Outsourcing: Joe Lawler, Chairman, President And CEO Of ModusLink (Part 6)

By Sramana Mitra and guest author Aditya Modi

Sramana Mitra: But Apple is an extreme case, right? They are very much about vertical integration and very much about an internally controlled kind of philosophy.

Joe Lawler: They are an extreme case, but they are certainly not alone; SanDisk has done the same thing over the past couple of years. This is a business that was outsourcing chip production for a long time and has now built their own facility, and they are operating their own facility because they saw what was happening to the cost curve, and they needed to come up with a different kind of answer. I think the point is that, I don’t see anybody reassembling and becoming a totally vertically integrated business. That is not happening and I don’t see that trend, but I do see that there is a selective in-sourcing and outsourcing that is going on. I think you will continue to see this.

SM: Any other comments on trends?

JL: No, I think those are some of the big ones I see.

SM: OK! I am going to ask you one question that is slightly in a different direction, and you may or may not have thought about this at all, so I will let you take it slowly. If you are a young entrepreneur – well, a new entrepreneur, you don’t have to be young but a new entrepreneur – today in your domain, what areas would you look at to start a company in?

JL: Yes, interesting!

SM: What are the gaps in your business? And you could answer this from the point of view of the technology you need to make things work better or other kinds of outsourcing opportunities and areas of specialization.

JL: I think all the time about young people who are moving into new spaces, and I think the overall supply chain space is going to be a terrific career. When you look at the number of universities that have undergraduate or graduate programs, universities are focused on helping people to become more expert in their chosen field. Some things I think I will be looking at are, first, everybody talks about China as an amazing manufacturing location for the world, and it is because of this intersection between government policy that has enabled the manufacturing industry to grow – and undoubtedly made some compromises to environmental health and their overall economy as result of doing so – with the massive number of people on the ground there, and they need to have an industry that can accommodate many of them. They have done just an amazing job over the past 20 or 30 years building up a core competency. If I were a young entrepreneur, I would be looking at, Where is the next China, and is it in manufacturing? Is it going to be in Africa? Is it going to be in India? What parts of the world have the potential to bring together government focus, government mandates and have the headcount and the skill set and the education base for the next 10 or 20 years that might enable them to differentiate themselves from the rest of the global market? Folks who are in the moving of content business are going to get better and better, so we are going to be able to deal with even more remote locations in the future, and all the other things that are necessary to move products around the globe. I think it is going to be an interesting opportunity for people over the next 20 years.

SM: Yes, the Third World supply chain is very weak, China excluded. I think India’s supply chain is very weak, in various African countries the supply chain is very weak, the Latin American supply chain is somewhat weak, not as weak but somewhat weak. I think that is a valid point, that there are lots of opportunities for entrepreneurs to build interesting businesses to fill in those gaps.

JL: When you say they are weak, it is not so much that the supply chain is weak, it is that the infrastructure doesn’t enable the movement of goods, and in some cases services, very efficiently in places like India, in certain parts of Africa. That is where you really need a government, a political force that enables supply chains to be able to work because the governments have so many of the other components that you need to build a strong, economically viable capability. Without core infrastructure, you can’t make supply chains that touch goods that work very well.

SM: Very true. I think the road systems and rail systems are not built properly, and a lot of the ports in India or in Africa are not well equipped. But look at India and the huge amount of fresh produce that rots because there is no efficient infrastructure, cold-storage infrastructure or transportation infrastructure to be able to carry fresh produce into the markets. It doesn’t really exist. So, it is partially infrastructure and partially that the supply chain services don’t exist.

JL: Yes, absolutely!

SM: Those are entrepreneurial opportunities for sure.

JL: Yes, I agree.

SM: Great! If you don’t have anything else that you want to add, I appreciate your taking the time to share your story with us, and I am sure the audience will enjoy reading it.

JL: Good! Well, thanks Sramana; we appreciate being included.

This segment is part 6 in the series : Outsourcing: Joe Lawler, Chairman, President And CEO Of ModusLink
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