International Hubbing & Structure | Trust Trends 2014 Series
Major international hubs are forming around manufacturing and logistics clusters, and corridors between them are developing like superhighways of land, air, and sea.
Major international hubs are forming around manufacturing and logistics clusters, and corridors between them are developing like superhighways of land, air, and sea. Global trade, services, and online infrastructure are becoming quicker, easier, and more connected to the source, and manufacturing is shifting from China to Southeast Asia, Africa, and back to the United States. In 2014, the world is growing an international infrastructure.
Economic centers are sprouting, clustering, and becoming large hubs around the globe, and they’re becoming more connected and efficient. Rapid urbanization is leading to mega cities and regions around the US.[i] America 2050 names 11 emerging mega-regions where economies are becoming strongly interconnected: Cascadia, Northern California, Southern California, Arizona Sun Corridor, Front Range, Texas Triangle, Gulf Coast, Florida, Piedmont Atlantic, Northeast, and the Great Lakes.[ii] The world is developing in a similar way, especially at logistics clusters, and China is an excellent microcosm.[iii] China’s Guangdong factory metropolis between Shenzhen and Guangzhou is expected to balloon to 42 million people by 2018. Shanghai continues to expand as a shipping hub at Pudong International Cargo Hub, with an expected 50 million tons of annually cargo passing through annually by 2020. With FedEx’s $100 million investment in the hub, it will triple its capacity, blowing away the size of any other hub in the world.[iv] As global hubs grow, sustainable and smart cities are becoming more valued and possible. In 2010, 80% of Americans lived in cities, and it’s expected that 90% will live in cities by 2050. 67% of energy used, 60% of water consumed, and 70% of greenhouse gas emitted are in cities.[v] Smart and sustainable city revolutions are beginning and much needed in these global hubs.
Hubs are growing increasingly more connected. Trading agreements and infrastructure are resulting in the development of corridors between hubs. New flight paths like those connecting American cities to Southeast Asia, new infrastructure like the Beijing to London high speed rail, and new shipping lines like the increased European car shipments to Singapore, are creating land, air, and sea superhighways around the globe.[vi] To increase the rate even further, previously limiting trading restrictions are being abolished and new partnerships are forming every month. In addition, United States trade agreements continue to improve, and US diplomats are working to remove barriers that could boost exports of the service industry by $860 billion per year and create 3 million jobs. Above that, Fed Ex claims that Japan’s new participation in the Trans-Pacific Partnership could define 21st century trade. Also, a new deal was recently approved between the United States and South Korea for 95% bilateral duty free trade for 5 years, the US and Panama recently removed hundreds of tariffs in a new 5 year trading plan, and the list goes on and on.[vii] In the next 10 years, these corridors and hubs will expand, grow stronger, and become centers for innovation.
Improved Online Infrastructure
More are connecting, digital commerce continues to rise, and online infrastructure is rapidly improving. Upwards of 45% of adults now own smart phones, compared to just 35% in 2011, and many expect there to be 50 billion web-connected devices by 2020. That is right – you heard the number correctly – 50 billion.[viii] RFID, WIFI, and WIMAX networks are becoming more integrated, quantum computing is in initial stages with the potential to transform computing, and cloud infrastructure is lightening and securing the end user experience. Both public and private cloud infrastructure are maturing and growing smarter and more customized. Cloud and other online infrastructure are arriving just in time as digital delivery of products and services skyrockets.[ix]
With increased online connection, shipping methods, and trade, end users rarely need brokers to the source. Dr. Andrew Simon refers to this change as “middleman extinction”.[x] Personal 3D printing is expected to change the way individuals and small businesses think about manufacturing. Some call it the “makers revolution”, as networks grow that allow everyday designers to click to have their creation manufactured on a local 3D printer and delivered to their home.[xi] Mass teaching platforms are revolutionizing education from paying to sit in a 30-chair classroom with a local instructor to free lectures from the world’s brightest professors online.[xii]
China Manufacturing Shift
Global manufacturing norms are transitioning, and American businesses are zooming out their focus from only China. In a 2013 report, Deloitte cites rising production costs, improving competition, intellectual property risk, and dwindling government incentives as reasons for the shift away from China.[xiii] In a recent poll, Deloitte found that 37% of businesses manufacturing in China are expecting to shift to other countries by 2014. These shifts from China are moving to less expensive Southeast Asian markets, African markets, and back to the USA.[xiv] Deloitte Manufacturing research shows that 39% of 900 predominantly US-based executives and managers believe their next manufacturing plant will be in the US. 16% said they will stay in China. Deloitte sites that the American Manufacturing Renewal is fueled by a stable and clear legal and regulatory environment in the US and faults poor math, saying that a quarter of manufacturing offshore could be done more profitably onshore.
Why this matters
“A recent estimate by the United States Congressional Budget Office suggests that every dollar of infrastructure spending generates an extra 60 cents in economic activity (for a total increase to GDP of $1.60).” – Deloitte[xv]
- It’s often less expensive to maintain control of the supply chain from the source versus using a broker.
- Building Trust in Business found that HPO’s (high-performing organizations) focus on building and managing relationships and sharing responsibility for success in the workforces.
- Expanding US companies globally actually increases US job growth for R&D.[xvi]
- Singapore and Germany boast the world’s greatest infrastructure, and there’s a clear link between their level of development and both nation’s economic status, with Germany carrying Europe and Singapore as the hub of a regional boom. [xvii] What if the world’s major economic cities linked up, like the streets of Singapore and the cities of Germany, and created economic corridors?
- Fast internet connection and computers save frustration, time, and money.
How to seize the embedded opportunities
- Emphasize developing the clarity, connection, and consistency pillars of The Trust Edge.
- Function like an HPO, and allow employees to build relationships and become bridges, upon their own accord. In fact, incentivize them to do it.
- Don’t get stuck in the traditional procedures and systems of the organization.
- Invest in better, up-to-date technology.
- Locate your next office near a growing hub.
- Recognize corridors relevant to you, and build corridors that can become superhighways for your business. Secure manufacturing that will be most efficient. Get to the source.
- Consider shifting your manufacturing elsewhere, possibly even back to the USA.
- Engage globally across corridors and create new micro-corridors to increase revenue.[xviii]
- Strategize how your organization can make its current network pathways into fast superhighways.
- Key opportunity for competitive advantage: intelligent manufacturing.
[i] Efrat, Zeev. Top Global Mega Trends to 2020 and Implications to Business, Society and Cultures. Frost & Sullivan. http://www.bar-oriyan.com/Portals/0/mega%20trands%20exec%20summary%20v3%20(1).pdf
[ii] Megaregions. America 2050. http://www.america2050.org/content/megaregions.html
[ix] 2013 Top Ten Technology Trends for Business. Price Waterhouse Cooper. http://www.pwc.com/us/en/advisory/2013-digital-iq-survey/top-10-technology-trends-for-business.jhtml
[x] Andrea Simon, PhD. Ten Business Trends from the Trenches for 2013. http://www.forbes.com/sites/womensmedia/2013/02/11/ten-business-trends-from-the-trenches-for-2013/
[xii] A Top Ten for Business Leaders. The Economist. The World in 2013. http://www.economist.com/blogs/theworldin2013/2012/11/global-trends-2013http://www.economist.com/theworldin/2013
[xiii] Business Trends 2013. Deloitte. http://www.deloitte.com/view/en_US/us/Services/consulting/Strategy-Operations/business-trends/index.htm
[xiv] Cueto, Santiago. Top 5 International Business Law Trends to Watch in 2013: Trend #1 Global Manufacturing. http://www.internationalbusinesslawadvisor.com/2013/01/articles/international-investments/top-5-international-business-trends-to-watch-in-2013-trend-1-global-manufacturing/
[xv] 2013 Global Manufacturing Competitiveness Index. Council on Competitiveness. http://www.deloitte.com/assets/Dcom-Global/Local%20Assets/Documents/Manufacturing/dttl_2013%20Global%20Manufacturing%20Competitiveness%20Index_11_15_12.pdf
[xvi] Slaughter, Matthew. American Companies and Global Supply Networks. January 2013. Retrieved from http://businessroundtable.org/uploads/studies-reports/downloads/BRT-SlaughterPaper-singles-Dec21.pdf
[xviii] Slaughter, Matthew. American Companies and Global Supply Networks. January 2013. Retrieved from http://businessroundtable.org/uploads/studies-reports/downloads/BRT-SlaughterPaper-singles-Dec21.pdf