Chapter 2: Flattener #7 - Supply-Chaining

The World Is Flat: A Brief History of the Twenty-first Century - Thomas L. Friedman

Chapter 2: The Ten Forces That Flattened the World
Flattener #7
Supply-Chaining: Eating Sushi in Arkansas

Friedman points to supply-chaining as the seventh force that flattened the world. He defines supply-chaining as “a method of collaborating horizontally–among suppliers, retailers, and customers–to create value” (p. 152). Supply chaining is both enabled by a flat world and a flattener itself.

Wal-Mart is used as an example of supply-chaining. It is the world’s largest retailer, and yet it does not make a single thing…it simply serves as a huge, efficient supply chain!

Friedman explains that supply-chaining is crucial in a flat world because you must get the best products at the lowest prices (from anywhere in the world) or your competitors will. As the competition for goods grows, supply chains will become more and more efficient. In order to for a supply-chain to become efficient it must not only be good at getting products fast, it must be quick to gather information about what products consumers are buying - an area in which Wal-Mart succeeds.

Wal-Mart became the biggest retailer in the world because it drove a hard bargain with everyone it came in contact with. But make no mistake about one thing: Wal-Mart also became number one because this little hick company from northwest Arkansas was smarter and faster about adopting new technology than any of its competitors. And it still is.
p. 157

Friedman calls Wal-Mart “the China of companies” because of the amount of leverage it has, both to “grind down any supplier to the last halfpenny” and to “play its foreign and domestic suppliers off against each other” (163). Because of this pressure many suppliers have had to move their businesses to China in order to be able to meet the price pressure. Xu Jun, a Wal-Mart spokesman stated that “If Wal-Mart were an individual economy, it would rank as China’s eighth-biggest trading partner, ahead of Russia, Australia and Canada” (164). Not bad for a company that doesn’t produce anything!!