Thomas Friedman - The World is Flat

This supply chain symphony-from my order over the phone to production to delivery to my house-is one of the wonders of the flat world.

“We have to do a lot of collaborating,” said Hunter. “Michael [Dell] personally knows the CEOs of these companies, and we are constantly working with them on process improvements and real-time demand/supply balancing.” Demand shaping goes on constantly, said Hunter. What is “demand shaping”? It works like this: At 10 a.m. Austin time, Dell discovers that so many customers have ordered notebooks with 40-gigabyte hard drives since the morning that its supply chain will run short in two hours. That signal is automatically relayed to Dell's marketing department and to Dell.com and to all the Dell phone operators taking orders. If you happen to call to place your Dell order at 10:30 a.m., the Dell representative will say to you, “Tom, it's your lucky day! For the next hour we are offering 60-gigabyte hard drives with the notebook you want-for only $10 more than the 40-gig drive. And if you act now, Dell will throw in a carrying case along with your purchase, because we so value you as a customer.” In an hour or two, using such promotions, Dell can reshape the demand for any part of any notebook or desktop to correspond with the projected supply in its global supply chain. Today memory might be on sale, tomorrow it might be CD-ROMs.

Picking up the story of my notebook, on April 13, at 11:29 a.m., all the parts had been plucked from the just-in-time inventory bins in Penang, and the computer was assembled there by A. Sathini, a team member “who manually screwed together all of the parts from kitting as well as the labels needed for Tom's system,” said Dell in their production report to me. “The system was then sent down the conveyor to go to burn, where Tom's specified software was downloaded.” Dell has huge server banks stocked with the latest in Microsoft, Norton Utilities, and other popular software applications, which are downloaded into each new computer according to the specific tastes of the customer.

“By 2:45 p.m., Tom's software had been successfully downloaded, and [was] manually moved to the boxing line. By 4:05 p.m., Tom's system [was] placed in protective foam and a shuttle box, with a label, which contains his order number, tracking code, system type, and shipping code. By 6:04 p.m., Tom's system had been loaded on a pallet with a specified manifest, which gives the Merge facility visibility to when the system will arrive, what pallet it will be on (out of 75+ pallets with 152 systems per pallet), and to what address Tom's system will ship. By 6:26 p.m., Tom's system left [the Dell factory] to head to the Penang, Malaysia, airport.”

Six days a week Dell charters a China Airlines 747 out of Taiwan and flies it from Penang to Nashville via Taipei. Each 747 leaves with twenty-five thousand Dell notebooks that weigh altogether 110,000 kilograms, or 50,000 pounds. It is the only 747 that ever lands in Nashville, except Air Force One, when the president visits. “By April 15, 2004, at 7:41 a.m., Tom's system arrived at [Nashville] with other Dell systems from Penang and Limerick. By 11:58 a.m., Tom's system [was] inserted into a larger box, which went down the boxing line to the specific external parts that Tom had ordered.”

That was thirteen days after I'd ordered it. Had there not been a parts delay in Malaysia when my order first arrived, the time between when I phoned in my purchase, when the notebook was assembled in Penang, and its arrival in Nashville would have been only four days. Hunter said the total supply chain for my computer, including suppliers of suppliers, involved about four hundred companies in North America, Europe, and primarily Asia, but with thirty key players. Somehow, though, it all came together. As Dell reported: On April 15, 2004, at 12:59 p.m., “Tom's system had been shipped from [Nashville] and was tenured by UPS shipping LTL (3-5-day ground, specified by Tom), with UPS tracking number 1Z13WA374253514697. By April 19, 2004, at 6:41 p.m., Tom's system arrived in Bethesda, MD, and was signed for.”

I am telling you the story of my notebook to tell a larger story of geopolitics in the flat world. To all the forces mentioned in the previous chapter that are still holding back the flattening of the world, or could actually reverse the process, one has to add a more traditional threat, and that is an outbreak of a good, old-fashioned, world-shaking, economy-destroying war. It could be China deciding once and for all to eliminate Taiwan as an independent state; or North Korea, out of fear or insanity, using one of its nuclear weapons against South Korea or Japan; or Israel and a soon-to-be-nuclear Iran going at each other; or India and Pakistan finally nuking it out. These and other classic geopolitical conflicts could erupt at any time and either slow the flattening of the world or seriously unflatten it.

The real subject of this chapter is how these classic geopolitical threats might be moderated or influenced by the new forms of collaboration fostered and demanded by the flat world-particularly supply-chaining. The flattening of the world is too young for us to draw any definitive conclusions. What is certain, though, is that as the world flattens, one of the most interesting dramas to watch in international relations will be the interplay between the traditional global threats and the newly emergent global supply chains. The interaction between old-time threats (like China versus Taiwan) and just-in-time supply chains (like China plus Taiwan) will be a rich source of study for the field of international relations in the early twenty-first century.

In The Lexus and the Olive Tree I argued that to the extent that countries tied their economies and futures to global integration and trade, it would act as a restraint on going to war with their neighbors. I first started thinking about this in the late 1990s, when, during my travels, I noticed that no two countries that both had McDonald's had ever fought a war against each other since each got its McDonald's. (Border skirmishes and civil wars don't count, because McDonald's usually served both sides.) After confirming this with McDonald's, I offered what I called the Golden Arches Theory of Conflict Prevention. The Golden Arches Theory stipulated that when a country reached the level of economic development where it had a middle class big enough to support a network of McDonald's, it became a McDonald's country. And people in McDonald's countries didn't like to fight wars anymore. They preferred to wait in line for burgers. While this was offered slightly tongue in cheek, the serious point I was trying to make was that as countries got woven into the fabric of global trade and rising living standards, which having a network of McDonald's franchises had come to symbolize, the cost of war for victor and vanquished became prohibitively high.

This McDonald's theory has held up pretty well, but now that almost every country has acquired a McDonald's, except the worst rogues like North Korea, Iran, and Iraq under Saddam Hussein, it seemed to me that this theory needed updating for the flat world. In that spirit, and again with tongue slightly in cheek, I offer the Dell Theory of Conflict Prevention, the essence of which is that the advent and spread of just-in-time global supply chains in the flat world are an even greater restraint on geopolitical adventurism than the more general rising standard of living that McDonald's symbolized.

The Dell Theory stipulates: No two countries that are both part of a major global supply chain, like Dell's, will ever fight a war against each other as long as they are both part of the same global supply chain. Because people embedded in major global supply chains don't want to fight old-time wars anymore. They want to make just-in-time deliveries of goods and services -and enjoy the rising standards of living that come with that. One of the people with the best feel for the logic behind this theory is Michael Dell, the founder and chairman of Dell.