Setting the scene
Kirsty Davies, director and general manager of Professional Polishing Services, first ‘went public’, in 2007, after the Birmingham Post reported a confrontation with the Birmingham Chamber of Commerce. A letter had been sent to local firms urging them – where appropriate – to consider offshoring. Five years later, Professor David Bailey (then at Coventry University Business School) reported in the Birmingham Post (which is not maintaining the link) that “repatriating activity – including some sourcing – to the UK is very much on the agenda”. He summarised the impact of offshoring on British manufacturing over the last decade, and considered the tentative signs of “onshoring” in certain sectors due to a combination of factors, including:
- increased transport costs,
- rising wages in key areas of China,
- and a greater awareness of supply chain resilience, in the wake of disruption due to the Japanese earthquake and tsunami.
‘Home-sourcing’ and closer value chains in mature economies: the case of Spanish manufacturing*, by David Bailey, Carlo Corradini and Lisa De Propris, was published in August this year.
Most recently, governments in Europe and the USA have started to question the implications of production location choices by multinational enterprises for domestic economies and to express their intention to rebuild manufacturing capabilities in the domestic economy.
This has led to a debate on changes in the global organisation of production with an emphasis on a current global shift-back trend that has been captured in the more visible debate on ‘reshoring’ or ‘backshoring’ and, more broadly, a switch from foreign to home-sourcing in supply chain management.
Reshoring trends in Germany
Kinkel and Maloca (2009) looked at reshoring trends in Germany and found that one in six companies that had offshored between 2004 and 2006 chose to reshore and in a 2012 paper found that during the period 2007–09, for every three firms offshoring, one reshored (Kinkel, 2012).
One in six UK manufacturing firms are actively engaged in reshoring
In the UK context, Bailey and De Propris (2014) argue that while evidence points to reshoring being a discernible trend, practical constraints such as access to skills and finance, energy costs and land availability appear to limit it, hence the relatively modest scale of reshoring activity that they find.
Their paper focusses on the nature and characteristics of the businesses switching from foreign to domestic suppliers. They found that R&D-intensive businesses with core non-standardized products may be more likely to change the composition of their supply chain by ‘switching’ or ‘replacing’ foreign outsourcing for home-sourcing,
Their findings will lead to a broader understanding of what manufacturing activities might realistically and sustainably be built and anchored in mature economies that are high cost but technologically advanced, such as those in Europe.
Bailey and De Propris suggest the advantages must be understood in terms of the skilled jobs created and the multiplier effect derived from recoupling manufacturing with the value creation content of the functions that are home-sourced.
* Cambridge Journal of Economics, Volume 42, Issue 6, 9 November 2018, Pages 1567–1584, https://doi.org/10.1093/cje/bey020