Understanding Manufacturing Location Decision Making: Rationales for Retaining, Offshoring, Reshoring, and Hybrid Approaches

Abstract

How do companies decide where to locate their manufacturing? This study uses insights from manufacturing company executives collected by means of in-depth interviews with 50 manufacturers in the United Kingdom to develop an understanding of manufacturing location decision making. The findings indicate that companies derive competitive advantage from organizing manufacturing in different ways. Retaining or reshoring manufacturing to a company’s home country can enhance new product development, control of quality, product customization, delivery performance, and cost leadership. On the other hand, companies can enhance new product development, customization, and delivery performance for new markets, if production facilities are offshored to or in proximity to these locations. In addition, some companies use a hybrid approach of offshoring the production of some components or products for cost arbitrage while retaining or reshoring other components or products for advantages from value chain integration. Based on the findings of this study, a set of key manufacturing location questions are developed that should be considered by firms pondering onshore, offshore, reshore, or hybrid manufacturing location decisions.

Global Sourcing in Fast Fashion Retailers: Sourcing Locations and Sustainability Considerations

“…Location decision-making consists of multiple stages with different influencing factors at each stage and, due to the high level of uncertainty involved, is time and resource consuming [4][5][6][7]. Over recent decades, companies have been making location decisions with the aim of increasing competitiveness in global markets, effectively creating global value chains [5,28,33]. In practice, although location decisions may appear to be principally operative, they often have consequences for strategic relevance [5].…”

“…Over recent decades, companies have been making location decisions with the aim of increasing competitiveness in global markets, effectively creating global value chains [5,28,33]. In practice, although location decisions may appear to be principally operative, they often have consequences for strategic relevance [5]. Thus, the emerging significance of location decisions has caused a rethinking of "the meaning of location, of competitive advantage, and on the transmission of knowledge among countries" [66] (p. 261) and the number of factors to consider in order to make the best decision has increased over time.…”

“…Generally, the key criteria to select sourcing locations in the apparel [27,29] market were price, quality, and production capacity offered by suppliers [70][71][72][73]. However, sourcing location decisions are strictly dependent on suppliers' availability and manufacturing conditions [5,7,74] and this caused a shift from using purely quantitative selection criteria, mainly based on suppliers' price, to qualitative ones such as payment terms, delivery time, compliance with quality standards, and the ability to respond quickly to any changes [70].…”

“…To date, sustainability issues at suppliers' factories in foreign sourcing markets have not been considered in previous academic literature pertaining to location decisions [4][5][6][7]. In this study, location decisions are aligned with the multifaceted location model [67], which states that the final decision about sourcing destinations depends on the analysis of specific factors: cost levels; human capital; business environment; and distance of interaction.…”

“…Globalization and a growing reliance on network relationships have led to renewed interest in global sourcing for higher competitiveness and productivity [1][2][3]. Within international business academic literature, several studies have focused on manufacturing location decisions [4][5][6] to examine whether low-cost locations can support optimal supply chain configurations [7]. For decades, European and US apparel companies have profited from moving their manufacturing to low-cost countries in the Far East looking for minimum labor costs [8].…”