Digitization and the Reorganization of GVCs
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Digitization and the Reorganization of GVCs Dev Nathan1 Published online: 23 September 2020 © Indian Society of Labour Economics 2020
Digitization has already been occurring, but it has been enormously accelerated in the period of the pandemic. As Satya Nadella, the CEO of Microsoft, put it, “We have seen 2 years of digital transformation in 2 months” (Bradley et al. 2020, 3). Some features of digitization have been the growth of telemedicine, online education, video conferencing instead of meetings, remote working and e-commerce, and automated manufacturing. We look at the last three trends mentioned, which are more important from the perspective of reorganization of value chains.
1 Automation and On‑Shoring Transport stoppages and the disruption of input supplies due to rolling lockdowns have intensified the move toward on-shoring, near-shoring, and the building of regional supply chains. Digitization, in the form of automated manufacturing, has begun even in labor-intensive industries such as garments and shoes (the quintessential commodities that involve outsourced manufacturing), low labor and environmental costs. Adidas has set up an automated shoe manufacturing factory in Germany, combining robots, 3-D printing, and digitization. Barely, 150 employees are required to produce half a million pairs of shoes per year. A T-shirt manufacturing plant, using Sewbots instead of tailors, has been set up in North Carolina, USA. There, the cost of production of a T-shirt is just 33 US cents, which is lower than the unit cost of manufacture in low-wage Bangladesh. A few years ago, an Indian auto-component manufacturer lost its orders for radiator caps for GM automobiles not to a lower-wage country but to high-wage Austria, where the production process had been automated. Low-wage labor-intensive manufacturing generally cannot compete with digitized and automated manufacturers. But the costs of reorganizing value chains, including investment in new, automated factories, Thanks to Gerry Rodgers and Ed Steinmuller for comments. The author is with the Institute for Human Development, Society for Labour and Development and the GenDev Centre for Research and Innovation. * Dev Nathan [email protected] 1
Institute for Human Development, Delhi, India
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The Indian Journal of Labour Economics (2020) 63 (Suppl 1):S173–S179
would restrict the speed at which labor-intensive GVCs (global value chain) mention full form are reorganized. In order to stay competitive in what have so far been labor-intensive value chains, China is also pushing strongly to deploy Sewbots and other automated technologies. On an annual basis, more robots are being installed in China than in any other country. Such automation, however, does not mean that the splintering of production on a global basis will cease to exist; rather, the erstwhile supplier countries and firms will also have to technologically upgrade if they are to stay within the value chains.
2 India and GVCs The Indian economy has not been effecti
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