Vol. 49, No. 2
Offshoring, Re-Shoring and the Manufacturing Location Decision
Lisa M. Ellram
Intelli-Sourcing to Replace Offshoring as Supply Chain Transparency Increases
In the past twenty years, there has been an evolution in the way that sourcing and global manufacturing are viewed. While price is important, it is no longer supreme, as increased complexity and transparency have changed how leading firms think about "intelli-sourcing": Simultaneously balancing economics while protecting the firm's reputation.
Charles Fine, Ph.D., is the Chrysler Leaders for Global Operations Professor of Management and Engineering Systems in the Sloan School of Management at the Massachusetts Institute of Technology in Cambridge, Massachusetts.
Economic Analysis of International Supply Chains: An Internalization Perspective
Offshoring and outsourcing in global value chains have been extensively analyzed from a strategic management perspective [Gereffi and Li, 2012, Journal of Supply Chain Management, (48:3), pp. 24-32; Gereffi, Humphrey and Sturgeon, 2005, Review of International Political Economy, (12:1), pp. 78-104; Mudambi and Venzin, 2010, Journal of Management Studies, (47:8), pp. 1510-1533]. This paper examines these issues from an internalization theory perspective by summarizing the contribution of internalization theory to supply chain analysis; considering how a division of labor is coordinated, and comparing coordination by management with coordination by the market; and discussing the formal models of supply chains developed by economists. Supply chain researchers possessing an interest in economic principles and good mathematical skills can make an important contribution to internalization theory, and it is hoped that this paper will encourage them to do so.
Mark Casson, Ph.D., is a professor of economics in the Department of Economics at the University of Reading in Reading, England (UNITED KINGDOM).
Offshoring and Re-Shoring: An Update on the Manufacturing Location Decision
This research uses data from a survey to explore the factors that affect organizations' manufacturing location decisions. Manufacturing location — more specifically, the possibility of firms near-shoring or re-shoring — has received a great deal of recent attention, specifically in the United States. This paper applies the location aspect of internalization theory to provide an understanding of which factors affect organizations' perceptions of the attractiveness of various regions as locations for owned manufacturing facilities. An exploratory factor analysis is used to develop factors that drive manufacturing location decisions. Multiple regression analysis is used to test the relationship between the drivers of manufacturing location decisions and the movement of manufacturing into or out of a region, and the overall perceived risk of a region. Findings indicate that various drivers have differential effects across regions. For example, while North America is viewed favorably for its trade policies over the next three years, the trade policies also are viewed as an increasing source of risk — possibly reflecting bipartisan conflicts. Three theoretical propositions are developed to advance the understanding of the current state of manufacturing location decisions from an internalization perspective. It appears that organizations are beginning to look at their manufacturing location decisions with a broader lens, giving more weight to supply chain issues as well as strategic factors.
Lisa M. Ellram, Ph.D., is the Rees Distinguished Professor of Supply Chain Management in the Farmer School of Business at Miami University in Oxford, Ohio,
Wendy L. Tate, Ph.D., is an associate profesor in the Department of Marketing and Supply Chain Management at the University of Tennessee in Knoxville, Tennessee; and
Kenneth J. Petersen, Ph.D., is the John H. "Red" Dove Professor of Supply Chain Management in the Department of Marketing and Supply Chain Management at the University of Tennessee in Knoxville, Tennessee.
Understanding the Manufacturing Location Decision: The Case for the Transaction Cost and Capability Perspectives
This article highlights the value of employing the resource-based view (RBV) and transaction cost economics (TCE) to understand the manufacturing location decision. The RBV can assist with analyzing manufacturing capabilities, which can link the decision with performance and the competitive position of the organization. TCE provides a powerful theoretical lens to augment this analysis. Understanding transaction costs allows an organization to adopt a relationship strategy, which reduces the risks of outsourcing while at the same time leveraging the specialist capabilities of suppliers. Further research is required to enhance our understanding of how the variables from the RBV and TCE interact in sourcing decisions. In particular, it is argued that employing these theories in the manufacturing location decision would contribute to the academic debate on the complementary and contradictory prescriptions of TCE and the RBV in outsourcing decision-making contexts.
Ronan McIvor, Ph.D., is a professor of operations management at the University of Ulster in Northern Island (UNITED KINGDOM).
The Re-Shoring Phenomenon: What Supply Chain Academics Ought to Know and Should Do
The popular press has begun to pay attention of the phenomenon of re-shoring. The task of supply chain management researchers with regard to this phenomenon should be to clarify what it is; to explore whether it is really a new phenomenon; and, paraphrasing Simon (1967), to conduct research into the re-shoring phenomenon so as to contribute not only to the science but also to the practice of re-shoring. This essay is a starting point for our efforts in that direction. We make a number of informed assertions about re-shoring — assertions that are juxtaposed in relevant literature and that aim to (a) define what re-shoring is and is not; (b) explain why the re-shoring phenomenon should not be examined in isolation, but rather as a revision of a prior offshoring decision; (c) describe how the re-shoring phenomenon might evolve and societies, worldwide, place increasing emphasis on the environmental impact of business decisions; and (d) articulate a plausible scenario in which re-shoring eventually hampers employment in Western nations. We hope these assertions will, in turn, jumpstart an intellectual discourse through scientific research into the "what, how, when, where and why" of the re-shoring phenomenon.
John V. Gray, Ph.D., is an assistant professor in the Fisher College of Business at The Ohio State University in Columbus, Ohio,
Keith Skowronski, MBA, is a doctoral candidate in the Fisher College of Business at The Ohio State University in Columbus, Ohio,
Gökçe Esenduran, Ph.D., is an assistant professor in the Fisher College of Business at The Ohio State University in Columbus, Ohio; and
M. Johnny Rungtusanatham, Ph.D., is a professor of management sciences in the Fisher College of Business at The Ohio State University in Columbus, Ohio.
A Meta-Analysis of Supply Chain Integration and Firm Performance
As supply chain activities become more dispersed among customers, suppliers and service providers, there is an increased need for customers and suppliers to work together more closely. Supply chain integration (SCI) has been a highly-researched topic during the last twenty years. A meta-analytic approach is used to provide a quantitative review of the empirical literature in SCI, and examines relevant design and contextual factors. Eighty independent samples across 86 peer-reviewed journal articles, yielding a total of 17,467 observations, were obtained and analyzed. While general support exists in favor of the positive impact of SCI on firm performance in the literature, this research helps clarify mixed findings that presently exist. Our results indicate that there is a positive and significant correlation between SCI and firm performance. Additional sub-groups and moderators are tested and provide nuanced views of the scope and specific dimensions of SCI, firm performance and their relationships.
Rudolf Leuschner, Ph.D., is an assistant professor in the Department of Supply Chain Management and Marketing Sciences at Rugers University in Newark, New Jersey,
Dale Rogers, Ph.D., is a professor of logistics and supply chain management, and Co-Director of the Center for Supply Chain Management, at Rutgers University in Newark, New Jersey; and
François Charvet, Ph.D., is the Logistics Network Strategist for Staples, Inc.
Towards a Theory of Multi-Tier Supply Chain Management
Recent trends toward outsourcing and global sourcing have created longer, more complex and more fragmented supply chains. In this research, we aim to instigate a theoretical development of multi-tier supply chain (MSC) management by adopting an inductive case study research design. Following a multiple case research design, we investigate three-tier supply chains to develop a theory of MSC management. Each of the investigated supply chains consists of a buyer, supplier and supplier's supplier. Based on the case studies, propositions are built concerning how MSCs operate. As an underlying methodology, we first conduct a within-case analysis, and then expand that analysis to the cross-case context. The results show the impact that the dynamics of the MSC have on power balance, structure, interdependence and relationship stability inherent in MSCs.
Carlos Mena, Eng.D., is a senior lecturer at the Cranfield School of Management, in Bedford, England (UNITED KINGDOM), the director for the Centre for Strategic Procurement and Supply Management, and head of the Executive Procurement Network (EPN),
Andrew Humphries, Ph.D., is the CEO of SCCI Ltd, in Milton Keynes, England (UNITED KINGDOM); and
Thomas Y Choi, Ph.D., is the Bob Herberger Arizona Heritage Chair and professor of supply chain management at Arizona State University in Tempe, Arizona.
A Meta-Analysis of Environmentally Sustainable Supply Chain Management Practices and Firm Performance
Studies linking environmental sustainability to firm performance have been increasing as more companies are contemplating the implementation of sustainable practices internally and in coordination with other firms along their supply chains. However, findings from these studies have found positive and negative associations, leaving practitioners perplexed as to what actions it would be beneficial to pursue. With hypotheses grounded in the natural resource-based view of the firm, the current study examines over 20 years of research on environmental supply chain practices, using a meta-analysis to determine whether the overall effect of these specific practices on firm performance is, in fact, positive. The results show that the link between environmental supply chain practices and market-based, operational-based and accounting-based forms of firm performance is positive and significant, providing support for the business case that sustainable supply chain management results in increased firm performance. Different operationalizations of supply chain practices — upstream, design, production and downstream — along with industry, sample region, firm size and time are examined as moderators of this relationship, with nuanced results that help to extend the discipline's understanding of the relationship between environmentally sustainable supply chain management and firm performance.
Susan L. Golicic, Ph.D., is the Herbert Family Research Fellow and associate professor of supply chain management at Colorado State University in Fort Collins, Colorado; and
Carlo D. Smith, Ph.D., is as assistant professor of supply chain management, and director of the Supply Chain Management Institute, at Central Washington University in Des Moines, Washington.
An Experimental Test of Negotiation Strategy Effects on Knowledge Sharing Behaviors in Buyer-Supplier Relationships
Negotiations are an essential element of buyer-supplier relationships that form the foundation of modern supply chains. Research has identified two common types of negotiation strategies that are used in buyer-supplier negotiations. A win-win negotiation strategy attempts to maximize mutual gain, while a win-lose strategy focuses on obtaining a disproportionate share of benefits. This study investigates the relational costs of adopting a negotiation strategy in terms of adverse effects on knowledge-sharing intentions in interdependent buyer-supplier relationships. A between-subjects, scenario-based experiment is used to test hypotheses developed from applicable literature and social exchange theory. Results of the experiment indicate that employing a win-lose negotiation strategy may decrease future intentions toward information exchange, communication quality and operational knowledge transfer between buyers and suppliers. The findings inform managerial aspects of supply chain relationship management, extend the negotiation literature to consider longer-term effects of common negotiation strategies, and provide insights into social exchange theory.
Stephanie P. Thomas, MBA, is a doctoral candidate in the Department of Marketing and Logistics, College of Business Administration, at Georgia Southern University in Statesboro, Georgia,
Rodney W. Thomas, Ph.D., is an assistant professor in the Department of Marketing and Logistics, College of Business Administration, at Georgia Southern University in Statesboro, Georgia,
Karl B. Manrodt, Ph.D., is a professor in the Department of Marketing and Logistics, College of Business Administration, at Georgia Southern University in Statesboro, Georgia; and
Stephen M. Rutner, Ph.D., is a professor of logistics and transportation in the College of Business at Georgia Southern University in Statesboro, Georgia.
Leveraging Environmental Information Integration to Enable Environmental Management Capability and Performance
Although environmental sustainability has emerged as an important organizational capability to protect the environment and sustain businesses, there is little knowledge on how it is developed. This is of particular important when environmental management no longer relies solely on an individual firm's efforts, but on its supply chain partners as well. Building on dynamic capabilities theory, environmental information integration (EII) is defined as the organizational capacity of sharing information on environmental management with supply chain partners to facilitate coordination of environmental management practices. This study examines how EII contributes to environmental management capabilities in terms of corporate environmental innovativeness and adaptability. The research model is empirically tested using data collected from 230 firms. The findings show that supplier EII is insufficient in improving environmental management capabilities. Internal EII contributes to corporate environmental adaptability, while customer EII engenders both corporate environmental innovativeness and adaptability. This study suggests that strategic values of EII go beyond the sharing of environmental management information between supply chain partners, simultaneously contributing to the environmental management capabilities of firms. This study contributes substantially to environmental management research by providing empirical evidence on the specific dimensions of EII in supply chains that contribute to environmental management capabilities and business values.
Christina W. Y. Wong, Ph.D., is an assistant professor in the Business Division of the Institute of Textiles and Clothing at The Hong Kong Polytechnic University in Hong Kong (CHINA).