Thursday, July 6, 2017

Centralized Production and Management - Employee Relations

In this post I'll be using the auto industry as an example because it is a good one. There are a lot of good arguments for centralized manufacturing and structure, and buying local/domestic. When businesses build with a centralized strategy, they save on travel expenses, reduce communications problems and costs, achieve better control, and stimulate the domestic economy. Also, with all of the travel and distribution, fuel costs are driven up along with the demand for foreign oil.

One exception with centralization is large computer hardware/software companies, because they need to invest a lot in research in order to stay on top, so the bottom line with costs is really important.

Companies often opt to manufacture abroad because they face incentives, less regulation, reduced costs, and attractive currency exchange rates. Some people think this is beneficial to the foreign economies and it may be in certain ways. However, the jobs created aren't always ideal, and with modern communications and resources these places can usually develop their own economies.

With economics, people need to look really closely at the domestic and local economies, and what people are doing, what they should be doing and what they shouldn't be doing or "other things." Where are the opportunities? People need to minimize the "other things" and with this opportunities are very important.

When the auto makers shut down a lot of the domestic factories in the early eighties, some of the large problems were poor management - employee relations/communications, and a lack of focus. Using this industry as an example, what do these people (management and employees) want to do? In this case it should be build cars. Management could have made sacrifices if this is really what they enjoyed doing and if they appreciated the community more. Unions were an issue, but employees needed to understand the realities and work with them better. Sometimes a pay cut is better than no job.

With domestic production, some of the problems can be solved with more safety education, thereby reducing compensation claims, and more efficient regulation so it isn't cost prohibitive.

A lot of people don't even think about these things when they buy a car, as an example, but the reaching effects can be amazing. One of the less obvious effects of having a lot of poor people is they spend a lot of their money at "thrifty" establishments that are undesirable, because they can't afford to shop elsewhere. Also, economies of scale are important. The more these companies produce, the lower their costs, which affects export numbers.

Centralized Production and Management - Employee Relations