The Effect of Proximity

The Effect of Proximity

 I always find it interesting how physical space affects relationships, both on a personal level, and a corporate one. For example, the Wall Street Journal, this past week, had an article about a manufacturing cluster developing in South Carolina.

The article cites several effects that come from economies of scale in the “cluster,” such as access to a good highway system, shipping ports, and a feeder system of vocational schools and engineering colleges.

One thing that’s always struck me is the way logistical problems change when companies are close together or far apart. For example, if you’re in the same building and I need to get you a shipment of raw stock, I’m telling Bob with the fork truck to take 10 minutes and drive it over. If you’re in the same town, Bob’s taking an hour to drive the flatbed with your delivery. Beyond that, I can’t spare Bob for a full day, and now it means scheduling a freight delivery and paying a shipper to get the job done. Physical proximity translated to a real, competitive economic advantage.

Likewise, as our companies (or even divisions within the same company) spread farther and farther apart, the likelihood that any two people are friends, even in just a professional context, drops off dramatically. If we’re in the same building, we might have lunch together every day. The same town, if we are friends, maybe we meet every few days or weeks. If you’re across the country, maybe a few times a year at most.

Facebook, Skype, video chat, email, cell phones… they all bring us together in a lot of ways, but physical distance still matters. The world isn’t as global as some might lead you to believe.

image courtesy of Helico


I can think of no better argument for this than the electronics cluster in Shenzhen. This is an often state reason about why Apple will never bring their production back to the states: there is no similar supply chain infrastructure anywhere else in the world that can support their needs.

Here’s a fun video of a tour of the electronics market, which should blow your mind:

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