What is Procurement in the 21st Century?

 

What is Procurement in the 21st Century? To properly define the scope of procurement in our age, one needs to understand the race to the bottom as suppliers attempt to balance product quality against rising labor and production costs.  

The manufacturing procure definition ultimately includes such considerations as local wages, and more importantly, organized labor movements.  

As Western manufacturers have moved their assembly operations to the East, they have been forced to confront an increasingly dissatisfied labor pool struck by the contrast between their compensation and the price of the products they produce.  

This, combined with their contentious relationship with the plant managers and workplace-related health hazards, eventually leads to organized labor movements. As unions form, manufacturers continue to seek out more business-friendly destinations.  

Eventually, they are confronted with the stark reality of global space limitations.  Previously, all roads led to China, but now, even China is being abandoned in favor of its neighbors, such as Cambodia, when expansion becomes a consideration.  

Unionization is not allowed inside Chinese-owned shops, but it is allowed inside foreign-owned shops.  This, combined with publicized cases of poor quality products and the sensational suicides of Foxconn employees, has given Western corporations reason to expand elsewhere.  

China’s enormous labor pool masks a problem inherit in Third World production.  Namely, it obscures the amount of time it takes to produce a product, particularly with respect to software.

Outside the United States, software development times are comparatively lengthy and often churn out the dreaded demo which merely promises better things to come.   For whatever reason, foreign software development teams require a greater amount of time to produce a finished product than their U.S. counterparts.  

The lure of cheap labor invites a corporation to pack a development team with more employees than what is required to finish a project because of a belief that more is better and that somehow more people means a more productive team.  

However, more members also mean diminishing returns on labor productivity.  Organizations, especially ones separated by significant distances, tend to operate far less efficiently than tightly knit teams sharing a common set of workplace expectations.  

What the bean counters continually ignore in estimating development costs are the implicit costs created by diverging cultures and the opportunity costs that frequent delays often incur.  While a U.S. corporation waits for a foreign development team to move forward with production, the project could be nearing completion instead.  

Especially with respect to technology, lengthy delays compromise a project with things like feature creep where more bells and whistles are added as new technology becomes available. Often, this is a problem U.S. teams face as a project becomes vaporware instead.  

Regrettably, foreign software teams may have difficulty even satisfying the original statement of work much less being guilty of including more than what was initially expected.

Using the above example, it is clear that culture can sometimes complicate product procurement, and that those who adore cheap labor based solely on its price alone are destined to be disappointed in the larger scheme of things after the diverging economic incentives of their foreign workers becomes an afterthought.

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