Wharton-WHU Global Supply Chain Benchmark Study

The operations executive‘s puzzle: Offshoring, nearshoring, or reshoring?

After years of low-cost offshoring a public debate about the future of manufacturing especially in developed countries was started motivated by reports about companies “reshoring” manufacturing operations, bringing it back to – or at closer to – regions such as North America or Western Europe. While much anecdotal evidence exists for such decisions, there is little empirical analysis that has been conducted at the level of specific supply chain sourcing decisions understanding current trends, their drivers and impact. With the Global Supply Chain Benchmark Study we intend to address these questions. The goal of this study is to benchmark current practices with regard to the following three questions:

1. What global sourcing decisions have been made and what decisions are being contemplated?
2. What are the drivers of these decisions?
3. What has been their observed or expected impact?

Global supply chains are changing: Our sample tells us how exactly

During the past two years we worked with academics from leading business schools in the United States and Japan surveying leading global manufacturing companies from North America, Western Europe and East Asia on their current production sourcing decisions. Our analyses result in a set of findings which are to some extent surprising and confirm to some extent common perception:

• Companies are currently restructuring their global production footprints. Our research provides evidence that firms from all industries and origins are indeed currently reconfiguring their supply chains on a global scale.
• Hereby, a dominant strategy cannot be identified: Firms engage in wide variety of decisions, for a magnitude of reasons.
• China still attracts production volume investments by 45% of the sample across all industries. Yet, the driving forces have changed. Proximity to markets and supply chain related factors have grown in importance not only for decisions to invest in China. Companies chasing labor cost arbitrage shift production from China to ASEAN
• For North America evidence for a return of manufacturing can be found but a) not at a significant scale and b) not primarily as reshoring as 60% of manufacturing investments come from Asian and European firms
• For Western Europe we observe a decline in manufacturing. Western Europe along with Japan are the only regions for which more firms in our sample reported divestments than investments. A majority of the divestments in Western Europe are motivated by cost (shifts to Eastern Europe) or market reasons (shifts to China)

If you want to learn more about the results of our study download the final report at The Wharton School. The report discusses the results on a global level and provides more detailed analyses on the decisions to invest or divest in specific regions as well as their implications on manufacturing employment. In the appendix we complement these analyses with insights into the decisions made by firms from the different industry clusters in our sample. Further publication based on this study will follow in academic journals.