Manufacturing location decisions and organizational agility
ISSN: 1525-383X
Article publication date: 2 December 2020
Issue publication date: 30 April 2021
Abstract
Purpose
This paper aims to investigate the strategic consequences of manufacturing location decisions, with a focus on understanding the link between collocating manufacturing with other value chain activities, via reshoring or retaining and organizational agility.
Design/methodology/approach
The paper uses qualitative data from 115 interviews with executives from UK high value manufacturing companies to explore the recent phenomenon of reshoring and the strategic effects of manufacturing location.
Findings
The location of manufacturing is operationally and strategically important for multinational companies. The spatial dispersion of manufacturing is determined by firm-specific and external factors, both of which are subject to constant change. The analysis shows that concentrating on manufacturing in their home countries enables firms to increase organizational agility and stimulate innovation. Better integration with and more extensive collaboration between related value chain activities, such as research and development, sales and marketing, leads to higher flexibility, speed and responsiveness to customer requirements. However, under certain conditions, firms also continue to benefit from the known advantages of offshoring.
Originality/value
This research sheds light on possible strategic downsides of global value chains, characterized by dispersed activities and intermitted processes. The results provide evidence that retaining manufacturing or bringing back manufacturing operations to a company’s home country can increase organizational flexibility, speed, adaptability, innovativeness and responsiveness to customer requirements. As these capabilities are critical for long-term survival, especially in dynamic environments, firms need to review their global factory configurations and determine whether the short-term advantages of foreign locations continue to justify offshoring practices.
Keywords
Acknowledgements
The authors would like to thank the company executives who patiently answered the interview questions and welcomed us into their companies. We recognize Professor Mike Gregory for his mentoring and support throughout this research. We thank the participants of a session at the 2017 Annual Conference of the Strategic Management Society for insightful comments on a previous draft. Furthermore, the valuable suggestions of the editor and two anonymous reviewers of this journal significantly improved the quality of the paper. Finally, we are indebted to Andreas Faatz for important advice regarding the methodological approach.
Citation
Theyel, G. and Hofmann, K.H. (2021), "Manufacturing location decisions and organizational agility", Multinational Business Review, Vol. 29 No. 2, pp. 166-188. https://doi.org/10.1108/MBR-02-2020-0035
Publisher
:Emerald Publishing Limited
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