Offshoring and backshoring: A multiple case study analysis

A hybrid fuzzy-AHP-TOPSIS model for evaluation of manufacturing relocation decisions

Manufacturing relocation decisions are complex because they involve combinations of location modes like offshoring or reshoring, and governance modes like insourcing or outsourcing. Furthermore, the uncertainty involved in the decision-making process makes it challenging to reach a right-shoring decision. This study presents a hybrid fuzzy-AHP-TOPSIS model to support generic relocation decisions. Industry experts were involved in a pairwise comparison of the competitive priorities’ decision criteria. A meta-synthesis of empirical studies is used to generate theoretical relocation scenarios. The presented hybrid model is used to rank the relocation scenarios in order to identify the most pertinent alternative. The resiliency of the solution is presented through a sensitivity analysis. The results indicate that the proposed hybrid model can simultaneously handle all the main relocation options involving governance modes. Based on the input data in this study, the competitive priorities criteria quality, time and cost are shown to have a strong impact, whereas the sustainability criterion has a weak impact on the choice of relocation option. The research presented in this paper contributes to the research field of manufacturing relocation by demonstrating the suitability of the hybrid fuzzy-AHP-TOPSIS model for relocation decisions and the resilience of the results. Furthermore, the research contributes to practice by providing managers with a generic relocation decision-support model that is capable of simultaneously handling and evaluating various relocation alternatives.

From World Factory to Global City-Region: The Dynamics of Manufacturing in the Pearl River Delta and Its Spatial Pattern in the 21st Century

Since the 21st century, the PRD has gradually been transforming from a world factory to a global city-region. Based on the manufacturing and urban economic data, this paper uses the upgrade (UPG) index of industrial structure, comparative advantage and economies of scale to evaluate the development level of manufacturing in the PRD from 2000 to 2019. Through geographically and temporally weighted regression (GTWR), this paper measures the impact of four types of components (R & D, service economy, production capability and foreign investment) on the development of manufacturing in different periods. The results show the disharmony between the scale, structure and quality of the manufacturing in different cities. The impact on the manufacturing from R & D has spatiotemporal differences; the impact of foreign investment on the west coast cities of PRD is stronger than that of the east coast cities with varied impact mechanisms. The impact of the service economy is strong in sub-core cities. The impact of production capability has a transmission effect from core cities to the sub-core cities, indicating the manufacturing subdivision of function within the region. By 2019, The PRD has gradually transformed into a dual-core structure and the two cores have differentiated development paths.

Near-shoring versus far-shoring: effects on customer perceived quality and purchase intention

Purpose

Driven by the disruptive effects of the Covid-19 pandemic, the ongoing debate about the international location of firms' manufacturing activities has increasingly highlighted the specific benefits and costs of near-shoring versus far-shoring. However, the effects of near-shoring versus far-shoring on customer perceived quality and purchase intention have not been examined. Thus, this study aims to develop a conceptual model and provide new evidence to fill this gap. In particular, the study explores the roles of brand familiarity and corporate social responsibility (CSR) to explain the different levels of perceived quality and purchase intention in relation to near-shoring versus far-shoring.

Design/methodology/approach

This study includes two analyses of data collected from a sample of Italian customers. The first analysis consists of a 2 (high/low brand familiarity) × 3 (domestic insourcing, near-shoring, far-shoring) factorial design, and data are assessed via analyses of variance (ANOVA). The second analysis evaluates the suggested model in the two scenarios (near-shoring and far-shoring) via partial least squares–structural equation modelling (PLS-SEM) multigroup analysis.

Findings

Results showed that customer perceived quality and purchase intention were significantly higher for near-shoring than for far-shoring, but only when brand familiarity was low. No significant difference was found for participants with a high level of brand familiarity. In addition, the level of a brand's pre-offshoring perceived CSR was negatively related to perceived quality, and this was conceptually justified by the CSR-washing effect. Again, this effect was found only when brand familiarity was low.

Research limitations/implications

The findings contribute to advancing the current understanding of the multiple effects of the offshoring decision and clarify that near-shoring and far-shoring have different effects for customers with low brand familiarity. The findings also emphasise that the far-shoring decision can elicit the perception of decoupling between the firm's CSR claims and CSR actions, thus decreasing perceived quality.

Practical implications

This study provides managers with additional inputs to make more informed decisions regarding offshoring. While the post-pandemic scenario seems to favour near-reshoring over far-shoring due to agility considerations, this study also provides additional evidence of the superiority of near-reshoring from the customer's perspective.

Originality/value

This is the first study to examine and prove the differential effects of near-shoring versus far-shoring on the customer's perceptions and behaviours.

Adoption of digital technologies and backshoring decisions: is there a link?

The present paper assesses whether the adoption of Industry 4.0 technologies can be related to backshoring. It does so by -firstly- investigating the implementation of such technologies by industrial firms with foreign production plants, the experiences and intentions of these firms regarding the location of production activities, and -secondly- by analyzing backshoring cases among them.

It finds that backshoring is a rare phenomenon, and it is questionable whether there is a correlation, left alone causality, between the adoption of digital technologies in home-based manufacturing sites and backshoring hitherto. And while the future may hold more backshoring movements in store, they may not be primarily due to the adoption of Industry 4.0 technologies at home-based plants. Instead, other (foreign) location-specific factors seem to have greater weight in the decision-making processes around backshoring operations. I.e., deteriorating sales forecasts in offshore places where firms have production activities, increases in institutional uncertainty in such places, rationalization of global production apparatuses, and/or a lack of possibilities to deploy foreign manufacturing activities and output for third markets. Also against the backdrop of events like the outbreak of Covid19 and the uncertainty-raising effect it has on international business, the trade-off between producing off-shore or bringing manufacturing activities back home is not likely to depend on technology adoption levels at home and abroad either.

Digital Innovation for the Sustainability of Reshoring Strategies: A Literature Review

Recently, some critical events (e.g., the economic decline, the growing socio-ecologic burden, even more demanding customers, etc.) have led several companies to re-think their “shoring” decisions. Therefore, many of them decided to reshore manufacturing or to bring back home production activities previously offshored. This phenomenon represents one of the current imperatives for research. In fact, the location where manufacturing takes place has a massive influence on the sustainability of firms on a local and global level. Therefore, to better understand what makes reshoring strategies sustainable as well as to identify the drivers that can boost it, further research is still needed. The explorative nature of this paper recognizes some motivations or drivers for making reshoring strategies sustainable. To this end, a structured and narrative literature review has been conducted to grasp and describe the main motivations and implementation characteristics that can make reshoring decisions sustainable. The achieved results better define reshoring and the influence that some drivers, especially digital innovation, can play on the related strategies and on their sustainability. In doing so, this work is one of the first contributions that jointly approaches reshoring, sustainability, and digital innovation.

Challenges to competitive manufacturing in high-cost environments: checklist and insights from Swedish manufacturing firms

Research on competitive manufacturing (CM) in high-cost environments has earlier indicated that firms struggle to remain competitive and that manufacturing operations often have been offshored to low-cost environments. The purpose of this research is to explore and create a compounded view of challenges related to both internal and external environments of firms when operating in high-cost environments. This issue has been investigated through a qualitative case study involving five manufacturing firms in Sweden. This research has empirically derived the challenges associated with sustaining CM in high-cost environments and developed a prescriptive checklist. Seven main categories of challenges have been identified, ranging from a micro level related to product characteristics and employee involvement, to a macro level related to supply chain collaborations and industry systems. This research contributes to the existing literature on CM in high-cost locations by explaining and detailing what constitutes challenges in this kind of environment.

AHP-based support tools for initial screening of manufacturing reshoring decisions

Purpose

The existing literature expresses a strong need to develop tools that support the manufacturing reshoring decision-making process. This paper aims to examine the suitability of analytical hierarchy process (AHP)-based tools for initial screening of manufacturing reshoring decisions.

Design/methodology/approach

Two AHP-based tools for the initial screening of manufacturing reshoring decisions are developed. The first tool is based on traditional AHP, while the second is based on fuzzy-AHP. Six high-level and holistic reshoring criteria based on competitive priorities were identified through a literature review. Next, a panel of experts from a Swedish manufacturing company was involved in the overall comparison of the criteria. Based on this comparison, priority weights of the criteria were obtained through a pairwise analysis. Subsequently, the priority weights were used in a weighted-sum manner to evaluate 20 reshoring scenarios. Afterwards, the outputs from the traditional AHP and fuzzy-AHP tools were compared to the opinions of the experts. Finally, a sensitivity analysis was performed to evaluate the stability of the developed decision support tools.

Findings

The research demonstrates that AHP-based support tools are suitable for the initial screening of manufacturing reshoring decisions. With regard to the presented set of criteria and reshoring scenarios, both traditional AHP and fuzzy-AHP are shown to be consistent with the experts' decisions. Moreover, fuzzy-AHP is shown to be marginally more reliable than traditional AHP. According to the sensitivity analysis, the order of importance of the six criteria is stable for high values of weights of cost and quality criteria.

Research limitations/implications

The limitation of the developed AHP-based tools is that they currently only include a limited number of high-level decision criteria. Therefore, future research should focus on adding low-level criteria to the tools using a multi-level architecture. The current research contributes to the body of literature on the manufacturing reshoring decision-making process by addressing decision-making issues in general and by demonstrating the suitability of two decision support tools applied to the manufacturing reshoring field in particular.

Practical implications

This research provides practitioners with two decision support tools for the initial screening of manufacturing reshoring decisions, which will help managers optimize their time and resources on the most promising reshoring alternatives. Given the complex nature of reshoring decisions, the results from the fuzzy-AHP are shown to be slightly closer to those of the experts than traditional AHP for initial screening of manufacturing relocation decisions.

Originality/value

This paper describes two decision support tools that can be applied for the initial screening of manufacturing reshoring decisions while considering six high-level and holistic criteria. Both support tools are applied to evaluate 20 identical manufacturing reshoring scenarios, allowing a comparison of their output. The sensitivity analysis demonstrates the relative importance of the reshoring criteria.

Assessing the effects of labor market dynamics on CO2 emissions in global value chains

International production fragmentation has led to substantial changes in labor market, such as job creation/job loss, changing labor market structure and labor productivity. Such changes are perceived to affect CO₂ emissions of those economies that participate in different parts of global value chains. This paper develops an accounting framework relating CO₂ emissions to labor market shaped by global value chains. It analyses the influential factors driving CO₂ emissions, and documents several pervasive empirical patterns. This is based on the recent environmental accounts developed by the European Commission and the World Input-Output Database over 2000-2014. The results show that the growth of CO₂ emissions is primarily reduced by intensity effect, followed by labor market structural change due to participation in value chains, while it is driven by labor productivity effect and job creation. In particular, the foreign job creation effect is mostly emission-increasing, even in those economies with shrinking domestic employment. These results highlight the role of labor market and global value chains in climate policymaking.

Reshoring Decisions for Adjusting Supply Chains in a Changing World: A Case Study from the Apparel Industry

Global conditions for manufacturing are evolving rapidly and the myopic financial factors that once made overseas locations attractive for offshoring are now in favor of revising it. Besides, the COVID-19 pandemic has highlighted the need for restoring the previously offshored competencies. As a strategic decision, reshoring requires a balance of short- and long-term financial and non-financial considerations. This study extends the reshoring literature by exploring the underpinnings of the decision. For this purpose, the extended fuzzy Decision-Making Trial and Evaluation Laboratory (DEMATEL) is used to study the interrelationship among the decision criteria and explore the sequential effect of the prominent criteria on reshoring decisions. Data from the UK apparel industry is used as a baseline to provide insights for other industry situations. Findings are supportive of the supply process complexity as the prominent considerations with the highest potential impact on the financial criterion. Along with supply process complexity, environmental sustainability appears to have had the highest influence on cost-efficiency as the major driver of past offshoring decisions. Overall, the research findings provide insights for deeper analysis of the manufacturing location decisions for a globalized setting.

Doing the right thing or doing things right: what is better for a successful manufacturing reshoring?

The article concerns the revision of earlier decisions to offshore production activities (so called “relocation of second degree”); more specifically it is focused on the “reshoring” (also referred as “relocation to the home country”, “back-reshoring” or “back-shoring”). The research aims are to investigate what types of mistakes occur along the decision-making and implementation process and how they affect the outcome, in terms of success or failure, of a relocation strategy. A multiple case study involving four companies in the fashion industry from Portugal and Italy was conducted. The cross-case analysis allowed to differentiate decision-making mistakes from implementation ones and to assess differences and similarities among the cases in terms of content of the relocation, drivers and outcomes. The research contributes to previous literature on reshoring by bringing evidence of different types of mistakes to be considered, thus requiring further conceptualization of the reshoring process. Managers and entrepreneurs should consider the importance of doing the things right also during the implementation, too often underestimated. The present article is the first one in the reshoring literature bringing evidence of cases of failure in the relocation decisions and discriminating among different kinds of mistakes.

Back-shoring vs near-shoring: a comparative exploratory study in the footwear industry

After decades of off-shoring strategies, companies are often critically re-evaluating their earlier location decisions; in doing so, sometimes they implement the so-called relocation of second degree. Among them, back-shoring (i.e., relocation to the home country) and near-shoring (relocation to the home region) are two of the alternatives attracting growing interest from scholars. This paper aims to shed new light on the variables influencing the choice made between these two alternatives. As requested in the extant literature, a contingency approach is adopted, focusing attention on the footwear industry. Given the exploratory nature of the paper, evidence from 41 back-shoring and near-shoring strategies are analysed, comparing data from Spanish and Italian companies. Collected data are adapted to test hypotheses concerning three sets of variables: firms’ characteristics, motivations for the second degree relocation and its barriers. Collected data show that firm’s size directly influences the chosen alternative since larger companies prefer to near-shore instead of back-shore. When considering motivations, while the “made in” effect does not influence the firm’s choice, availability of skilled contractors and/or government aids induces companies to relocate to the home country instead of the home region. Finally, companies fearing encountering barriers, in terms of skilled contractors’ availability and/or (re-)development of internal manufacturing competences, will prefer the back-shoring rather than the near-shoring option. The study is focused on two countries (Spain and Italy) where the manufacturing sector (and the footwear industry within it) is still relevant to the local economy. Findings cannot be generalized to countries/industries where the local industry has been totally dismantled, without a previous in-depth analysis. The findings obtained offer managers useful insights on the elements that should be carefully evaluated when considering back- and near-shore alternatives. Additionally, valuable insights are provided for policy makers that plan to design industrial policies supporting back-reshoring policy initiatives. To the best of our knowledge, this is the first paper in the extant literature addressing variables influencing the choice between back- and near-shoring alternatives.

Does sustainability matter for reshoring strategies? A literature review

Purpose

Production activities affect environmental and social pillars of firm’s sustainability. Therefore, decisions regarding where products are manufactured have a tremendous impact on a firm’s sustainability. However, until now, interdependencies among back-shoring decisions and sustainability issues have been rarely addressed. This paper aims to fill this research gap and develop avenues for future research.

Design/methodology/approach

The paper adopts an explorative approach based on a two-steps desk research strategy. In the first one, a structured literature review is implemented analysing 105 Scopus documents published up to August 2018. In the second step, empirical evidence of manufacturing back-shoring decisions coming from secondary sources is analysed and discussed.

Findings

The investigated research questions shed new light on the “how” back-shoring decisions are taken and implemented. The structured review and the empirical evidence show that environmental and social sustainability issues are increasingly assuming certain relevance for the academic debate and managerial decisions.

Research limitations/implications

The structured analysis of the selected literature and the empirical evidence sorted by the UnivAQ Manufacturing Reshoring Dataset clearly shows that neither scholars nor firms’ managers and entrepreneurs considered the environmental and social pillars of sustainability as the most relevant in terms of back-shoring drivers/motivation, outcome/benefit and/or barrier/enabler.

Practical implications

The paper suggests policymakers that sustainability-based legislations may influence – and support – the firm’s decision to backshore. At the same time, policymakers should carefully reflect on the role of market labour laws and ensure that relocations are not based on “informal subcontracting and informal employment”. At the same time, the paper suggest managers to adopt a “progressive” and/or a “selective” approach when implementing reshoring decisions based (also) on sustainability issues.

Originality/value

Even if other authors suggest that sustainability issues may be relevant for the reshoring decisions, this is the first attempt to define the base of knowledge on this topic and to suggest avenues for further research.

Backshoring readiness

Purpose

The purpose of this study is to delineate key aspects of backshoring readiness and discuss how such aspects contribute to a smooth shift-back from global sourcing operations. It aims to answer the following questions: which factors constitute backshoring readiness and how these factors affect the backshoring transition.

Design/methodology/approach

Based on theory departure from the organizational readiness field and the emerging field on backshoring, a conceptual model is developed. A multiple qualitative case study is then conducted to exemplify the backshoring readiness factors delineated in the study.

Findings

The study indicates that due to previous outsourcing, limitations concerning the availability of firms’ capabilities are affected by ownership structures and that backshoring appears to be time-sensitive. The study delineates three key aspects of backshoring readiness and proposes a comprehensive understanding of readiness as an important construct to enhance successful backshoring.

Research limitations/implications

The findings are limited by the nature of this conceptual study, the restriction to a high-cost context and the small number of cases. Therefore, conclusions and proposed recommendations need to be further investigated in preferably larger samples of case studies.

Practical implications

By introducing contextual variables that go beyond traditional cost considerations, this work should be of special interest for both practitioners and academics, because the absorptive capacity for the exploitation of cutting-edge knowledge is globally scarce and hence rather expensive in Western countries compared with traditionally low-cost countries. Another practical contribution of this study is the conceptual backshoring readiness framework itself, as it can guide firms acquainting themselves with the resource availability in their home environment.

Originality/value

The research defines key resources needed to facilitate backshoring readiness in a conceptual framework developed from literature, which is then exemplified by a case study. This framework conceptualizes backshoring readiness as aspects of requirements to knowledge, technology and supplier infrastructures. Furthermore, the readiness framework developed provides firms and their managers with six recommendations that can enable a rigorous evaluation of a firm’s readiness to embark on backshoring and reflect on the aspect of fitness of its current strategies.