Benchmarking Global Production Sourcing Decisions: Where and Why Firms Offshore and Reshore
38 Pages Posted: 8 Jan 2020
Date Written: May 25, 2016
This paper reports on the results of a global field study conducted in 2014 and 2015 among leading manufacturers from a wide range of industries. It provides insights on managerial practices that concern production sourcing and on the factors that drive such decisions. Exploratory factor analysis and logistic regression models that use survey response data yield seven key findings. (1) Companies are currently restructuring their global production footprints. (2) The majority of firms engage in offshoring; reshoring does occur but seldom for corrective reasons. (3) North America may be at the cusp of a manufacturing renaissance, but not because of reshoring. (4) China remains the most attractive site for production sourcing, followed by the developing economies in Eastern Europe and Southern Asia. (5) Manufacturing continues to decline in the developed economies of Japan and Western Europe. (6) Labor cost no longer drives decisions about manufacturing location; rather, firms decide based on complex trade-offs among a variety of factors. (7) Firms localize production in developed economies and use developing economies as production hubs.
Keywords: manufacturing location decisions, offshoring, reshoring
JEL Classification: M11
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