Global Production Network - Essay Example

Global Production Network Names Institution Affiliation Today, a significant part of trade takes place through coordinated value chains in which lead firms play a dominant role globally and locally (Barrientos, Gereffi, and Rossi, 2011). For example, Northern buyer outsources production from Southern, which has seen the encouragement of regional and global production network (Barrientos, Gereffi, and Rossi, 2011). This has opened up supply opportunities in new markets such as China, Brazil, and India. The main challenge that is experienced in the promotion of decent work worldwide is on how to improve the position of workers and firms in the value chain and Global Production Network (Barrientos, Gereffi, and Rossi, 2011). The firms that involve themselves in GPNs have a chance in upgrading their economic value by engaging in higher value production. The main challenge that they face is meeting buyers’ commercial demands and quality standards. Garment production is one of the main activities that are found on GPNs. Garment production mainly occurs in the global south, in regions such as Latin, Asia, America and Africa. Garment production is found in all the contents, but it is mainly concentrated in Asia which represents 60% of clothing in the world. Asia offers the most competitive advantage regarding access to raw materials, workforce size, technology and diversity of skills needed. In Asia, garment production takes place in countries like India, Sri Lanka, Bangladesh, Pakistan, Vietnam, Cambodia, and Thailand. Various forms of labor are performed in the production, supply and consumption of garment. Small-scale household and home based work - in GPNs these form of labor is found at the base. It includes small-scale producers. In garment industries, this form of labor normally happens at homes. The workers normally work from their homes using their assets and they are mainly found in the developing countries. In this type of labor, it includes both paid and unpaid family labor. Mainly there is child labor in this form. There are different types of arrangement that are followed in order to link these forms of labour into GPNs. These type of work is important in garment industry because it forms the product that later becomes the factory-based export product. Low skilled, labor- intensive work- in this type of job, unlike small-scale household these form of labor is normally on a commercial production site. In this form of labor, it involves a relationship between the workers in garment industries and employers. By outsourcing from labor from developing countries, retailers can reduce costs and can spread their market in different contents. It has encouraged the expansion of garment production and employment in Global Production Network. Medium-skilled labor, technologies work- In this type of labor, full-package production is associated with it. This form of labor is generally driven by the increase in the in global buyers who expect the supplier to perform all the process and deliver a full product. They have to coordinate the product processes such as design, production, and packaging as well as other procedures. In other words, the supplier has to acquire all the skills that are required in the production of a garment all through till it is ready to be delivered to the consumer. For developing countries to be able to package a product they will need to access various production technologies and workers who have skills not only in product production but also in services that are related to production. Such services involve quality control, the design of a product, and quality control among other services. High skilled- These form of labor started in the years the 1980s and 1990s from different offshore activities sectors set up their international production centers to assemble their products. This form of labor is needed mostly in technology-intensive sectors. For example, in automobiles and electronics among other areas. In garment production, this type of skills is needed although not intensively. Knowledge –intensive-This form of labor is not highly required in garment production. It is mainly applicable in white-collar jobs such as call centers. It has now included business services such as accounting, finance among others. The figure below shows the distribution of type of works among different GPNs. That is Agriculture, Apparel, Automotive, and IT hardware and business services. From the figure above, we can see that in the production of garments, the most type of work that needs intensive workforce is on low-skilled labor intensive which is not the case for business service which requires more knowledge intensive labor force. Garment production has created employment opportunities for many people. It has created a source of income for the poor people. The income is supposed to improve the living standards for the employee which are not the case. GPN employments have some challenges such that the jobs are insecure and poor working conditions. Due to this reasons, there is a need to promote decent work to improve both the firms and workers. For example, Garment factories in Bangladesh are not standalone units that produce and sell their product rather they are just part of the unit in global production networks. The factories are the cut-make-trim (CMT) unit. The other units that are involved are large retailers such as Tesco, Wal-Mart among others. The last unit, apparel brands such as sportswear labels; Nike. In a garment industrial relations, different players play part in one way or another. They are; Buyers, FDI, Government, and workers. We need to note that the buyers in GPN are not direct employers of the workers. The employers are the local owners of the factory. There are also foreign investors who form FDI (Foreign Direct Investors) in the EPZS (Export Processing Zone). The employers are the ones responsible for determining the employee wages and working conditions. Another player in GPN is the government. It is supposed to be responsible for setting and implementing the laws in their country. The last player in garment industrial is the worker. It is an advantage to have a body that represents the workers, employer, and the government. There has been a limitation in the consideration of workers in GPNs, especially in academic studies. The main focus of early literature on GVS/GPN was on the firm; labor was treated as an endogenous factor of production (Nathan and Sarkar, 2011). In value chains, labor analysis has been limited to a collective number of workers found in different ends of the chain. Recently, there have been studies that have been carried out on the conditions of employees in GPNs. For example, the study of female workers (Aspers, Hale, and Willis, 2007) among others. Labour analysis in a GPN, is carried out using two perspectives. The first perspective is where labor is viewed as productive factor. In this perspective, labor is viewed as a factor of production based on the marginal productivity of labor and labor costs within individual firms (Nathan and Sarkar, 2011). An assumption is made in this perspective that the factory need to manufacture at the minimal production cost for it to stay competitive. However, the role that labor plays in GPNs context is not put into consideration, where the key driver is meeting cost pressure and the quality standards expected. This will cause effects on the work intensity and the skills level required in different nodes of GPNs. The available skills of workers also affect how the buyers’ requirements are met. The other perspective is where labor is seen as socially embedded. By looking employees as social agents, they are considered beyond their role as a factor of production rather as human beings who have capabilities and entitlements (Sen, 1999 and 2000). In this perspective, employees normally have their rights under national legislation and international conventions of the ILO (Nathan and Sarkar, 2011). To enhance their well-being, wage laborers’ rely heavily on access to their rights. In turn, this access can either have negative or positive effect by participating in GPNs. Out of workplace; employee well-being of workers and their families is affected by government strategies. Garment industries have been characterized by poor working conditions for those employees. For the last decade, there has been a campaign by the workers’ rights activists from retail and production ends supporting workers to form an organization, awareness of violation of labor rights among others. Through this campaigns, companies, governments, unions, social organizations have come together to form a multi-stakeholders initiative that is mainly focused on accountability. Working conditions, consumer attitudes, and the activists have documented global supply chain among other aspects of the garment industry. In Global Production Network, production and marketing tasks are not carried out in integrated firms. Instead, the tasks are split among different firms, where each firm carries out a particular task. This division of labor is not only done in different companies but also in firms that are found in different countries. This disintegration of the firm follows from the gains to be had from a reduction in transactions costs (Nathan and Sarkar, 2011). The main characteristic of GPN trade is trading tasks instead of goods (Grossman and Rossi-Hansberg, 2008). In GPN tasks have to mean if they contribute to the production of a good. In GPN, a lead firm is responsible for the integration of all tasks that that is carried out in different firms across the various countries. During this process of integrations of tasks, a value is produced which is not equally shared by the different segments. In Global Production Network, the lead firms can separate and monopolies the value gained. Nathan and Sarkar (2011) argue that the lead firms capture all or most of the surplus profits within the Global Production Network while the manufacturing firms get just competitive profit. As a result, there is a distribution of rents in GPN. In a vertical relationship between the buyers and suppliers, if there is market determine the distribution of shares in GPN. In this type of relationship, the lead firm determines the market price. The buyers normally set the price, time of delivery and the volume needed. This may fluctuate across the year which makes the supplier organize relatively small permanent labor force and flexible labor force that comes in case there is an increase in the number of orders. This buyer practices also has an effect that is there is inhibition of workers investment. This is because of the seasonal nature of jobs which makes it hard for employees because it will take them time to pay. The change in prices, delivery time and change in the volume required does not only have an effect on what the suppliers earn but also have an effect on their labor force practices. Whether regarding wages, flexibility in the form of employment or forced overtime. This verticle relationship determines the revenue and has an influence on the labor force employment practices in suppliers firms. But, this does not determine the wages and the labor force within a manufacturing company. After all the external cost has been deducted the net revenue, is then shared within the Cut-Make-Trim (CMT) unit. In conclusion, we see that garment production industries form a Global Production Network. There are benefits that the garment industries experience by being part of GPN. For example, they can sell their products across different contents. The main problem that we see is that Lead firms take it upon themselves to dictate the prices for the garments without considering the workers. Although it is not the role of a lead firm to pay the workers, they should be concerned in their welfares. When lead firms take the highest profit, the supplier is left with no other option but to pay the worker low wages so that at least they can be left with some cash to carry out factory operations. Reference list Aspers, P., Hale, A. and Willis, J. (2007) ‘Threads of labour, garment industry supply chains from the workers’ perspective’, The Canadian Journal of Sociology / Cahiers canadiens de sociologie, 32(3), p. 418. doi: 10.2307/20460656. BARRIENTOS, S., GEREFFI, G. and ROSSI, A. (2011) ‘Economic and social upgrading in global production networks: A new paradigm for a changing world’, International Labour Review, 150(3-4), pp. 319–340. doi: 10.1111/j.1564-913x.2011.00119.x. Grossman, G.M. and Rossi-Hansberg, E. (2008) ‘Trading tasks: A simple theory of Offshoring’, American Economic Review, 98(5), pp. 1978–1997. doi: 10.1257/aer.98.5.1978. Mayer, Frederick W. and John Pickles. 2010. Re-embedding governance: global apparel value chains and decent work.Capturing the Gains: Economics and Social Upgrading in Global Production Networks.Working Paper 2010/1: Manchester, UK. Miller, D., S. Turner and T. Grinter. 2008. Back to the future: Mature systems of industrial relations approaches and social compliance in outsourced apparel supply chains. Mimeo, Northumbria University Mohiuddin, M. (2014) ‘Labor management relations following the labor laws of ready made garments in Bangladesh: The present perspective’, IOSR Journal of Business and Management, 16(3), pp. 32–36. doi: 10.9790/487x-16343236. Nathan, D. and Sarkar, S. (2011) A note on profits, rents and wages in global production networks. Available at: http://www.capturingthegains.org/pdf/EPW_xlvi_36.pdf (Accessed: 29 April 2016). Roukova, P., Varbanov, M., Ravnachka, A., Van Hamme, G. and Lockhart, P.M. (2013) Working paper 8.1. Global commodity/value chain approach to assess the position of regions in the European and global economy. Available at: https://www.espon.eu/export/sites/default/Documents/Projects/AppliedResearch/TIGER/FR/TIGER_working_paper_8.1_-_global_commodity_value_chain.pdf (Accessed: 29 April 2016). Starmanns, M. (2011) ‘comment on Sonja Dänzer. Structural injustice in global production networks: Shared Responsibil- ity for working conditions *’, . Read More