ppt reshoring NUOVO.pptx - International Management
34
+ The manufacturing backreshoring: a new phenomenon or a temporary trend? Serena Tenuzzo October 7 th , 2015
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Transcript of ppt reshoring NUOVO.pptx - International Management
+
The manufacturing back-‐reshoring: a new phenomenon or a temporary trend?
Serena Tenuzzo October 7th, 2015
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summary 1. A recognition of general terms
2. Production offshoring: is it still the
right stategic choice?
3. Manufacturing comes back home
4. What about Italian firms?
5. About the research
+
A recognition of general concepts
1.
+
Globalization has
profoundly
changed the
business strategies
of companies and
the way they trade
internationally.
Presence of developing economies among the leading actors in the
international competition
New mechanism of dividing labor at a worldwide level
Ease in communicating and in moving goods
and people
+
Global value chains
International production, trade and investments
are increasingly organized within so-‐called global value chains (GVCs)
where the different stages of the production process are located across different
countries.
Globalization motivates companies to restructure their operations internationally
through
outsourcing and offshoring of activities
+
OFFSHORING
Companies’ purchases of intermediate goods from
foreign providers or
the transfer of particular tasks within the firm to a foreign
location
OUTSOURCING
The purchasing of intermediate goods
from outside specialist providers
either nationally or internationally
a geographical matter
a matter of ownership Fonte: OECD SURVEY 2010
+ Location versus Control
national international
Outsourced (to external supplier)
DOMESTIC OUTSOURCING
INTERNATIONAL OUTSOURCING
Insourced (within the boundaries of the firm)
DOMESTIC SUPPLY INTERNATIONAL INSOURCING CO
NTR
OL
LOCATION
Source: OECD SURVEY 2010 OFFSHORING
+ Offshoring
n No general definition accepted at a worldwide level
n The quantification is problematic à Lack of micro data
à no single database that quantifies the companies involved
n In Italy there is not a common research initiative
concept and measurement
+
Production offshoring: is it still the right strategic choice?
2.
+ Michael Porter once said: “ A lot of chief executives offshored
too quickly and too much”
Offshoring has been considered as a necessity for entrepreneurs in the manufacturing sector
For years, the concepts of offshoring and outsourcing has been the mantra of every supply chain manager eager to cut costs
Offshoring was defined as a “herd instinct”
The real benefits of offshoring have never been as high as imagined
+ Mistake in the location decision
n Firms often considered the location decision only from a cost-‐driven perspective
n Decision makers based their decision to offshore the manufacturing process on the mere cost of production
rather than on the total cost of sourcing
n Cost-‐oriented offshoring decisions are based on assumptions that often are not reliable in the medium and long term
+ Decision makers often did not consider the hidden costs of offshored production
direct costs
• Travel costs • Transportation costs • Costs for late delivery • Payment for bribes
• Additional salary • Additional investment for machines and devices
indirect costs
• Indirect labor costs • Low productivity
• Quality problems
• Additional stocking costs • Excahnge rate risk • Cultural differences
“The original offshoring decision was based on a tempting per-‐unit price, with little consideration for total cost analysis, which includes hidden costs”
(Gray et Al., 2013)
+
Manufacturing comes back home
3.
+
General Electric Apple
Caterpillar and Ford
These are just some names among the industrial giants that in the last years announced to move part of
their production back to their home countries.
A great amount of small and medium
enterprises have been following the path.
+ There is neither a common name
nor a common concept
n Onshoring
n Inshoring
n Reshoring
n Reverse shoring
n International reconcentration
n Reverse globalization
n Back-‐reshoring
academic literature Uni-‐CLUB MoRE Back-‐reshoring
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Back-‐reshoring: a possible definition
A voluntary corporate strategy
regarding
the home-‐country’s partial or total relocation
of in-‐sourced or out-‐sourced production
to serve the local, regional or global demand
Source: Uni-‐CLUB MoRe Back-‐reshoring
+
Back-‐reshoring is like a celebrity, but full of weaknesses
Information is provided by: -‐ Economic press
-‐ White papers of consulting firms -‐ UNCTAD
but
Lack of academic attention: -‐ Shared definition
-‐ Magnitude of the phenomenon -‐ Understanding of the driving factors
-‐ A model to predict future trends
+ back-‐reshoring cannot be examined
in isolation
Reshoring is concerned with WHERE manufacturing activities are to be performed
independent of WHO is performing the activity in question.
So it is a LOCATION DECISON
It is a reversion of a prior offshoring decision (Gray, 2013)
+
Home country
Country 3
Country 1 Country 2 offshoring
further offshoring
back-‐reshoring
nearshoring back-‐reshoring
The international location decisions
+ Evolution of the phenomenon at a worldwide level
QUESTION: Has the financial crisis fostered the back-‐reshoring phenomenon?
Source: UNI CLUB MoRe Back-‐reshoring
+ The geography of back-‐reshoring
the USA and Italy
get the gold and silver medals
+
The “abandoned” countries
254
53 48 34 22
7 5 0
50
100
150
200
250
300
China Asia Eastern Europe
Western Europe
Central & South
America
North Africa & Middle East
North America
+
The involved sectors
83
51
45
46
38
33
30
19
17
12
12
9
9
19
0 20 40 60 80 100
clothing & footwear
electronic (including PC)
electric, electromechanical & lighting
furinure & home furnishing
mechanical
automotive & auto parts
home appliances
toys
chemical plastic & rubber
biomedical
food & beverage
health & beauty care
tractors & used heavy
others
What are the driving factors of back-‐reshoring?
+
what about Italian firms?
4.
+ The evolution of the phenomenon in Italy
Source: UNI CLUB MoRe Back-‐reshoring Research Initiative
+
The distribution of back-‐reshoring cases
in Italy:
the record of the Veneto Region
+ Facts and figures about the phenomenon in Italy
Abandoned countries about Italian companies
Most involved sectors China: 36% Eastern Europe: 27% Western Europe: 18% Rest of Asia: 15%
Clothing and footwear: 44% Electronic, electric and lighting: 14% Furniture & home appliances: 11% Automotive and auto parts: 8%
+ the quality and the Italian craftsmanship are of foremost importance while dealing with international clients
+
About the research
5.
+ aim of the research
starting from an understanding of the causes involved in the previous offshoring process, the study will investigate:
n the reasons that run the back-‐reshoring decisions of Italian manufacturing firms à WHY?
n The steps of the manufacturing process that are involved à WHAT? (Is the entire production relocated? Or only part of it?)
n The industrial sectors involved
+ Internship at Fondazione Nord Est
+ Collaboration with the Uni-‐CLUB MoRe Back-‐reshoring group
Global Garden products
GTA MODA
firms are not willing to share data about reshoring because in this way they can admit a mistake in their corporate strategy Holz (2009)
+ Final considerations
n The idea of back-‐reshoring is not about going back to the original status quo.
n It is rather a effort to move forward.
n Quality, differentiation of products, the speed in the reaction to market requests are the fundamental features upon with Italian
companies should bet.
“Back-‐reshoring is a trickle, it is not a flood.
There is still more going out than coming in” (Davidson)
+ Thank you!
