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My Two Cents About Pennies
September 23, 2014
Are We Getting Squeezed by Lemon Growers?
September 25, 2014
In a 1958 essay, a pencil says to us, “Pick me up and look me over. What do you see? Not much meets the eye–there’s some wood, lacquer, the printed labeling, a graphite lead, a bit of metal, and an eraser…”
Continuing, though, we learn a pencil is not as simple as it first appears. Made from trees in California and Oregon, it requires trucks, saws, rope, logging camps and coffee. Some millwork is next where the logs are cut into “pencil-length slats” and tinted. In a pencil factory, the slats receive graphite “lead” from Ceylon (now Sri Lanka) that was mixed with clay from Mississippi, some brass made of zinc and copper and rubber-like erasers from Malaysia.
What are we really talking about? Global supply chain links.
The iPhone 6 Supply Chain
Composed of design and development, sourcing, manufacture, warehousing and a distribution infrastructure, the iPhone 6 supply chain links people around the world.
By showing all of the countries that play a role in the creation of the iPhone 6, this section of an awesome infographic only begins to convey mind-boggling worldwide cooperation.
You can see below that China and the U.S, at 349 and 60, respectively, have the most suppliers.
iPhone 6 Suppliers:
But, naming countries separately obscures what really happens. A company based in South Korea or Japan or Taiwan, for example, outsources to lower cost facilities, perhaps in Malaysia or Thailand. And then, they send components that range from antenna switches to SDRAM memory mostly to China and some to Brazil.
In China, two firms have contracted to complete 50 million iPhone 6s by the end of 2014:
And, we have not even mentioned some of the minerals that are shown in the following section from another amazing infographic called “The Periodic Table of iPhones.”
Our Bottom Line and the Price System
As a final step, we should ask why so many people around the world cooperate to make a pencil and an iPhone. Answering our question, Nobel Laureate Milton Friedman (1912-2006) said, “the price system.” Prices are the incentives that encourage us to form the worldwide supply chains that compose globalization.
