Exam 11: Managing Operations

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When the drawbacks of offshoring outweigh its cost advantages, MNCs may move operations back to the home country, a practice known as reshoring.
First, changes in relative costs contribute to the trend of reshoring. Increasing labor, utilities, and transportation in some traditional low-cost countries have offset the cost disadvantages of the U.S.
Second, changes in customer demand push companies to increase local responsiveness, and reshoring allows some companies to be faster and more flexible, have better control over quality and intellectual property, and better serve U.S. customers' needs.
Third, technological advancement in manufacturing has made reshoring more feasible. Automation and flexible manufacturing enable companies to cost-efficiently perform low-volume/high-mix production.
Fourth, in order to attract manufacturing jobs, local governments have offered generous incentives, and labor unions have also made compromises on wages.

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This is an interesting question for class discussion. Compared to the flood of offshoring, the reshoring flow is still a trickle. Technological advancement has made reshoring more feasible. In most reshoring cases, companies are only bringing back a portion of their production destined for the U.S. market. Moreover, decades of offshoring has led to a shortage of skilled workers and suppliers in the U.S. When these companies reshore they tend to utilize advanced manufacturing involving automation, which requires better educated or highly skilled workers. Despite its increasing labor costs and property prices, China still attracts manufacturers because of its well-developed supply chain. It is hard to say that the trend of reshoring will become stronger. There is no clear indication as to whether reshoring will increase or that offshoring will decline.