Offshoring and backshoring manufacturing from a supply chain innovation perspective

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.

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.

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.

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.

Technology transfer as a part of the business – inter-organizational transfer strategies based on experiences of aircraft production

Purpose

The purpose of this paper is through a literature study and a study of the Saab offset cases to identify strategies to increase inter-organizational transfer capability.

Design/methodology/approach

This paper is based on a literature study and a study of three of Saab’s offset cases and Saab’s process for technology transfer.

Findings

This study has identified inter-organizational transfer strategies based on the importance of the hierarchy of decision-making and the change from capacity transfers to capability transfers in offset business. The type of performance goals set in the business agreement decides how to realize the transfer. The hierarchy of decision-making creates a need to align the understanding of the performance goals between the different parts of the organization, which affect the plans for how to transfer knowledge between the organizational as well as the individual levels. To reach the performance goals of the technology transfer, there needs to be a balance between the disseminative capability of the sender and the absorptive capability of the receiver.

Research limitations/implications

This study is based on a single case within a relatively unique industry with an offset perspective and production transfers. Therefore, there is also a need for future studies to confirm the identified relationships within outsourcing/offset within other industries and other types of transfers.

Originality/value

A change from capacity transfers to capability transfers in both outsourcing/offshoring and offset business indicates that more research should be placed on the disseminative capacity of the sender. The literature review revealed that the disseminative capacity of the sender has been the subject of less research than the absorptive capacity of the receiver.

What do we know about manufacturing reshoring?

Purpose

The aim of this paper is to analyze and classify research that has been conducted on manufacturing reshoring, i.e. the decision to bring back to the home country production activities earlier offshored, independently of the governance mode (insourcing vs outsourcing). Consequently, the paper also aims at providing avenues for future research and to highlight the distinct value of studying manufacturing reshoring either per se or in combination with other constructs of the international business tradition.

Design/methodology/approach

A set of 57 carefully selected articles on manufacturing reshoring published in international journals or books indexed on Scopus in the past 10 years was systematically analyzed based on the “5Ws and 1H” (who-what-where-when-why and how) set of questions.

Findings

The authors’ work shows a certain convergence among authors regarding what reshoring is and what its key features and motivations are. In contrast, other related aspects, such as the decision-making and implementation processes, are comparatively less understood.

Research limitations/implications

As manufacturing reshoring is a “recent” topic, for some of its aspects, only exploratory research is available to date, limiting the authors’ possibility to either characterize it in a more exhaustive way or highlight well-established patterns.

Practical implications

The paper demonstrates that studying reshoring will indeed contribute to expanding our understanding of internationalization processes and strategies in general and of production internationalization specifically. While past studies have argued that the learning derived from international experience would permit firms to overcome their unfamiliarity with new business environments, reshoring might show that this outcome is not necessarily certain. Rather, firms might not be able to overcome obstacles because of internationalization or they might realize that attempting to do so is not desirable, e.g. because of excessive risk or changes in the firm’s strategic priorities.

Social implications

From a societal point of view, the present research underlines that reshoring can be part of that re-industrialization policy that many Western countries include in their economic agenda – yet, its impact on employment should not be overestimated, as often relocation is only in regard to some product lines. At the same time, there might be an intimate relationship between reshoring and the various forms of technological innovations applied to manufacturing – which has become popularly labeled as “Industry 4.0”.

Originality/value

Literature reviews proposed until now usually paid almost exclusive attention to motivations driving this phenomenon. This paper offers a broader and more comprehensive examination of the extant knowledge of manufacturing reshoring and identifies the main unresolved issues and knowledge gaps, which future research should investigate.