Reshoring drivers and barriers in the Swedish manufacturing industry

Gabriella Engström (Department of Industrial Engineering and Management, School of Engineering, Jönköping University, Jönköping, Sweden)
Kristina Sollander (Department of Industrial Engineering and Management, School of Engineering, Jönköping University, Jönköping, Sweden)
Per Hilletofth (Department of Industrial Engineering and Management, School of Engineering, Jönköping University, Jönköping, Sweden, and Department of Industrial Engineering and Management, University of Gävle, Gävle, Sweden)
David Eriksson (Department of Industrial Engineering and Management, School of Engineering, Jonkoping University, Jonkoping, Sweden)

Journal of Global Operations and Strategic Sourcing

ISSN: 2398-5364

Publication date: 18 June 2018

Abstract

Purpose

The purpose of this study is to explore reshoring drivers and barriers from a Swedish manufacturing perspective.

Design/methodology/approach

This paper is a case study, including four Swedish manufacturing companies, with focus on drivers and barriers from the context of the Swedish manufacturing industry. A literature review of previously established drivers and barriers is used to map out the empirical findings and thereby identify potential gaps between the current body of literature and drivers and barriers from a Swedish manufacturing context.

Findings

The findings of the study suggest that quality issues continue to be one of the strongest reshoring drivers. Except for product quality, quality is also connected to host country’s infrastructure, communication and service. The supply chain perspective is a source of several drivers and is identified as a perspective often overlooked in offshoring decisions. Barriers related to firm specifics were more elaborately discussed by the companies, especially concerning calculation of location decision and the need to invest in resources, which allows for a higher level of capacity at the home country facility.

Research limitations/implications

The study develops a structured table of reshoring drivers and barriers which can serve as a base for future research. Future research on the calculation of location decisions is deemed as a crucial step to further understand reshoring and aid companies in the decision-making process.

Practical implications

The drivers and barriers identified in the study can give practitioners insight into reshoring from the perspective of the Swedish manufacturing industry and thus aid in future manufacturing location decisions. The table of drivers and barriers can also be important to understand how Sweden can strengthen its competitive advantage and motivate more companies to reshore manufacturing.

Originality/value

This is one of only few papers from the Nordic countries and also one of few case studies examining reshoring in manufacturing companies.

Keywords

Citation

Engström, G., Sollander, K., Hilletofth, P. and Eriksson, D. (2018), "Reshoring drivers and barriers in the Swedish manufacturing industry", Journal of Global Operations and Strategic Sourcing, Vol. 11 No. 2, pp. 174-201. https://doi.org/10.1108/JGOSS-06-2017-0014

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Publisher

:

Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited


1. Introduction

Following the development of a global market, offshoring and outsourcing has increased as a popular strategy for companies (Kedia and Mukherjee, 2009; Kinkel and Maloca, 2009; Hilletofth and Hilmola, 2010; Lewin and Peeters, 2006). Offshoring is often done with the hope to make manufacturing more cost efficient (Ellram et al., 2013; Lewin and Peeters, 2006; da Silveira, 2014), mainly by taking advantage of low labor costs in developing countries (Bunyaratavej et al., 2008; Kinkel and Maloca, 2009). During the past decades, the promise of what offshoring could give companies has led to companies moving parts or their entire manufacturing process to low cost countries (Ellram, 2013; Lewin and Peeters, 2006).

Today, consulting agencies and the academic community have concluded that offshoring is not inherently beneficial to businesses. The difficulty of estimating total costs and oversimplified models for decision-making are argued as key sources of failure (Brown, 2010; Wiesmann et al., 2017). Furthermore, the focus on offshoring has increased the concern for global issues such as intellectual property theft (Forbes, 2009), higher in-transit inventory costs (The Economist, 2013) and issues relating to the management of environmental and social issues (Eriksson et al., 2013). These issues have led to the growth of a phenomena called reshoring, which entails the strategic relocation of industrial manufacturing from an offshore location to the company’s country of origin (Fratocchi et al., 2014).

The increasing amount of reshoring cases has sparked interest in the area (Tate, 2014). Non-scientific publications have been eager to cover the phenomena of reshoring with articles published by, for example, The Wall Street Journal and The Economist. From the scientific community, research and publications are limited (Fratocchi et al., 2014), but have started to increase. Research, from countries such as, the USA, Denmark and Germany, points toward increasing levels of reshoring in the future (Arlbjørn and Mikkelsen, 2014; Tate et al., 2014; Ellram et al., 2013; Kinkel, 2012). Although early reports were not able to conclude a reshoring trend in Sweden (Svenskt Näringsliv, 2013), recent reports showed that reshoring is a trend in Sweden (Svensk Industriförening, 2015; Unionen, 2016).

The Swedish context is yet largely unexplored in literature, but examples do exist (Kerkhoff et al., 2017). Sweden is an interesting country for studying manufacturing. In the twentieth century, Swedish quality was famous, and several Swedish companies have made impressions on the global market, including Electrolux, Ericsson, Husqvarna, SAAB and Volvo. Sweden is also considered to be an innovation-driven, competitive market, but it is also known for high tax rates and salaries (Schwab, 2015). Current issues for Swedish manufacturing include a need to create entry-level jobs, making reshoring of production important. There is research focusing on the intricacies of competitive manufacturing in high-cost countries (Sansone et al., 2017), and perhaps lessons from Sweden can also be useful for countries in a similar situation.

Although reshoring research is called for by both practitioners and researchers, existing literature does not adequately cater to this demand. Through increased knowledge, companies can learn how to implement the necessary strategies, make well-informed decisions and successfully reshore manufacturing. As a response to this gap in knowledge, research has focused on drivers and barriers to reshoring among manufacturing companies (Wiesmann et al., 2017). To increase knowledge in this area of research, this paper focuses on four Swedish manufacturing companies that have reshored production from both Asia and Europe. The purpose of the paper is to explore reshoring drivers and barriers from a Swedish manufacturing perspective. To fulfill the purpose, two research questions were formulated. The first research question strives to gain an understanding of why companies choose to move production back to Sweden and therefore focuses on reshoring motives:

RQ1.

What reshoring drivers do manufacturing companies experience?

The second research question captures the difficulties with reshoring and therefore focuses on reshoring barriers.

RQ2.

What reshoring barriers do manufacturing companies experience?

To answer the research questions, a case study of four Swedish manufacturing companies, with experience in reshoring, was conducted. The paper is structured to include a theoretical background which presents the current body of literature. Thereafter, the method used to conduct the research is accounted for. Following this, the empirical data of each case company are presented separately. The empirical data are then analyzed and compared with the drivers and barriers presented in the theoretical framework. The comparison and analysis allow for an understanding of which drivers and barriers are prevalent in Swedish manufacturing companies and also to see potential new drivers and barriers. The paper ends with a discussion of the empirical findings, implications and the main conclusions, as well as encouragement for future research.

2. Literature review

2.1 Defining reshoring

To ensure being competitive in the market, companies have to choose an appropriate supply chain strategy (Fraering and Prasad, 1999). These strategies can be seen from two perspectives: First, the ownership mode. The ownership mode can be divided into two categories depending on the decision to either produce internally or buy from an external supplier (Åkesson et al., 2007; Slack and Lewis, 2010). Second, the supply market. The supply market is based on the decision to manufacture in the domestic market or on the international market (Åkesson et al., 2007). These two perspectives are visualized in Figure 1, with the four additional arrows showing how four different categories of reshoring relate to supply channel and supply market.

Figure 1 also captures the argument that reshoring is a manufacturing decision irrespective of the ownership mode. The common denominator for all four reshoring categories is the movement of manufacturing to the country where the company’s head office is located. The differences between the four categories of reshoring presented in Figure 1 are explained in Table I.

Table I and Figure 1 visualize important components of reshoring. However, it is important to also explicitly state how the term reshoring is defined and adopted in this paper. Although reshoring has been used interchangeably with other terms such as backshoring and has also been subject to discussion of how to properly define it (Fratocchi et al., 2015), Wiesmann et al. (2017) were able to identify a common denominator in the current body of literature, stating that reshoring is most often used to capture the phenomena of moving previously offshored production back to its original location. To summarize the definition of reshoring, Wiesmann et al. (2017) argued that three of the five generic assertions established by Gray et al. (2013) are relevant:

  1. reshoring is a location decision;

  2. reshoring can only occur if offshoring has occurred previously; and

  3. often both decisions (offshoring and reshoring) are flawed.

These three generic assertions in combination with Wiesmann et al.’s (2017) definition is adopted in this paper. Accordingly, this paper studies reshoring as a question of location and not ownership; reshoring is defined throughout the paper as a decision to move whole or parts of previously offshored manufacturing back to the home country. From the perspective of why companies engage in reshoring, focus has been on what drives companies to reshore despite the advantage of low labor cost in the offshoring location. Although focus is on drivers, certain barriers have been identified (mostly when relative comparisons are made).

2.2 Drivers of reshoring

Reshoring drivers were identified from each of the five categories, the most prominent being supply chain. An overview of all the drivers identified and the respective references can be seen in Table II.

The first category of drivers addresses the global environment. The global environment is subject to constant change and is hard to influence yet can have a profound effect on business climate and questions related to localization. In the current body of literature, reshoring drivers and barriers were identified relating to global politics and global economics. Previous research shows that companies have taken global issues into account when making reshoring decisions (Kinkel, 2012). According to Tate et al. (2014), companies are increasingly competing for the same resources creating issues related to access of competent workforce and raw materials. A German company, for example, had to change their raw material supply strategy when prices in Thailand increased (Kinkel and Maloca, 2009). The company was forced to export the raw material from Germany to their manufacturing facility in Thailand (Kinkel and Maloca, 2009).

The second category, host country, represents drivers which relate specifically to the country to which manufacturing is offshored. Many drivers related to the host country are all rooted in the same issue; quality (Bailey and De Propris, 2014; Kinkel, 2012). The potential for quality issues related to the product are many times overlooked when offshoring decisions have been made, ultimately resulting in higher costs of quality control and assurance than anticipated (Kinkel and Maloca, 2009).

The third category is the supply chain itself, which includes flows of goods, communication and information (sometimes also manpower and capital equipment) (Forrester, 1958). Today’s supply chains are increasingly complex, making it difficult to control all components. The lead times are also affected by the global and complex supply chains; therefore, one of the most frequently identified drivers to reshore is the ability to shorten lead times and have a more flexible and efficient supply chain (Ellram et al., 2013). A recent study showed that 72 per cent of manufacturing companies expressed problems with flexibility and ability to deliver (Kinkel and Maloca, 2009), and similar results were seen in a more recent study in New Zealand (Canham and Hamilton, 2013).

The fourth category relates to home country drivers which are specific to the country where the company has its headquarters. The ability to have production in the home country has changed in the past years because of advances in technology which allow for higher levels of automation. However, some drivers were present when the offshoring decision was taken but were not considered or appropriately evaluated. An example is the workforce’s productivity and work ethic which in previous research has proven to be higher in high cost countries (Moutray and Swift, 2013; Tate et al., 2014; Pearce, 2014). Furthermore, companies can have a social responsibility toward the workforce in the home country. This has been witnessed in the USA where many companies have chosen to reshore manufacturing to support the country’s economy and welfare (Kazmer, 2014). This form of reshoring is seen as a form of patriotism (Canham and Hamilton, 2013).

The last category captures drivers related to the firm and its specific characteristics. When making a decision on the location of manufacturing, the expected outcome has to be balanced with the potential risks (Lewin and Peeters, 2006). Kinkel and Maloca (2009) expressed that companies generally lack knowledge about the host country when the decision to offshore is made. To make a decision to offshore, a long-term plan is necessary, as well as investigation in marketing-, sales-, cultural differences- and workforce-related issues in relation to the host country. Without this form of thorough investigation and understanding, Anderson et al. (1998) argued that companies will be blind to crucial power structures and unwritten social codes in the host country. This form of miscalculation is at the heart of many of the reshoring drivers (Kinkel and Maloca, 2009) in not only the firm-specific category but also all five categories.

2.3 Reshoring barriers

In total, 20 reshoring barriers were identified in the current body of literature. There are barriers in four out of five categories, the exception being supply chain. An overview of all the fifteen barriers identified and the respective references can be seen in Table III.

As was presented under the section for global environment drivers, the state of global politics and economy can shift the perception of a region or country greatly. One of the identified barriers relates to economic differences, for example, differences between two countries in their taxation legislation can result in one country being cheaper to produce in (Bailey and De Propris, 2014). Similarly, differences in labor costs are often argued to be so great that it is better to offshore manufacturing (Bailey and De Propris, 2014).

Reshoring barriers related to the host country barriers are hard to quantify yet could significantly impact on day-to-day business operations. Several of the barriers stem from risks of moving away from the offshored location. For example, there is a risk of losing vital knowledge and know-how, especially when the offshored manufacturing facility is not owned by the company (Ellram et al., 2013). If the company owns the facility, it is still difficult to ensure that knowledge is not lost. Additionally, it can be costly and time consuming to implement strategies to retain the knowledge.

From the perspective of the home country, it is important to note that when evaluating the potential ability to reshore the first step is to ensure that the home country and firm are able to maintain the standard of the current host country. Furthermore, the home country and firm should address the issues which have resulted from offshoring. One barrier often identified by companies is related to labor, both in terms of access to competent labor (Bailey and De Propris, 2014) and in terms of flexibility of the workforce (Canham and Hamilton, 2013).

Relating to a specific firm, research shows that many companies that have offshored are disappointed with the results; however, they consider it to be too late to change and reshore (Bailey and De Propris, 2014; Canham and Hamilton, 2013). This is partially because of the companies believing that the costs of reshoring are too high (Canham and Hamilton, 2013). Furthermore, companies see issues with not having the experience needed to ensure the efficient and effective leadership of a reshoring project (Arlbjørn and Mikkelsen, 2014).

3. Research method

This research is part of a larger research project, including an ongoing data collection from Swedish manufacturing companies and a structured literature review. The data presented in this paper were collected from four Swedish companies who have experience with reshoring. The researchers have worked extensively with two of the case companies (FurnitureCo and TruckCo), multiple times over several years with the third case company (ClothingCo) but reshoring data have only been gathered formally for this specific research. It is the first time the researchers are working with the fourth company (FixingsCo). Because of the relation with the different companies, some companies have been visited more extensively and also been used to gain a general understanding about reshoring. The use of case research is a good strategy to capture a holistic perspective and a deep understanding (Aastrup and Halldórsson, 2008; Eisenhardt, 1991). Furthermore, the topic of reshoring is intertwined with other contextual factors, which also lends itself to a case study (Eriksson, 2015). Although multiple case studies are generally used with a replication logic (Eisenhardth, 1989), in this study it is primarily used to gain in-depth knowledge about a subject which is context-dependent. By including multiple companies in the case research, both the construct and the narrative could be improved (Dyer and Wilkins 1991). To summarize, multiple case studies as a research method is argued to provide a broader exploratory foundation in comparison to a single case study (Yin, 2013).

The sampling of case companies was both purposeful and based on convenience (Yin, 2013). It was purposeful in the matter that manufacturing companies with experience of reshoring were selected, and it was based on convenience in that Swedish companies were used, so as to allow the researchers to gather the desired data. The rationale for such approach is motivated by viewing research as an ongoing process, in which the body of knowledge is always expanded upon, even though some areas of empirical data are easier to reach than others (Eriksson, 2015).

In the larger picture, this study is one step toward constructing a more complete framework of drivers and barriers to reshoring. The first step was to conduct a literature review, the second step, which is here presented, is to build a greater contextual and empirical knowledge and the reasonable third step is a survey capturing drivers and barriers on a larger scale.

3.1 Data collection

The empirical data were collected from four companies chosen based on the concept of analytical, purposeful sampling. It allows the researcher to choose research subjects with consideration to the study’s purpose and questions (Williamson, 2002). Therefore, all companies included in the case have experience of the decision processes of reshoring manufacturing operations. Although all companies have experience with reshoring, they vary in respect to supply channel and supply market as was previously introduced in Table I. The four companies and the type of reshoring experience they have are listed in Table IV.

The interviews were semi-structured. An interview guide of specific questions and discussion points was constructed, but because of the intertwined nature of the topics discussed, and the goal of exploring and contextualize, structured interviews were not considered suitable. According to Patel and Davidson (2011), qualitative interviews allow for insight in the interviewees understanding in a subject, therefore this study adopted a qualitative approach. Furthermore, the interview questions are formulated in more casual manner than quantitative approaches generally entail, this is to allow for follow up questions and for the interviewee to elaborate an answer (Merriam and Nilsson, 1994). The interviewees were all in middle and upper management and had been involved in reshoring processes. A more detailed overview of the interviewees is found in Table V.

The interviews were complemented with document studies, enabling both triangulation (Yin, 2013) and redirection (Dubois and Gadde, 2002). FurnitureCo and TruckCo provided documents from previous localization projects were examined to gain a deeper insight into drivers and barriers. All companies supplied the researchers with company information which gave insight into the history and background of the companies.

3.2 Data analysis

The data analysis has been ongoing throughout the data collection, so as to increase the understanding and create congruence between theory, framework, empirical data and the case (Dubois and Gadde, 2002). The data from each individual company were analyzed using open coding aimed at identifying and grouping words, phrases and themes related to reshoring drivers and barriers (Ellram, 1996). Informants were given the opportunity to check the categories, increasing the credibility of the work (Eriksson, 2015; Lincoln and Guba, 1985). The analyzed data from all companies were then compared to find similarities and differences between the cases. The last step was to map empirical data against the literature review giving light to which drivers and barriers in the current body of literature that could be verified in by the companies, and which drivers and barriers needed to be added to the list of reshoring drivers and barriers (Yin, 2013).

4. Empirical findings

In the presentation of the empirical findings, the companies are presented individually to allow insight in their reshoring experience and the drivers and barriers they identified. A synthesis of the cases will be done in the following section.

4.1 FixingsCo

FixingsCo is a Swedish manufacturing company that focuses on supplying their costumer with premium quality products. The company primarily sells two products, which will be referred in this study as Hit and Turn. FixingsCo has two manufacturing facilities, one in a European low-cost country and one in Sweden. The European facility is specialized on product Turn, while the Swedish facility is focused on Hit. The company’s main customers are professionals in the Nordic countries and Western Europe. The European manufacturing facility was acquired in the 1990’s and was deemed an appropriate offshoring location. The offshoring decision was based on the company being influenced by the trend to offshore and the idea that labor intense operations should be placed in a low-cost country. At the beginning, the European facility produced both Hit and Turn, while the Swedish facility focused on high-quantity orders of Hit. In 2014, the company re-examined their strategy for manufacturing and began the process to reshore the following year. The reshoring decision was based on the evaluation that it was better for the manufacturing facilities to focus on different products and to allow the European facility to specialize Turn, so as to better cater the host country’s domestic market. The reshoring of Hit to Sweden was not seen as expensive, as the Swedish facility had free capacity and the majority of the needed machines and tools. When reflecting on the result of reshoring, the company saw that they no longer needed to maintain two similar machine parks. Instead, the company could enjoy the benefits of centralizing manufacturing processes and all energy time could be focused on one facility.

Transportation was also a driver at FixingsCo. The majority of the customers for product Hit were in the Nordic countries and therefore transportation time and costs could be cut. Lead times were also shortened drastically by moving manufacturing closer to the customers. Furthermore, the shortened distance between manufacturing and the market allowed for better flexibility and made planning of production easier, which in turn lead to the ability to lower inventory levels. The increased levels of flexibility in manufacturing allowed FixingsCo to better meet consumer demands. Quality was not seen as an issue with the Hit product until after the product was reshored. By moving manufacturing closer to the market consumers were able to communicate more directly and their feedback reached FixingsCo faster. FixingsCo also expressed that the reshoring of Hit enabled the product development department to work with manufacturing more seamlessly. FixingsCo has already seen a positive effect of the two departments creating a closer relationship and cooperation.

The difference in culture and language was important for the reshoring decision. The host country had a different culture, especially concerning work ethics and routines. Communication was also an issue, as the level of fluency in English varied between the employees. Furthermore, FixingsCo had experienced difficulty recruiting competent personnel as a result of the increasing competition from other international companies in the host country. In recent years, FixingsCo also experienced diminishing differences in wages between the host and home country.

Although FixingsCo saw a plethora of positive effects of reshoring, they also experienced barriers. The process of reshoring was more complex than FixingsCo expected, especially concerning the host country’s legal system which was complicated and bureaucratic. As a result, FixingsCo spent a lot of money on legal counselling and tax lawyers. The host country’s taxation agency demanded that FixingsCo paid a sum to compensate for the loss of future profits. This was the agency’s way of protecting the domestic industry. FixingsCo also ran into issues with the home country’s legislation in the form of environmental regulations. Consequently, FixingsCo decided to not move all machines and equipment. Another barrier that FixingsCo had expected was the cost of making changes to the host country facility. FixingsCo was prepared for the risk that workers at the host country facility would lose motivation and work less efficiently once they received the news that they were making changes. To avoid the host country workers from taking out their frustration of losing work by sabotaging equipment, something that FixingsCo had experienced before, personnel from Sweden were present when machines and equipment were dissembled and packed. The transfer of information was also identified as a barrier to reshore, especially because of the home and host country speaking different languages.

4.2 FurnitureCo

FurnitureCo is an international company manufacturing furniture, primarily in the business-to-business market. The company has a large manufacturing facility in Sweden and several suppliers and manufacturing facilities outside of Sweden. The company strives to supply customers with a high level of service, flexibility and customization, which puts pressure on their supply chain to be efficient. The company has had a long-term strategy to implement and develop more efficient manufacturing methods reducing the relatively high cost of labor, which has pushed automation of manufacturing processes. Over time, manufacturing changes have freed up capacity and inventory space in the Swedish facility. As a result, FurnitureCo saw the ability to gain scale benefits through reshoring. A major overview of their global footprint was done in the summer of 2016, during which a European manufacturing facility was closed and production was moved to Sweden.

By reshoring, FurnitureCo saw the possibility to shorten lead times and increase flexibility. For FurnitureCo, quick delivery times to their customer is crucial, and by shortening the lead time they could improve customer service. Another reason for reshoring was the many hidden costs that were overlooked in the calculation when they offshored, including costs related to quality issues and coordination. When issues with quality have occurred, they have often not been sufficient to communicate through e-mail or telephone; instead, Swedish personnel have had to travel to the facility, costing both time and money. Therefore, FurnitureCo argued that reshoring would lead to more control over quality and allow for quality issues to be detected earlier and solved faster and cheaper.

The coordinating of logistics and transportation is one area where FurnitureCo sees a potential to cut costs drastically by reshoring. Furthermore, the risks associated with transporting products could be minimized through reshoring. The company follows a just-in-time (JIT) strategy; therefore, late deliveries from the offshored facility can have major consequences. The JIT strategy is also a response to customer demand for a more flexible and customizable product. To meet this demand, FurnitureCo offers a wide array of options for their product. However, it is impossible to have all options in stock and therefore there is a need to manufacture to order. This form of production is difficult to offshore, as it makes more challenging to ensure that the delivery time does not exceed the time the customer is prepared to wait. By reshoring, FurnitureCo could meet their customers’ demands more accurately while also enabling a better cooperation between production and product development. This close cooperation is also believed to lead to increased customer satisfaction.

Producing in the home country had additional appeal, for example, a stronger brand image domestically. Furthermore, producing in Sweden would enable the company to improve social responsibility on a local level, especially by securing jobs. Another driver expressed by FurnitureCo was the concern over changes in currency rates between the host and home country being a factor they had no control over or could predict. FurnitureCo expressed the importance of understanding the supply chain and all the suppliers involved when making a location decision, so as to make the supply chain as efficient as possible. The supply chain perspective was identified by FurnitureCo as one of many factors neglected when the offshoring decision was taken. Furthermore, FurnitureCo stated that ten to fifteen years ago companies in general felt an obligation to offshore, as it was a way to communicate that the company was international.

Even though FurnitureCo expressed the belief that reshoring was the best solution for them, there were barriers that prohibited them from beginning the process of reshoring. They still perceive the higher labor cost in the home country to be an issue. While the company has worked to make manufacturing more efficient in the Swedish facility, labor cost is still an issue. On top of increased labor cost, the facility has a high cost and might require additional investments. Raw material is also an issue currently under investigation. Suppliers are being examined to evaluate if the raw materials are available closer to the home country, as well as what the consequence of transporting the materials to Sweden would be. These aspects, and many more, need to be appropriately evaluated in a calculation, which has proven to be difficult for FurnitureCo, making it hard to take an appropriate reshoring decision.

4.3 ClothingCo

ClothingCo is a clothing manufacturer, targeting a premium, high quality, segment. Approximately 20 years ago, ClothingCo established a manufacturing facility in a low-cost European country, which they later sold to a domestic company. Following the change of ownership, the company examined the possibility to reshore production back to Sweden. A decision was reached few years ago to produce simple and large quantity orders that were labor intensive in the host country facility, while smaller quantity orders with special requirements should be produced in Sweden.

The main reason ClothingCo decided to reshore was to serve their customers better quality products and service through better flexibility and control. The company also faced the risk of not being prioritized by suppliers if larger companies placed orders at the same supplier. By producing in Sweden, they gained control and could avoid the risk of competing with larger companies for resources in offshore locations. Transportation cost and time was also cut through reshoring, making it possible to offer customers faster and more reliable deliveries. Furthermore, ClothingCo had an increasing amount of customer request for their products to be manufactured in the Swedish facility for the products to have a made-in-Sweden label.

Operating in different linguistic and cultural areas added to the cost of operating and coordinating two manufacturing facilities. The coordination also required several expensive trips, to get on top of problems. A particular issue related to ClothingCo’s unique selling point was to learn the employees to get a feeling for the desired quality of the product. Having production closer to the headquarters could not only solve the issue with quality but also promise better coordination between product development and manufacturing and improved problem-solving, as well as better long-term solutions.

Moving production to Sweden, despite the potential benefits, was not easy. For several decades, manufacturing has been offshored and competency has been lost over time, while investments in equipment has been sparse. As such, finding competency in certain manufacturing processes is challenging in Sweden. Therefore, ClothingCo was only able to reshore parts of their manufacturing operations. To solve the issue of lack of competency, ClothingCo employed previous employees and examined the possibility of importing workforce from another European country. Furthermore, to reshore the chosen products, investments had to made in new machines and a new facility. Adding to the problems, ClothingCo found it hard to calculate the cost of reshoring. For example, labor costs in the offshored facility was paid per minute in comparison to having a full-time employee with all the required benefits in Sweden. To compare the two forms of labor costs can be difficult when flexibility, control and quality needs to be incorporated.

4.4 TruckCo

TruckCo manufactures trucks with a high degree of customization and focus on quality, ease of use and ergonomics. The company is owned by a multi-national corporation and therefore have a large global network of suppliers. TruckCo has a large manufacturing facility in Sweden which mainly supplies the Western European market. The company has experience of several reshoring projects, one of which is the manufacturing operations of the facility they owned in Asia that was reshored. Previous reshoring projects have involved reshoring from suppliers. As such, the drivers and barriers include reshoring of both in-house and outsourced activities. In the specific case discussed below, TruckCo reshored mainly because of quality issues.

The quality issues experienced at the host-country facility were not only connected to the final product. TruckCo experienced problems with the quality of the infrastructure in the host country, for example roads, internet and electricity were not reliable. Furthermore, there were issues with the reliability of transportation, although not always caused by the facility but the transportation company. It was evaluated that a higher level of reliability concerning transportation could be assured through reshoring. The issue of transportation was linked to the distance between the home and host facility, as well as the infrastructure in the host country. The issues with transportation resulted in long lead times which in turn resulted in higher inventory levels. From Asia, delivery was three months which made the company very vulnerable to forecast errors. The cost of transportation and logistics has also increased, driving the company to consider manufacturing closer to the customers.

The global network of suppliers requires coordination and travels. TruckCo has on multiple occasions been forced to send Swedish employees to suppliers to solve issues. Still, not all issues could be solved because of language barriers. Another issue related to the global supply is the different time zones, at times, resulting in two facilities having narrow time windows for discussions, making communication very inefficient. TruckCo has also experienced a supplier increasing their prices and are worried that it will happen again. By reshoring, the company removes one source for unexpected price increases. Furthermore, TruckCo highlights the risk of relying on an external supplier. The supplier can, for example, change focus from producing smaller components to finished goods.

From the perspective of the home country and Swedish facility, TruckCo argues the importance of evaluating how to sustain competitive advantage. Furthermore, they argue that increased automation and free capacity can change over time therefore needs to continuously evaluated. When TruckCo evaluated these factors, it became evident that reshoring would be the best decision. Another benefit of reshoring that TruckCo experienced was the improved ability to meet customer demand. Recently, the demand for environmental sustainability has grown. Therefore, TruckCo demands that their suppliers do not use of harmful chemicals. TruckCo also experienced a better ability to meet customer demands when reshoring since product development and manufacturing are closer leading to better cooperation.

The calculations used prior to the offshoring decision did not correspond to the actual outcome. In hindsight, TruckCo can see that they focused too much on the cost of one product. The overhead costs were overlooked, and TruckCo has therefore tried to take these into account when making future manufacturing location decisions. Furthermore, TruckCo has experienced how the difference in labor costs can diminish over time, stressing the importance of not giving to much significance to differences in labor costs.

Over the years, TruckCo has experienced several barriers to reshoring. One of the major barriers is the collection and evaluation of information which used to financially evaluate the reshoring decision. Intellectual property rights have also been problematic for TruckCo to manage. In some cases, the supplier has full or shared ownership of important patents. In those instances, it is problematic to reclaim control over production. On the other hand, by letting the supplier have ownership over the patent, they have the responsibility to maintain it which can be costly. A related problem is when the supplier has control over product blueprints. Product blueprints are often changed over time, so as to include minor problems, and TruckCo is not always aware of these updates. When choosing to stop working with a supplier on certain products TruckCo also sees the potential risk of losing the partnership they have built with suppliers. TruckCo has experienced that when reshoring a few products from a supplier of several other products, the supplier has a strong position at the negotiation table and can respond by cancelling all contracts. A supplier becoming insolvent or having economic issues can force a reshoring. However, TruckCo expressed that reshoring as a precaution is difficult, as it often requires the company to invest in new machines, hire new employees and create new workspace.

The company has identified that products which are labor-intense are not profitable to move home because of the high cost of labor in Sweden. Furthermore, Sweden lacks the competent personnel to perform several of the processes involved in manufacturing and therefore reshoring often involves costly education and training of new employees. Differences between Sweden and many of the countries that TruckCo has experience with is labor, business and environmental laws and regulations. In Sweden, these laws and regulations often make products and the process of reshoring more expensive.

5. Analysis

The story behind how each company offshored manufacturing differs; however, all four companies ultimately made the decision to reshore manufacturing. The drivers and barriers that the four companies experienced during the process of reshoring are presented in the following sections. The drivers and barriers are analyzed cross case and compared to the established reshoring literature.

5.1 Drivers

There were seven drivers that were identified by all four case companies: quality, distance, transportation and logistics, research and development, capacity, customer and centralization. Although there were many similarities between the companies, new perspectives of reshoring drivers were gained from the analysis of both the similarities and the differences. The drivers identified by the four case companies are compared with those found in literature (Table VI).

Compared to the literature, drivers related to the global environment are more prevalent among the case companies. FurnitureCo, ClothingCo and TruckCo expressed arguments similar to those presented by Bailey and De Propris (2014), who stated that there are still big economic differences between countries, making some countries more attractive because of labor costs, tax rates and labor regulations. However, as is seen at FixingsCo, the economic differences between some countries have diminished. When companies offshored, it was popular to base the decision on differences in labor costs (Kinkel and Maloca, 2009). It is therefore noteworthy that FixingsCo reshored when they experienced that labor costs differences were minimal. TruckCo was even able to see that certain suppliers in Sweden had lower labor costs than their current offshored suppliers. From the perspective of global economics, FurnitureCo discussed issues of currency rates as a form of driver and barrier. The popularity in offshoring manufacturing has been the source of increased global resource competition (Tate et al., 2014). FixingsCo expanded on this, stating that the competition made it difficult to hire competent employees and made suppliers prioritize orders from larger companies. Although the global environment was not as widely discussed as other categories, the global environment influences the other categories, and it is still relevant to consider when exploring reshoring.

Under the category host country, the most prevalent driver was quality. This is also seen in previous research (Fratocchi et al., 2015; Kinkel, 2012; Kinkel and Maloca, 2009). One new driver identified at FixingsCo’s was domestic market. This entails that companies do not inherently lose access to a market when reshoring, instead manufacturing can be organized so as to better serve both markets. TruckCo gave new insights to the driver risk management, by exemplifying how the host country suppliers can drive reshoring by changing prices, being financially unstable and stopping to supply the products. It is important to note that three of the companies included in the study were reshoring from European countries, while the majority of previous literature on reshoring has focused on reshoring from Asian low-cost countries. Therefore, certain host country drivers established by previous literature might not apply to these specific cases; this raises the importance of differentiating between different host and home countries when discussing reshoring.

Among all four companies, the majority of drivers were connected to the supply chain. This reinforces that the supply chain is becoming increasingly important to consider when making manufacturing location decisions (Ellram et al., 2013). Several of the companies expressed having neglected the supply chain perspective when making the offshoring decision. Costs associated with coordination and higher inventory levels were often overlooked. The growing demand from customers to have a customizable product delivered in a short time necessitates that companies secure a flexible manufacturing process. At all companies, reshoring was a response to have a better fit between the customer demand and supply chain capability, especially in respect to shorter lead times and increased flexibility. The physical and mental distance between the home and host country was identified as a source of issues for all companies, similar to previous studies (Ancarani et al., 2015; Canham and Hamilton, 2013; Ellram et al., 2013). These issues are also found in literature, highlighting how globalization and complex supply chains increase risks and drive costs in transportation and distribution (Ellram et al., 2013). The physical distance was also discussed in connection to product development (research and development), where all the companies experienced that the distance effected their ability to develop their products in accordance with customer demands and needs. Furthermore, quality issues could have been addressed more efficiently by having manufacturing close to product development. TruckCo observed an increase in the cost of transportation and logistics because of the increased physical distance, which motivated them to reshore. Furthermore, TruckCo experienced communication issues because of the physical distance in the form of time differences between the facility and headquarters. The mental distance was apparent in the examined case companies, especially in connection to communication and cultural issues. When analyzing FixingsCo, it is apparent that the mental distance created two facilities working toward separate goals and handling important components such as customer service very differently. This finding is in line with previous research which stresses that mental distance can create a company with facilities focusing and addressing crucial components of business differently (Kinkel and Maloca, 2009; Tate et al., 2014).

Related to Sweden as the home country, one driver that was not discussed was political incentives. This is in contrast to previous literature from the USA, where the government has actively been working to entice companies to reshore (Fratocchi et al., 2014). In earlier research, Swedish manufacturing companies discussed political incentives from the perspective of a potential barrier, with companies stating the government could protect local manufacturing better and promote reshoring (Engström et al., 2018). The brand image associated with the country of manufacturing is according to Canham and Hamilton (2013) and the four case companies becoming more important. ClothingCo had several customers who requested that their products should be produced in Sweden. Furthermore, Sweden is well known for its strict environmental laws and regulations which can be beneficial for manufacturers, as consumers grow increasingly, concerned with the environment. From a sustainability perspective, it should be noted that it is not sufficient to determine the actual sustainability focusing only on one part of manufacturing. Environmental sustainability is more complex and also includes extraction, transportation, use and end-of-life. Nevertheless, the made-in-Sweden label has the potential to stand for high quality and sustainability and can create a push to reshore. According to the examined companies, the business climate in Sweden has in recent years focused on increasing efficiency at large by prioritizing and making automation available, ultimately creating capacity to reshore.

The increased level of capacity is identified as a driver from a firm-specific perspective. At FurnitureCo, for example, efficient manufacturing methods have reduced time in operations, and automation is perceived to be a strong reshoring driver. At FixingsCo, automation and strategic ability to serve two markets more efficiently through specialization is perceived to be their strongest driver. In contrast to previous research on Swedish manufacturing companies (Engström et al., 2018), the subject of ownership of facility and ownership of the company did not appear to be an important factor. Instead of discussing ownership, the examined companies discussed capacity and centralization more extensively. The costs associated with managing two facilities (or an external supplier) was often underappreciated when offshoring decisions were made. By reshoring and centralization, manufacturing processes became more efficient. Other Swedish companies have the same experience (Engström et al., 2018). Calculations made during the offshoring decision neglected several factors, such as costs of managing several facilities, the lack of internal competence and experience of location decisions. This led to gross over estimations of the benefits of offshoring.

5.2 Barriers

The reshoring barriers identified in the literature, as well as this study, are compared in Table VII. Three barriers were identified in all examined companies: capacity, calculation and labor market in home country. Furthermore, three new barriers were identified when examining the four case companies, labor in host country, supplier partnership and ownership of product blueprint.

From the perspective of the global environment, the changes in economic differences between countries were discussed related to the host country in question, and therefore differed between the companies. As was presented in the analysis of reshoring drivers, economic differences ultimately affect factors such as labor costs and taxation laws. In the case of TruckCo, it was discussed that certain positions in manufacturing were cheaper in Sweden than in some of their host countries. Barriers related to the global environment were deemed outside of the companies control and were therefore not discussed to the same extent as other categories.

New barriers were identified in the host country category. First, the potential barrier created by the host country’s labors’ reaction to the changes being made. This has been seen in previous research, where the company has felt a social responsibility to help their employees in the host country (Engström et al., 2018). In previous reshoring projects, FixingsCo had experience of former employees sabotaging equipment. To summarize the first new barrier, it can be said that if companies expect labor in the host country to react in a powerful and negative way, which could ultimately be both costly and damaging to the company, reshoring may not be deemed appropriate. The second new barrier to be identified relates to the potential result of taking away business from a supplier with whom a partnership has been created. This is especially important to take into consideration when parts of manufacturing processes are reshored and certain operations or products remain with the same supplier. The risk that the supplier chooses to cancel all contracts concerning the remaining products can create a need to reshore a larger portion than the company initially wanted. From the perspective of the host country, the reshoring barrier related to access of raw material, domestic market and competency as identified by previous research (Ellram et al., 2013; Kinkel and Maloca, 2009; Wiesmann et al., 2017) was also identified in the analysis of the four case companies.

From the perspective of the home country, Sweden, barriers continue to be mainly related to access of crucial resources. Similar to the finding of Moutray and Swift (2013), that access to competent labor is a major reshoring barrier, almost all companies discussed how certain competences have become scarce in Sweden. A new barrier was identified through the analysis of FurnitureCo’s reshoring case. This barrier captured the comparative difference in cost of facility between home and host country. Investments needed to ensure the home facility can reach the new levels of capacity and efficiency can be expensive and needs to be included in manufacturing location calculations.

The firm-specific category had the highest number of barriers identified from the current body of literature. One of the most elaborately discussed barriers was the calculation of the reshoring decision. Knowing how to measure and compare the factors included in a manufacturing location, decision proved to be difficult for several of the companies included in the research, which is also the case in previous research (Arlbjørn and Mikkelsen, 2014). Investments needed to ensure capacity at the firm was able to absorb the reshored production could potentially be capital intensive. A new barrier was identified when analyzing the case of TruckCo, ownership of product blueprints. Relying on host country suppliers to take part in developing products can lead to documents not being updated and the supplier having ownership over crucial documents. The subject of ownership of the host country facility and the ownership mode of the company was not widely discussed by the examined four companies in the study.

6. Concluding remarks

6.1 Answering the research questions

The analysis and presented tables provide answers to the purposed research questions – RQ1 and RQ2. By analyzing the empirical findings in connection to previous research the purpose of the study is considered to be fulfilled.

In the empirical studies, 18 drivers and 15 barriers which existed in previous literature were found. One new driver was identified in the case study: the ability to serve the host country’s domestic market better if manufacturing was re-organized. When considering manufacturing location, it should be evaluated if there is a possibility for the facilities to serve their respective domestic market. The supply chain perspective continues to be a source of several drivers to reshoring, as well as being identified as being overlooked during the offshoring decision. The supply chain determines the company’s ability to meet consumer demands. Therefore, it is natural that the supply chain has to adjust as consumers change. High inventory levels and quality issues are often the result of not adjusting the supply chain according to customer demand of flexibility, short lead times and customization. Quality was frequently mentioned in the interviews and can be easily identified in the current body of literature (Bailey and De Propris, 2014; Canham and Hamilton, 2013; Kinkel, 2012). Quality is associated with communication, product specific, service, infrastructure and several other perspectives. The empirical findings suggest that quality also is effected by the long distances between manufacturing and research and development/product development.

It was not hard to identify and understand reshoring drivers at the case companies. New barriers were identified at the examined companies relating to how employees and the suppliers in the host country react to the decision to reshore manufacturing. Furthermore, a barrier was related to the ownership of patents, and product blueprints/documents was identified, which serves as a reminder that offshoring creates a relationship with the supplier which can become difficult to break. Therefore, it could be argued that research needs to focus on understanding the barriers encountered by companies which ultimately lead to them not engage in reshoring.

After examining the four Swedish manufacturing companies and reflecting on the complexity behind the location decision of manufacturing, it can be questioned if the real world is as simple as Smith’s words imply. The question is also how to calculate the costs of a commodity. Is it based on total costs or are soft values such as the environment included in the cost? All the companies included in the study, informants expressed confusion and an interest in re-examining how a product’s cost is calculated. Therefore, this paper encourages future research to focus on the how the cost calculation should be constructed to aid a well-informed and correct manufacturing location decision.

6.2 Contribution and implications

Currently, research on reshoring is limited. Reshoring to the USA is discussed by several authors, but research focus on smaller markets is scattered. By identifying new drivers and barriers, as well as reaffirming previously established drivers and barriers, the study has contributed to the research field of reshoring. Notably, in the literature it is stated that drivers and barriers are treated in isolation, both inside and between the two categories. In this study, it was clear that free capacity in the current manufacturing facility was of importance. The free capacity is, in many cases, the result of years of improvement projects including automation. For researchers, it is important to consider if the level of automation should be seen as a factor acting as a barrier or driver or if the terminology itself is currently unable to capture the nuances of reshoring.

As was addressed in the introduction, companies seek to learn more about reshoring. Therefore, the empirical findings presented in the study can fill the current gap and be a source of inspiration and guidance for other manufacturing companies. From the perspective of Sweden, and certainly several other countries, it is important to highlight the barrier of finding competent personnel. The companies expressed the sentiment that Sweden prioritizes academic education over vocational education. This is a political question, and it is crucial for Swedish manufacturing companies to remain and grow in Sweden to increase welfare and generate more jobs. On the organizational level, this paper sheds an important light on the need of continuous improvements. Countries with relatively high labor cost is at a disadvantage in the international competition between manufacturing units. Higher efficiency brings several immediate benefits, including increased competitiveness and cost-reduction through economies of scale, and it has the potential of bringing long-term benefits if the corporate footprint is under review and manufacturing units face the possibility of being shut down. Improving efficiency and freeing space should therefore be seen as tools not only for competitiveness but also to keep the manufacturing unit prepared and resilient for the future.

6.3 Limitations and future research

The data collected for the study were in form of semi-structured interviews and a document study. New drivers and barriers could be identified through this method and allowed for a revised summary of reshoring drivers and barriers to be applied to future studies. The semi-structured interviews allowed for the new drivers and barriers to naturally emerge during the data collection. Furthermore, the interviews were limited to a few managers. By interviewing employees in other positions, additional drivers and barriers might have been identified. The research is limited because of the focus on manufacturing companies and therefore the findings cannot be generalized for the service industry.

Many of the drivers and barriers identified in literature and this study show the importance to understand the complexity of location decisions. It is however evident from the empirical findings that issues related to the supply chain’s ability to meet customer demand create several drivers for all companies. The highest number of barriers could be categorized as firm specific. Among them, a lot of emphasis was put on how to make a good reshoring decision, including how to collect, analyze and evaluate information. Future research on firm characteristics, such as its place in the supply chain, if it concerns business-to-business or business-to-consumer, and the ownership, can allow for a more nuanced understanding of which drivers and barriers are most relevant for a specific company. The issues of calculating reshoring is an important field for future research to focus on, so as to fully understand the phenomenon and could potentially give companies a practical tool to aid them in reshoring decisions.

Figures

Reshoring categorization

Figure 1.

Reshoring categorization

Reshoring types

Type Name Description
1 Reshoring of in-house activity In-house activity in offshore location moved to home country and remains in-house
2 Reshoring for outsourcing In-house activity in offshore location moved to home country and changed to outsourced activity
3 Reshoring for insourcing Outsourced activity in offshore location moved to home country and changed to in-house activity
4 Reshoring for outsourced activity Outsourced activity in offshore location moved to home country and remains outsourced

Drivers of reshoring found in the literature

Category Driver Description References
Global environment Global economy The current cycle the world economy is in, with special attention to stability, recession, and economic boom. The economic perspective also encompasses issues related to the stability of currency and thus exchange rate. Furthermore, economic differences between countries is changing which brings change to for example minimum wages Ancarani et al. (2015), Arlbjørn and Mikkelsen (2014), Bailey and De Propris (2014), Bals et al. (2016), Canham and Hamilton (2013), Ellram et al. (2013), Fine (2013), Fratocchi et al. (2014, 2015, 2016), Gray et al. (2013), Hartmann et al. (2016), Kazmer (2014), Kinkel (2012), Kinkel and Maloca (2009), Martínez-Mora and Merino (2014), Moutray and Swift (2013), Pearce (2014), Stentoft et al. (2016), Tate (2014), Tate et al. (2014), Wu and Zhang (2014), Wiesmann et al. (2017)
Global politics Global political state can create a risky business climate with unexpected and severe interference in trade flows and access to important raw materials Ellram et al. (2013), Fratocchi et al. (2015), Kinkel (2012), Kinkel and Maloca (2009), Tate (2014), Tate et al. (2014), Wiesmann et al. (2017)
Host country Economic growth The potential economic growth in developing countries diminishes as the market become saturated with companies competing for the same resources Fratocchi et al. (2015), Kinkel (2012), Wiesmann et al. (2017)
Quality issues Related to a wide array of factors such as product, service, and infrastructure which all ultimately lead to a product below the company and their customers’ expected quality Ancarani et al. (2015), Arlbjørn and Mikkelsen (2014), Bailey and De Propris (2014), Bals et al. (2016), Canham and Hamilton (2013), Fratocchi et al. (2014, 2015, 2016), Joubioux and Vonpoucke (2016), Martínez-Mora and Merino (2014), Kinkel and Maloca (2009), Kinkel (2012, 2014), Kotlarsky and Bognar (2012), Tate et al. (2014), Wiesmann et al. (2017)
Risk management Several risks have been identified in the aftermath of offshoring, for example risk for suppliers not complying with international or cooperate laws, as well as risk of theft of intellectual property Bals et al. (2016), Ellram et al. (2013), Fine (2013), Fratocchi et al. (2015, 2016), Hartmann et al. (2016), Kazmer (2014), Pearce (2014), Stentoft et al. (2016), Tate (2014), Tate et al. (2014), Wiesmann et al. (2017), Zhai et al. (2016)
Labor market Companies have reported employees displaying low levels of trust, engagement, and professionalism. Furthermore, increased levels of employee turnover and minimum wages are causing issues Bals et al. (2016), Canham and Hamilton (2013), Fine (2013), Fratocchi et al. (2016), Kinkel (2012), Kinkel and Maloca (2009), Kotlarsky and Bognar (2012)
Supply chain Distance Mental and physical distances are created by differences in language, time zones, business methods and culture, ultimately effecting the firm. The increased distances result in high coordination costs of managing complex global supply chains Ancarani et al. (2015), Bals et al. (2016), Canham and Hamilton (2013), Fratocchi et al. (2015, 2016), Gray et al. (2013), Joubioux and Vonpoucke (2016), Kinkel and Maloca (2009), Kinkel (2012), Martínez-Mora and Merino (2014), Tate (2014), Tate et al. (2014), Wiesmann et al. (2017)
Research and development If engineers working with the development are close to production sites, the possibility to innovate increases. It is argued that it is easier to manage product development and changes in products if the supply chain is short Arlbjørn and Mikkelsen (2014), Bailey and De Propris (2014), Bals et al. (2016), Fratocchi et al. (2015), Kinkel and Maloca (2009), Pearce (2014), Stentoft et al. (2016), Tate (2014); Wiesmann et al. (2017)
Transportation and logistics Logistic and transportation costs have increased in the past years and represents a big percentage of the total costs of offshoring. Furthermore, the result of more global supply chains has increased transportation and logistics costs Arlbjørn and Mikkelsen (2014), Bals et al. (2016), Bailey and De Propris (2014), Canham and Hamilton (2013), Ellram et al. (2013), Fine (2013), Fratocchi et al. (2015, 2016), Gray et al. (2013), Kinkel (2014), Kinkel and Maloca (2009), Martínez-Mora and Merino (2014), Moradlou et al. (2017), Moutray and Swift (2013), Pearce (2014), Tate (2014), Tate et al. (2014), Wu and Zhang (2014), Wiesmann et al. (2017), Zhai et al. (2016)
Consumer/Market The importance of meeting consumer’s demands and needs poses more challenges for the global supply chain. Today’s consumers are demanding smaller quantities, more flexibility and services connected to the product Bailey and De Propris (2014), Bals et al. (2016), Fratocchi et al. (2015, 2016), Martínez-Mora and Merino (2014), Moradlou et al. (2017), Pearce (2014), Stentoft et al. (2016), Wu and Zhang (2014), Wiesmann et al. (2017), Zhai et al. (2016)
Home country Automation The recent advances in technology have enabled a higher grade of automation of production which ultimately reduces the importance of labor cost and makes it more viable to produce in a high-cost environment Ancarani et al. (2015), Arlbjørn and Mikkelsen (2014), Bailey and De Propris (2014), Bals et al. (2016), Fratocchi et al. (2015), Stentoft et al. (2016), Tate (2014), Wiesmann et al. (2017), Zhai et al. (2016)
Capacity Implementation of automation and business practices such as lean production has created new higher levels of potential production at company’s home base. Additionally, capacity can increase because of domestic labor being more skilled and efficient Bailey and De Propris (2014), Canham and Hamilton (2013), Ellram et al. (2013), Fine (2013), Fratocchi et al. (2015), Gray et al., (2013), Kinkel and Maloca, (2009), Kinkel (2012, 2014), Moutray and Swift (2013), Pearce (2014), Tate (2014), Tate et al. (2014), Wiesmann et al. (2017), Zhai et al. (2016)
Domestic goodwill Previous research has identified the importance of reshoring production to show patriotism, create jobs and support the home country’s economy Ashby (2016), Bals et al. (2016), Canham and Hamilton (2013), Kazmer (2014), Moradlou et al. (2017), Wiesmann et al. (2017)
Sustainability With stakeholders becoming more concerned with sustainability it is evident that the lenient environmental, social and economic regulations in low-cost countries have in the eyes of companies changed from an advantage to a risk Bals et al. (2016), Ellram et al. (2013), Fine (2013), Gray et al. (2013), Tate (2014), Tate et al. (2014), Wiesmann et al. (2017), Zhai et al. (2016)
Branding The use of “Made in …” as a branding tool has gained attention. The product’s country of origin can affect a consumer’s perception of the company and the product Ancarani et al. (2015), Ashby (2016), Bals et al. (2016), Canham and Hamilton (2013), Fratocchi et al. (2015, 2016), Pearce (2014), Wiesmann et al. (2017), Zhai et al. (2016)
Political incentives Changes in domestic politics can result in subsidies, tax reliefs, and other forms of support which can encourage companies to reshore Bailey and De Propris (2014), Bals et al. (2016), Ellram et al. (2013), Fratocchi et al. (2014, 2015, 2016), Kazmer (2014), Moradlou et al. (2017), Moutray and Swift (2013), Pearce (2014), Stentoft et al. (2016), Tate et al. (2014), Wiesmann et al. (2017), Zhai et al. (2016)
Firm specific Customer If the company’s key customers are negatively affected by issues arising from the offshored manufacturer the company can be driven to consider reshoring Stille and Narayanan (2016), Wiesmann et al. (2017)
Capacity Implementation of automation and business practices such as lean production has created new higher levels of potential production at company’s home base Ellram et al. (2013), Fine (2013), Gray et al. (2013), Kotlarsky and Bognar (2012), Tate (2014), Tate et al. (2014)
Ownership Ownership of the company can have impacts on localization decisions, for example if the owner is a MNC or the next generation of the company’s founding family. Furthermore, structural changes can affect localization decisions, for example mergers, divestments or acquisitions Kotlarsky and Bognar (2012)
Miscalculation Previous research argues that many companies lack adequate knowledge about the host country when the offshoring decision is made. The aftermath of miscalculated localization decisions is the realization afterward that production at the home base is a more economic viable option Anderson et al. (1998), Ellram et al. (2013), Lewin and Peeters (2006), Kinkel and Maloca (2009), Wiesmann et al. (2017)

Barriers of reshoring found in the literature

Category Barrier Description References
Global environment Global economy Economic differences between countries can result in more beneficial tax reliefs in developing countries. Furthermore, the stability and strength of international currencies can create risks but also economic benefits Bailey and De Propris (2014), Ellram et al. (2013), Tate et al. (2014), Wiesmann et al. (2017)
Global politics Differences in between regions or countries access to resources such as raw material, energy, and competency can create barriers to reshore production Bailey and De Propris (2014), Wiesmann et al. (2017)
Host country Market access By reshoring production companies risk losing customers closer to the offshored location Ellram et al. (2013), Kinkel and Maloca (2009), Wiesmann et al. (2017)
Raw material access Certain raw materials can be exclusive or easier to access in the offshored location Ellram et al. (2013), Kinkel and Maloca (2009), Wiesmann et al. (2017)
Competency access The offshored manufacturing facility and their employees have crucial competency that can be lost when reshoring Ellram et al. (2013), Wiesmann et al. (2017)
Supply chain None identified
Home country Labor market Availability of competent workforce is a fundamental prerequisite to engage in reshoring. Furthermore, in developed countries have a more inflexible workforce regarding for example employment protection Bailey and De Propris (2014), Canham and Hamilton (2013), Moutray and Swift (2013)
Raw materials If it is not possible to access the raw materials in the quantity and quality needed in the home country, issues can arise that in turn can lead to costly imports of the raw material Canham and Hamilton (2013)
Environmental regulations In many developed countries the environmental regulations are stricter than in developing countries. If the manufacturing facility in the home country is not able to produce the goods in compliance to the environmental regulations it can cause big problems Ellram et al. (2013), Gray et al. (2013), Wiesmann et al. (2017)
Firm specific Customer If the company’s key customers are highly integrated with the offshored supplier it can be risky to engage in reshoring. The customer needs to be taken into consideration to evaluate if the customer is placed in a risk full situation by moving the manufacturing Stille and Narayanan (2016)
Time Although many companies have expressed dissatisfaction with the outcome of offshoring, many argue that it is too late to reshore. One reason it is argued to be too late are the high costs associated with reshoring Bailey and De Propris (2014), Canham and Hamilton (2013), Wiesmann et al. (2017)
Calculations The geographical location of manufacturing is a fundamental yet complex decision. Companies can experience difficulty in finding sufficient and all-encompassing information to ensure a well informed decision Arlbjørn and Mikkelsen (2014), Wiesmann et al. (2017)
Internal competency Lack of internal competencies in the production focused workforce can create issues related to quality and efficiency for reshored manufacturing Arlbjørn and Mikkelsen (2014), Bailey and De Propris (2014), Wiesmann et al. (2017)
Capacity Although some companies may have increased their potential capacity through lean policies and automation, many companies will need to expand their production capacity by investing in new machinery and renting/buying more space. Furthermore, lack of resources and internal competencies can make it difficult to reach higher levels of capacity Arlbjørn and Mikkelsen (2014), Bailey and De Propris (2014), Canham and Hamilton (2013)
Communication and leadership To ensure a successful reshoring it is crucial that the companies leaders are able to communicate an implement it. Reshoring is still a relatively new phenomenon, and few have experience with how to manage a successful reshoring project Arlbjørn and Mikkelsen (2014), Wiesmann et al. (2017)
Access Access to economic funds to finance the reshoring is a fundamental prerequisite, along with access to a competent workforce Arlbjørn and Mikkelsen (2014), Bailey and De Propris (2014), Wiesmann et al. (2017)

Case company information

Firm Name Type of Reshoring Geographic Reshoring Ownership Approximate No. of Employees (2015)
FixingsCo Reshoring of in-house activity From European low-cost country to Sweden Conglomerate 90
FurnitureCo Reshoring for insourcing From European low-cost country to Sweden Conglomerate 538
ClothingCo Reshoring for insourcing From European low-cost country to Sweden Family owned 9
TruckCo Reshoring for insourcing From Asia to Sweden Multi-national corporation 400

Interview information

Interview Position Company Length (min)
1 Supply chain manager FixingsCo 180
2 Supply chain manager and production manager FurnitureCo 90
3 Production development and quality manager FurnitureCo 90
4 Co-owner/Product development ClothingCo 60
5 Manager of supplier quality and manager quality engineer TruckCo 60
6 Control manager TruckCo 60
7 Purchasing manager and strategic buyer TruckCo 60
8 Vice President of manufacturing TruckCo 60
9 Industrial engineer and manufacturing engineer manager TruckCo 60

Drivers in empirical data in comparison to literature review

Category Driver FixingsCo FurnitureCo ClothingCo Truck Co Literature Review
Global environment Global economy X X X X
Global politics X
Host country Economic growth X
Quality issues X X X X X
Risk Management X X X X
Labor market X X
Domestic market X
Supply chain Distance X X X X X
Research and development X X X X X
Transportation and logistics X X X X X
Consumer/
Market
X X X X X
Home country Automation X X X
Capacity X X X X X
Domestic goodwill X X
Sustainability X X
Branding X X X X
Political incentives X
Firm specific Customer X X X X X
Capacity X X X
Ownership X
Miscalculation X X X
Centralization X X X X X

Barriers in empirical data in comparison to literature review

Category Barrier Fixings Co FurnitureCo Clothing Co Truck Co Literature Review
Global environment Global economy X
Global politics X
Host country Market access X X
Raw material access X X
Competency access X X X
Legal regulation X X X
Labor X
Supplier partnership X
Supply chain None identified
Home country Labor market X X X X
Raw materials X X
Environmental regulations X X X
Cost of facility X
Firm specific Customer X
Time X
Calculations X X X X
Internal Competency X X X
Capacity (and investments) X X X X X
Communication and leadership X
Access X X
IT integration X
Social responsibility X
Ownership of company X
Ownership of manufacturing facility X
Ownership of product blueprint X

References

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Further reading

Eisenhardt, K.M. and Martin, J.A. (2000), “Dynamic capabilities: what are they”, Strategic Management Journal, Vol. 21 Nos 10/11, pp. 1105-1121.

Corresponding author

David Eriksson can be contacted at: dr.d.eriksson@gmail.com

About the authors

Gabriella Engström (MSc) is a Research Assistant at Jönköping University in Sweden. Her research focuses on operations and supply chain management with an emphasis on reshoring of manufacturing to Sweden.

Kristina Sollander (MSc) is a PhD Student at Jönköping University in Sweden. Her research focuses on operations and supply chain management with an emphasis on reshoring of manufacturing to Sweden.

Per Hilletofth (PhD) is a Professor of Operations and Supply Chain Management at Jönköping University in Sweden. His research focuses on demand-supply integration, operations strategy, supply chain relocation, product development and decision support. He has editorial assignments in several international journals.

David Eriksson (PhD) is an Associate Professor at Jönköping University in Sweden. His research agenda consists of various research subjects including corporate social responsibility, methodology, new product development, supply chain management, sustainability and waste management. He has editorial assignments with European Business Review, Industrial Management & Data Systems and World Review of Intermodal Transportation Research.