OM Forum -- Benchmarking Global Production Sourcing Decisions: Where and Why Firms Offshore and Reshore

23 Pages Posted: 10 Jun 2016 Last revised: 19 Jul 2017

See all articles by Morris A. Cohen

Morris A. Cohen

University of Pennsylvania - The Wharton School

Shiliang Cui

Georgetown University - McDonough School of Business

Ricardo Ernst

Georgetown University - Robert Emmett McDonough School of Business

Arnd Huchzermeier

WHU - Otto Beisheim School of Management

Panos Kouvelis

Washington University

Hau L. Lee

Stanford Graduate School of Business

Hirofumi Matsuo

Kobe University

Marc Steuber

WHU - Otto Beisheim School of Management

Andy Tsay

Santa Clara University - Leavey School of Business

Date Written: July 7, 2017

Abstract

Problem Definition: Manufacturing firms are undergoing re-structuring defined by a collection of adjustments and decisions, which affect the source and destination of manufactured products throughout the firm’s global supply chain network. We report on a comprehensive picture of manufacturing sourcing on a global basis.

Academic/Practical Relevance: With dynamic changes in global economic, political and technological conditions, the design of global supply chain strategies has become critically important for executives, and has great potential for Operations Management (OM) research.

Methodology: Our work is based on a global field study conducted in 2014 and 2015 among leading manufacturers from a wide range of industries. The data set has the distinguishing feature of reflecting actual decisions that the firms made recently (during the last 3 years).

Results: Companies are currently restructuring their global production footprints. The majority of firms engage in offshoring. Reshoring does occur but seldom for corrective reasons. China remains the most attractive site for production sourcing, followed by Eastern Europe and Southern Asia. Manufacturing continues to decline in the developed economies of Japan and Western Europe. We observe that while North America may be at the cusp of a manufacturing renaissance, such a change is not just because of reshoring by domestic firms. Labor cost no longer dominates manufacturing location decisions, rather, firms decide based on complex trade-offs among a variety of factors. Finally, firms localize production in developed economies and use developing economies as production hubs.

Managerial Implications: Our goal in this paper is to inform both managerial policy decisions and the academic research agenda by developing insights on managerial practices that concern production sourcing and on the factors that drive such decisions. We develop hypotheses concerning how firms make these strategy decisions and we discuss implications for analytical and empirical research.

Keywords: manufacturing location decisions, offshoring, reshoring

Suggested Citation

Cohen, Morris A. and Cui, Shiliang and Ernst, Ricardo and Huchzermeier, Arnd and Kouvelis, Panos and Lee, Hau L. and Matsuo, Hirofumi and Steuber, Marc and Tsay, Andy, OM Forum -- Benchmarking Global Production Sourcing Decisions: Where and Why Firms Offshore and Reshore (July 7, 2017). Georgetown McDonough School of Business Research Paper No. 2791373; Stanford University Graduate School of Business Research Paper No. 16-28. Available at SSRN: https://ssrn.com/abstract=2791373 or http://dx.doi.org/10.2139/ssrn.2791373

Morris A. Cohen (Contact Author)

University of Pennsylvania - The Wharton School ( email )

Philadelphia, PA 19104
United States

Shiliang Cui

Georgetown University - McDonough School of Business ( email )

Washington, DC 20057
United States

Ricardo Ernst

Georgetown University - Robert Emmett McDonough School of Business ( email )

37th and O Streets, NW
Washington, DC 20057
United States

Arnd Huchzermeier

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany
+49-261-6509380 (Phone)
+49-261-6509389 (Fax)

HOME PAGE: http://www.whu.edu/prod

Panos Kouvelis

Washington University ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Hau L. Lee

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Hirofumi Matsuo

Kobe University ( email )

2-1, Rokkodai-cho, Nada-ku
Kobe, 657-8501, 657-8501
Japan

Marc Steuber

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

HOME PAGE: http://www.whu.edu/prod

Andy Tsay

Santa Clara University - Leavey School of Business ( email )

500 El Camino Real
Dept of Operations Mgmt & Info Systems (OMIS)
Santa Clara, CA California 95053
United States

HOME PAGE: http://www.scu.edu/business/omis/faculty/tsay.cfm

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