Brains, Not Brawn

Brains, Not Brawn

EMPLOYMENT TRENDS by Francis X. Gilpin | Associate Editor

Moving production facilities offshore is slowly losing favor with corporate America.

That is the observation of Paul Schnitzler, an engineering instructor at the University of South Florida. Schnitzler was among a trio of USF educators who addressed Tampa business leaders and academics at a recent seminar on staying competitive in the 21st century.

Schnitzler says he doesn't have to look any further than the drive-through window at an American icon, McDonald's Corp.

Mickey D's is outsourcing the taking of orders for fast food picked up at the windows. Yet nobody in India is asking via telephone hookup: "You want fries with that?" McDonald's is farming out the chore to a centralized stateside call center in Colorado.

Outsourcing decisions are beginning to be driven by the need to maintain good customer relations as much as by the need to trim expenses. "Decisions won't be made on the cost of labor," says Schnitzler.

Not that the Tampa Bay area has felt much of a sting from moving jobs offshore, Schnitzler argues. During one recent quarter, a national survey found that the Bay area lost 4,633 jobs to overseas competition. He considers the figure surprisingly small, given the publicity about American job losses to foreigners.

Jerry W. Koehler, a management professor at USF's business school, told attendees that the impact of joblessness is short-lived. Koehler, a former deputy state labor secretary in Florida, says the idled often find better-paying employment, although he cited no research to support his statement.

Schnitzler says history shows that the unit-cost advantages of remote manufacturing eventually fade. Product quality improves and wages rise at faraway plants.

It happened 40 years ago in Japan. The quality of transistor radios from Japan used to be ridiculed by Americans. Today, the Japanese not only make better electronics products than U.S. manufacturers but also better automobiles.

Keeping up with China

The same transformation is happening in China right now, according to Schnitzler. Once China reaches full economic potential, Schnitzler says the Communist country's gross domestic product will be four times larger than that of the United States. "There isn't a single thing we can do about it," adds Schnitzler.

American companies should use the free-market system to continue innovating better at home than anywhere else in the world. "The competitive advantage is the brain," says Schnitzler.

Kingsley Reeves, an assistant professor of industrial management at USF's engineering school, has studied how General Motors Corp. and Toyota Motor Corp. upgraded their supply chains.

Toyota managers examined the processes of how parts made it to their factories. GM simply ordered up more technology in an attempt to streamline the processes.

In the opinion of Reeves, Toyota managers used the smarter approach. "As a result, they were much more productive," says Reeves, who used to be a Ford Motor Co. engineer and did consulting later in the auto industry. "You don't want to just throw automation or throw technology at a bad process."

Supply chains shouldn't be just managed, Reeves says, but should be made more productive. They should be a competitive advantage for companies.

Reeves suggests a couple of ways to make process improvements that don't necessarily require an immediate investment in more technology:

• Find ways to increase the salvage value of discontinued and unsold inventory.

• Don't be afraid to rely on competitors to supply infrequently requested items that would cause a margin loss if a company had to stock them.

Chauffeuring the beard

Koehler adopted a tongue-in-cheek attitude as he criticized what he claims is corporate America's reluctance to welcome new ideas.

The management professor, who has consulted for Honeywell Inc. and other companies, says some of the best U.S. enterprises were founded by people who couldn't get their moneymaking ideas taken seriously at previous employers. "You don't work for an organization that would even listen to you," says Koehler.

Workplace suggestion boxes and the like are a joke. "There's no system to respond to the suggestion," Koehler says. "Lots of managers are just talk because they don't know how to manage the processes that they're discussing."

Koehler recalled his work as a consultant for the Walt Disney Co. 30 years ago to illustrate how the entertainment titan is one of the few American companies accommodating the creative.

Standing with Disney executives one day at a theme park, Koehler saw a Rolls Royce drive up. A chauffeur got out and opened the door for a passenger riding in the back seat. "This guy had a beard that went to the ground," Koehler told the Tampa crowd. "All right, so it was an inch from the ground. I've never seen a beard like that in my life."

Koehler says he asked the Disney executives to identify the visitor. "That's the guy who designs all this," Koehler says he was told.

The bearded one came up with the Pirates of the Caribbean attraction, which became one of the most popular rides in Disney history and inspired a trilogy of motion pictures, the second of which is set for release this summer.

"Somebody out of their mind created that," says Koehler, mocking his own buttoned-down, briefcase-toting consultant's view of the spectacle at the time. "And I saw him. He's out of his mind."

Fortunes are made from such original thinking. Innovators should be similarly prized throughout the American business world. "The brawn is gone," Koehler says. "The brain is in."

Koehler thanked the audience for listening to his unconventional presentation. "I hope I was just weird enough to give you some innovative ideas," he told his listeners.