Innovation and well-paying jobs are crucial to World Supply Chain Economy

Traditionally, Supply Chain (SC) jobs were considered interacting merely with manufacturing. With gl...

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Posted by Dave Food on Jan 22, 2020 7:36:47 PM
Dave Food

Traditionally, Supply Chain (SC) jobs were considered interacting merely with manufacturing. With globalisation and the integration to the World Economy, the entire SC has now an increasingly-important role. Though its rising-importance, there is no finding of industries embodied in the SC, nor measures of quantification or quality of jobs involved, neither an assessment on how much SC matters to innovation.

 Mercedes Delgado and Karen Mills, MIT  fulfil this lack by creating an innovative categorisation entitled the ‘Word Supply Chain Economy', intended to offer an alternative initiative focusing on the role of suppliers of products and services.

The World SC Economy represents industries that sell mainly to businesses or government, and those Business-to-consumer (B2C) industries which sell for personal consumption.  About 80 % of SC jobs are seen as a service, rather than as the manufacturing of the physical product.

Facts about the World SC Economy

·       It encloses 37% of all global jobs, hiring 44 million people.

·       SC employments have significantly higher than average salaries.

·       These jobs represent far more of the innovative activity in the economy.

·       Science, Technology, Engineering and Math (STEM) jobs indicate innovation capability. It is almost five times higher than in B2C economy.

·       Patenting is also highly-converging in SC industries.

Why are SC businesses the cause of countless high-paying jobs and a good deal of innovation? One reason is that SC industries  links and distributes the innovation they generate to multiple sectors and crossways of the economy, capable of increasing the value of such innovations. The traditional categorisation highlighting manufacturing over services was not enough

For example, the semiconductor (a general-purpose technology) went from being an invention developed in the SC of a top company, to become an ever-imaginable technology for consumers. Or the case of a government and industry partnership that created a roadmap to tackle technical barriers for distributing semiconductor technology now sold to over 60% of world industries.

These modern semiconductors are increasingly found in services like cloud computing, an enterprise software. Cloud computing services are sold to more than 90% of world industries. These services are decisive to the economy, as they allow businesses to store, process, and access essential data.

The value of Supply Chain Services to innovation

Given the contribution of the SC Economy to innovation and well-paying jobs, it is essential to recognise what industries comprise this segment accurately. A typical example of suppliers is: plastic injection moulders — manufacturing parts used in ending product.

The traditional categorisation that highlights manufacturing over services was not enough.  10% of employees in the economy is in manufacturing, while 90% is in services.  It is considered that most of those service-jobs at restaurants or retail stores are low-wage occupations while the manufacturing-jobs have higher-wages.  But not all services are the same.

By applying categorisation, we can separate the higher-paying SC service jobs from Main Street Service that tend to be lower-paying jobs, e.g. many different labour occupations, from operation managers to computer programmers, to truck drivers. They cover about 80% of SC employment in many countries.

Deeper steps into the SC services category take us to identify the subcategory of SC ‘traded services’; for example, those that are sold across regions. This subcategory includes science, technology, engineering, or mathematics (STEM) worker with the highest wages. These jobs are growing fast and might reflect the evolution of many large companies from manufacturing to services.

STEM intensity in the economy (19%) covers average wages three to eighteen times higher than Main Street services. Our SC Economy structure leads to a more optimistic view of the economy.  If we were to focus on supporting SC services, particularly those in trading industries, the result would be more innovation-well-paying jobs round the world.

What does categorisation involve for SC Economic policy?

-         Invest in skilled-labour - The SC has the majority of STEM workers, while others have a deficiency of them, or difficulty in finding skilled workers.  Service suppliers are most at risk as their innovations are relies highly on access to/retaining talent.  Counting on immigration policies would help, as immigrants represent broader access to this labour pool.

-         Support regional industry hubs - Suppliers generate efforts for companies; hence, they benefit from being allocated with their buyers in industry clusters.  Building up industries that sustain regional groups promotes buyer/supplier collaboration.

-         Ensure suppliers gain access to capital - STEM intensive service suppliers often produce innovations that can’t be patented, making it difficult to raise external funding. Carrying out pro-active government policies, through loan guarantees or credit support for suppliers, can ensure worker efficient access to capital to start producing.

WRAPPING UP:  The new categorisation of the world industries reveals a large and dynamic SC Economy. Service suppliers have a crucial role in driving innovation and creating well-paying jobs. Focus on cultivating the SC service-jobs, which will drive the global economy forward.

Dave Food

Prophetic Technology

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