The Leader - September 2007 - (Page 29) locatIoN velocIty: Good today, but What about tomorroW? site; government restrictions and cost to downsize; lease length, terms, and conditions; and site/building attractiveness for disposition. coNcludING remarks Location velocity is a global phenomenon. It is especially key in the U.S. where a projected national labor shortage is forecast and long-term economic prospects are bright, placing continuous demand for qualified workers. Plenty of examples illustrate the impact of location velocity. In the 1990s, the Puget Sound seemed to comprise a strong labor market for customer service operations. But as the area’s economy grew, especially in software, aerospace, and other high-tech industries, basic call center operations had a harder time competing for labor. Several companies therefore opted to downsize their customer service operations (e.g., EarthLink, Amazon, eFunds, and Ticketmaster). Developed countries offshore also felt the pinch. As Dublin (Ireland) moved up the economic food chain, lower echelon back offices encountered trying labor market conditions. Emerging countries are also not immune from the negative effects of location velocity. Consider Bangalore, India, where software and other high-tech operations have become so concentrated that wages and turnover are rapidly rising. For some companies it now makes better sense to consider less discovered 3rd and 4th tier metropolitan areas (like Ahmadabad, Indore, and Chandigarh). Some might be surprised that China is also witnessing labor shortages, increasing wages, and escalating turnover. This is most pronounced in coastal and southern regions. Culprits include location velocity, the country’s birth control regulations, and agricultural policies which have slowed migration to large cities. As in most areas, it is the most cost sensitive operations (e.g., textiles, apparel, and light assembly) that feel the pinch first. Thus, we are seeing many companies in coastal or southern China migrating elsewhere (western China, northern China, or lower wage countries like Vietnam). This migration can be either relocation or placing fresh capacity in a new region or country. Companies that have opened new facilities beyond coastal and southern regions in China include GM, Honda, Intel, and Motorola. Location velocity has also impacted firms in tier one cities of several eastern/central European countries. In response, some firms have shifted operations to Asia (e.g., China and Vietnam) or found greener pastures in less developed European countries (e.g., Bulgaria and Ukraine). C M Y CM MY CY CMY K t he l e a de r 29 septem ber / october 2007 http://www.admtl.com
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