Aug

5

Circuit boardDuring controversies about outsourcing, an executive I knew liked to hold up a 10-year-old circuit board next to a current circuit board. Typically the newer board was much smaller and had only about one tenth the number of components.

"What happened to the manufacturing of all these parts?" the executive would ask.

Slowly, the realization would dawn on the audience. "It is gone!" 90% of the manufacturing was not gone to China, it was just gone.

Stefan Jovanovich writes:

W TOur staff is 10% of what it was, but we still have the capacity to handle 75% of the unit volume we ramped up to during the dot.com boom. What used to be done by people with clipboards is now done by custom-designed software running on computers with wireless bar code scanners. What used to require hundreds of square feet of linear space can now be handled in 15% of the area using vertical storage and retrieval. The enterprise is now a joint venture (like the Pequod) with no "payroll" employees; the tax savings alone are greater than our net profit was during the last year (FY 2008) under the old structure. As Steve might have put it, the "jobs" (sic) are gone; and they are not coming back.

And we are not the only light industrial business in Califormia going virtual:

"The U.S. industrial [real estate] market has recorded negative absorption in four out of the last five quarters, third quarter 2008’s 38 million of positive absorption being the sole exception. Second-quarter 2009 saw 49 million square feet in negative absorption, a new high for the decade following the first-quarter's minus-48 million square feet." CoStar Group.


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