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Performance outcomes of offshoring, backshoring and staying at home manufacturing

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  • Stentoft, Jan
  • Mikkelsen, Ole Stegmann
  • Jensen, Jesper Kronborg
  • Rajkumar, Christopher

Abstract

The objective of this paper is to advance the understanding of performance outcomes of companies pursuing different strategies in moving manufacturing abroad and moving it back again. The study is based on a large-scale survey of perceptual data from 233 senior managers in manufacturing companies. Furthermore, secondary performance data of return on capital employed is included in the analysis. Companies that have an explicit corporate manufacturing strategy report better operational performance in terms of product quality, lead time and flexibility than companies that do not have such a strategy. The analysis does not reveal any differences in productivity among companies that have offshored, backshored, or maintained manufacturing at home. Companies that have offshored manufacturing report lower unit costs than companies that have applied a staying at home strategy. No significant level of difference in unit costs was found when comparing companies that have backshored manufacturing and companies that have maintained manufacturing at home. Companies that have offshored manufacturing report that they can extract detailed component, product and process data from their cost-accounting systems to a higher degree. The paper stresses the importance of access to, and the quality of, cost-accounting data to make informed strategic manufacturing decisions, and how such decisions may affect operational and cost performance. The paper provides novel empirical insights on cost performance, operational performance and cost accounting data among manufacturers pursuing different strategies of moving manufacturing abroad and back to home destinations.

Suggested Citation

  • Stentoft, Jan & Mikkelsen, Ole Stegmann & Jensen, Jesper Kronborg & Rajkumar, Christopher, 2018. "Performance outcomes of offshoring, backshoring and staying at home manufacturing," International Journal of Production Economics, Elsevier, vol. 199(C), pages 199-208.
    • Handle: RePEc:eee:proeco:v:199:y:2018:i:c:p:199-208
    DOI: 10.1016/j.ijpe.2018.03.009
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    3. Gregory Theyel & Kay Hofmann & Mike Gregory, 2018. "Understanding Manufacturing Location Decision Making: Rationales for Retaining, Offshoring, Reshoring, and Hybrid Approaches," Economic Development Quarterly, , vol. 32(4), pages 300-312, November.
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    6. Kinkel, Steffen & Capestro, Mauro & Di Maria, Eleonora & Bettiol, Marco, 2023. "Artificial intelligence and relocation of production activities: An empirical cross-national study," International Journal of Production Economics, Elsevier, vol. 261(C).
    7. Młody Michał & Stępień Beata, 2020. "Principles of reshoring development in luxury goods sector," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 56(2), pages 140-158, June.
    8. Stephen Fox, 2019. "Moveable Production Systems for Sustainable Development and Trade: Limitations, Opportunities and Barriers," Sustainability, MDPI, vol. 11(19), pages 1-21, September.
    9. Młody Michał & Stępień Beata, 2020. "Principles of reshoring development in luxury goods sector," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 56(2), pages 140-158, June.
    10. Johansson, Malin & Olhager, Jan, 2018. "Comparing offshoring and backshoring: The role of manufacturing site location factors and their impact on post-relocation performance," International Journal of Production Economics, Elsevier, vol. 205(C), pages 37-46.

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