looking ahead, given increasing wages in certain developing economies, increasing transport costs, new technologies and concerns about separating R&amp;D from manufacturing activities, there is a possibility of a large number of manufacturing and services tasks returning to advanced economies.