Making the Most of the Global Economic ParadoxAFLA

September 14, 2006

The Competition for Natural Resources

Limited Industrialization

Global Development

Global Industrialization

Limited Development

Equal Learning

A pipeline sonogram. Walls with less than 20 percent of their original thickness are flagged. Scott Horsley/NPR

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Associated Press

Trade Deficits 

Continental Integration

NAFTA, CAFTA, etc.

Europe has remained largely steady on the path toward greater continental integration. The European Union (EU) admitted ten new members on May 1, 2004, bringing its total membership to twenty-five countries. These new members are Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia.

Romania and Bulgaria are tentatively scheduled to join in 2007, while preliminary membership talks are set to begin with Turkey and Croatia.

http:www.southerncenter.org

The Future of Knowledge Workers 

Graphical Order Configurators

Help the customer describe what they want and then translate accurately to manufacturing or distribution

Real Time Scheduling

Once you have a batch of orders, you need a way to schedule manufacturing to optimize production

Object oriented, memory resident programs that model manufacturing processes and their constraints that quickly produce an optimized manufacturing schedules

Technology

Shop Floor Flexibility

Combine real time production with modular product designs and small, flexible assembly teams

A networked client-server product that controls the sequences of operations and queues of materials on the shop floor and links with ERP systems

Technology

Customized Engineering

A custom design change can force a quick product engineering change

Sits between MRP and CAD systems to manage changes real time

Technology

Demand- Driven Logistics

Logistics - getting the right quantity of product to the right customer in the right form at the right time

Create customer specific profiles and track the flow of product

Technology

Linking to Suppliers

EDI

Bar Coding

E-Mail / The Internet

EFT

Seamless integration of customers, distributors, manufacturers. The opportunities for service improvement will be tremendous.

Technology

Composition of GDP

Governmentspending - 19%

CapitalSpending -16%

ConsumerSpending -70

Other - 5%

Composition of Consumer Spending (PCE*)

* Personal Consumption Expenditures

Durable Goods- 12%

Nondurablegoods - 29%

Services - 59%

The Reports on Business

• Surveying manufacturing since 1931• Over 350 respondents

• 20 SIC Codes

• Weighted by contribution to GDP

• 70% response rate

• Nonmanufacturing started in June 1997

The Reports on Business

• A series of diffusion indexes measuring

change from month to month

• Above 50% indicates growth

• Below 50% indicates contraction

• 50% is the breakeven or “no change”

Economics and Calculus

The Rate of UP is DOWN

50 %

The Rate of DOWN is UP

50 %

Manufacturing PMI - 54.5 (Sep)Non-manufacturing BAI - 57.0 (Sep)

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PMI BAI

Manufacturing New Orders August 2006 Index: 54.2

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New Orders 3 Month Moving Avg

Manufacturing Production August 2006 Index: 56.6

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Production 3 Month Moving Avg

Manufacturing EmploymentAugust 2006 Index: 54.0

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Employment 3 Month Moving Avg

Manufacturing Inventory to Sales Ratio(New Orders - Inventories)

August 2006: +4.0

0

5

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25

The recent trend is that new order growth has slowed and inventories have accelerated.

Manufacturing Prices vs Supplier Deliveries

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Supplier Deliveries Prices

Pricing Power is created by Slowing Supplier Deliveries

ECONOMICS 1011. The Law of Abundance vs the Law of Scarcity

2. Currency rates are more important than interest rates

3. Technology and Services drive the economy

4. Over time the economy solves its own problems

5. There are winners and losers in every economic scenario; how losers are compensated is as important as how winners are rewarded

6. All things in nature, the faster they grow the faster they die

7. Most of what we regard as objective is really subjective

8. Human beings are not wholly, or in some cases, even substantially rational

9. Uncertainty is the norm; certainty is the exception

10. Large parts of what we know are wrong; we just don’t know which parts