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Eight Ways China Affects Us

It's hard enough to manage a supply chain if all you have to do is walk from one end of the plant to the other to see if you have enough left-door arm rests to keep your SUV production line rolling at full speed. Now imagine that the left-door arm rests are coming from an auto-interiors assembler in Canada as part of an interior unit that itself relies on parts makers in Shanghai, Detroit, Stuttgart and Malaysia.

That logistics nightmare will require new systems for tagging and tracking in real time; these systems are just now emerging with radio-frequency identification tags and global satellite positioning systems.

China could make bottlenecks a way of life. In an ideal world, the combination of high-technology logistical systems with real-time data-sharing over the Internet would result in part A arriving at site B just in time to meet up with assembly C. But the real world is messier than that. Railroad cars wind up in the wrong place or just don't exist in sufficient numbers. An unexpected spike in demand meets up with health scares like SARS, and a key factory shuts down just at the worst time. I can see three results:

  • Massive and rapid swings in the prices of limiting inputs such as railroad cars or ocean freighters.

  • A sharp spike in consumer dissatisfaction as we hear more and more often, "I'm sorry. That's not in stock."

  • A rapid differentiation between companies that actually master this system (and gain lots of new customers and make lots of money) and those that don't (and go out of business).

That's about as far as I can see with my crystal ball. And as with any exercise in imaginative projection, I'm sure that any one reader will disagree with some or all of these potential trends.

But I think we can agree on one thing: The economic phenomenon that we call China will reshape daily life in the U.S. over the next decade in ways that we've just begun thinking about.
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