Thomas Friedman - The World is Flat

The move to sharply reduce energy consumption has to come from within China, as the Chinese confront what the need for fuel is doing to their own environment and growth aspirations. The only thing-and the best thing-we in the United States and Western Europe can do to nudge China toward that understanding is set an example by changing our own consumption patterns. That would give us some credibility to lecture others. “Restoring our moral standing on energy is now a vital national security and environmental issue,” said Verleger. That requires doing everything more seriously-more serious government funding for alternatives, a real push by the federal government to promote conservation, a gasoline tax that will drive more consumers to buy hybrid vehicles and smaller cars, legislation to force Detroit to make more fuel-efficient vehicles, and yes, more domestic exploration. Together, added Verleger, that could help stabilize the price at around $25 a barrel, “which seems to be the ideal range for sustainable global growth.”

In sum, we in the West have a fundamental interest in keeping the American dream alive in Beijing and Boise and Bangalore. But we have to stop fooling ourselves that it can be done in a flat world with 3 billion potential new consumers-if we don't find a radical new approach to energy usage and conservation. If we fail to do so, we will be courting both an environmental and geopolitical whirlwind. If there was ever a time for some big collaboration, it is now, and the subject is energy. I would love to see a grand China-United States Manhattan Project, a crash program to jointly develop clean alternative energies, bringing together China's best scientists and its political ability to implement pilot projects, with America's best brains, technology, and money. It would be the ideal model and the ideal project for creating value horizontally, with each side contributing its strength. Said Scott Roberts, the Cambridge Energy Research Associates analyst in China, “When it comes to renewable technology and sustainable energy, China could be the laboratory of the world-not just the workshop of the world.” Why not?

Free Trade is God's diplomacy. There is no other certain way of uniting people in the bonds of peace.

—British politician Richard Cobden, 1857

Before I share with you the subject of this chapter, I have to tell you a little bit about the computer that I wrote this book on. It's related to the theme I am about to discuss. This book was largely written on a Dell Inspiron 600m notebook, service tag number 9ZRJP41. As part of the research for this book71 visited with the management team at Dell near Austin, Texas. I shared with them the ideas in this book and in return I asked for one favor: I asked them to trace for me the entire global supply chain that produced my Dell notebook. Here is their report: My computer was conceived when I phoned Dell's 800 number on April 2, 2004, and was connected to sales representative Mujteba Naqvi, who immediately entered my order into Dell's order management system. He typed in both the type of notebook I ordered as well as the special features I wanted, along with my personal information, shipping address, billing address, and credit card information. My credit card was verified by Dell through its work flow connection with Visa, and my order was then released to Dell's production system. Dell has six factories around the world-in Limerick, Ireland; Xiamen, China; Eldorado do Sul, Brazil; Nashville, Tennesee; Austin, Texas; and Penang, Malaysia. My order went out by e-mail to the Dell notebook factory in Malaysia, where the parts for the computer were immediately ordered from the supplier logistics centers (SLCs) next to the Penang factory. Surrounding every Dell factory in the world are these supplier logistics centers, owned by the different suppliers of Dell parts. These SLCs are like staging areas. If you are a Dell supplier anywhere in the world, your job is to keep your SLC full of your specific parts so they can constantly be trucked over to the Dell factory for just-in-time manufacturing.

“In an average day, we sell 140,000 to 150,000 computers,” explained Dick Hunter, one of Dell's three global production managers. “Those orders come in over Dell.com or over the telephone. As soon these orders come in, our suppliers know about it. They get a signal based on every component in the machine you ordered, so the supplier knows just what he has to deliver. If you are supplying power cords for desktops, you can see minute by minute how many power cords you are going to have to deliver.” Every two hours, the Dell factory in Penang sends an e-mail to the various SLCs nearby, telling each one what parts and what quantities of those parts it wants delivered within the next ninety minutes-and not one minute later. Within ninety minutes, trucks from the various SLCs around Penang pull up to the Dell manufacturing plant and unload the parts needed for all those notebooks ordered in the last two hours. This goes on all day, every two hours. As soon as those parts arrive at the factory, it takes thirty minutes for Dell employees to unload the parts, register their bar codes, and put them into the bins for assembly. “We know where every part in every SLC is in the Dell system at all times,” said Hunter.

So where did the parts for my notebook come from? I asked Hunter. To begin with, he said, the notebook was codesigned in Austin, Texas, and in Taiwan by a team of Dell engineers and a team of Taiwanese notebook designers. “The customer's needs, required technologies, and Dell's design innovations were all determined by Dell through our direct relationship with customers,” he explained. “The basic design of the motherboard and case-the basic functionality of your machine-was designed to those specifications by an ODM [original design manufacturer] in Taiwan. We put our engineers in their facilities and they come to Austin and we actually codesign these systems. This global teamwork brings an added benefit-a globally distributed virtually twenty-four-hour-per-day development cycle. Our partners do the basic electronics and we help them design customer and reliability features that we know our customers want. We know the customers better than our suppliers and our competition, because we are dealing directly with them every day.” Dell notebooks are completely redesigned roughly every twelve months, but new features are constantly added during the year— through the supply chain-as the hardware and software components advance.

It happened that when my notebook order hit the Dell factory in Penang, one part was not available-the wireless card-due to a quality control issue, so the assembly of the notebook was delayed for a few days. Then the truck full of good wireless cards arrived. On April 13, at 10:15 a.m., a Dell Malaysia worker pulled the order slip that automatically popped up once all my parts had arrived from the SLCs to the Penang factory. Another Dell Malaysia employee then took out a “traveler”-a special carrying tote designed to hold and protect parts-and started plucking all the parts that went into my notebook.

Where did those parts come from? Dell uses multiple suppliers for most of the thirty key components that go into its notebooks. That way if one supplier breaks down or cannot meet a surge in demand, Dell is not left in the lurch. So here are the key suppliers for my Inspiron 600m notebook: The Intel microprocessor came from an Intel factory either in the Philippines, Costa Rica, Malaysia, or China. The memory came from a Korean-owned factory in Korea (Samsung), a Taiwanese-owned factory in Taiwan (Nanya), a German-owned factory in Germany (Infineon), or a Japanese-owned factory in Japan (Elpida). My graphics card was shipped from either a Taiwanese-owned factory in China (MSI) or a Chinese-run factory in China (Foxconn). The cooling fan came from a Taiwanese-owned factory in Taiwan (CCI or Auras). The motherboard came from either a Korean-owned factory in Shanghai (Samsung), a Taiwanese-owned factory in Shanghai (Quanta), or a Taiwanese-owned factory in Taiwan (Compal or Wistron). The keyboard came from either a Japanese-owned company in Tianjin, China (Alps), a Taiwanese-owned factory in Shenzen, China (Sunrex), or a Taiwanese-owned factory in Suzhou, China (Darfon). The LCD display was made in either South Korea (Samsung or LG.Philips LCD), Japan (Toshiba or Sharp), or Taiwan (Chi Mei Optoelectronics, Hannstar Display, or AU Optronics). The wireless card came from either an American-owned factory in China (Agere) or Malaysia (Arrow), or a Taiwanese-owned factory in Taiwan (Askey or Gemtek) or China (USI). The modem was made by either a Taiwanese-owned company in China (Asustek or Liteon) or a Chinese-run company in China (Foxconn). The battery came from an American-owned factory in Malaysia (Motorola), a Japanese-owned factory in Mexico or Malaysia or China (Sanyo), or a South Korean or Taiwanese factory in either of those two countries (SDI or Simplo). The hard disk drive was made by an American-owned factory in Singapore (Seagate), a Japanese-owned company in Thailand (Hitachi or Fujitsu), or a Japanese-owned factory in the Philippines (Toshiba). The CD/DVD drive came from a South Korean-owned company with factories in Indonesia and the Philippines (Samsung); a Japanese-owned factory in China or Malaysia (NEC); a Japanese-owned factory in Indonesia, China, or Malaysia (Teac); or a Japanese-owned factory in China (Sony). The notebook carrying bag was made by either an Irish-owned company in China (Tenba) or an American-owned company in China (Targus, Samsonite, or Pacific Design). The power adapter was made by either a Thai-owned factory in Thailand (Delta) or a Taiwanese, Korean, or American-owned factory in China (Liteon, Samsung, or Mobility). The power cord was made by a British-owned company with factories in China, Malaysia, and India (Volex). The removable memory stick was made by either an Israeli-owned company in Israel (M-System) or an American-owned company with a factory in Malaysia (Smart Modular).