With an entire week devoid of any kind of air travel (vacation), I was a bit behind on my magazine reading. BusinessWeek published their “50 Best Performers” issue, but what I find absolutely amazing was a terrific article on the challenges faced by Chinese factories, due to rising wages and regulation!

The nuts and bolts have to do with rising costs of raw materials, increasing demand for a fixed supply of labor, and currency changes, but the outcomes are what are really interesting. Basically, the message is that cheap labor is not enough, or even necessarily desirable. Companies are looking into increasing worker productivity through automation, and I suspect there will be growing interest in substituting “information for inventory”, which has long been a practice in higher cost economies.

This is very interesting to the B2B world, because one of the traditional challenges in driving B2B into lower cost countries is that the technology costs are not competitive with using people to solve the same problems. This is not to suggest that there is not a lot of sophisticated B2B going on, just that the goal has not been to reduce staff but to gain some kind of edge in speed or customer service.

With the current economic situation, it appears that companies may rebalance their productivity initiatives — focusing as much on using technology to drive productivity as labor arbitrage.

I just returned from a wonderful Spring Break vacation with my family, spent camping in our recently acquired pop-up trailer in the cave region of Kentucky. Mammoth Cave National Park happens to be very close to Bowling Green, so we took the opportunity to visit the National Corvette Museum, and tour GM’s Bowling Green Assembly Plant, the only factory on earth that produces the legendary Corvette…

I have had the opportunity to work with various companies in the auto industry (including GM), but I have never been to a major assembly plant before, and it was a treat. What was especially impressive is that in modern plants like Bowling Green, every car is built to order, despite the appearance of “mass production”. The plant builds both Corvettes and Cadillac XLRs, but the Corvette line fascinated me because the “outside” of the car is assembled (painted, welded, put together) separately from the “inside” (axles, tires, transmission, engine, etc). At one point in the process, the bodies descend from the ceiling and are attached to the drive train. The amazing thing is that most of the components are specific to each car — so the entire assembly operation must be kept in synch.

What impressed me was how little inventory was visible, with mobile racks of kitted parts moving around the plant. Reading the labels that happened to cross in front of me I saw no two kits coming from the same source (mostly GM plants in the midwest, though some tier one suppliers were also in evidence). With not an RFID tag in sight, I saw barcodes aplenty (one dimensional in this case), clearly linked up to a powerful production control system.

I think most of the people on the tour with me were impressed by the plant, it was hard not to be. But I doubt very many were able to appreciate that Bowling Green is so on top of its supply chain parts flow that they can start a car even though many of the kits to produce it are not even at the downstream stations yet. Since every car is built to order, parts from all over the US and some from Mexico must arrive at the station in time to be assembled — and the entire line will have to stop if anything is missing (it didn’t stop in the three plus hours I was there).

I have worked in B2B for a long time, but I still really enjoy seeing what is possible when trading partners can move at the speed of information. It was a beautiful sight…and the cars were nice too.