Firms benefit from direct and indirect re-shoring

Posted on 06 Oct 2017 and read 317 times
Firms benefit from direct and indirect re-shoringAccording to a new report from WMG (at the University of Warwick) and Reshoring UK, UK companies believe that both direct and indirect re-shoring of manufacturing can boost business performance.

The report urges companies to consider both approaches when developing their future strategies (direct re-shoring is bringing offshore production back to the home country, while indirect re-shoring is a firm’s strategic decision to increase capacity at home instead of abroad).

The report was launched at the WMG Supply Chain Research Group (www2.warwick.ac.uk) event entitled Realities of Reshoring: A UK Perspective.

Janet Godsell, WMG Professor of Operations and Supply Chain Strategy, said: “More and more companies are realising that overseas production is not as cost-effective as it used to be.

"With factors such as increasing supply-chain costs and wages, overseas operations are no longer the most efficient way to work.

"This has led to the business practice of re-introducing domestic manufacturing — re-shoring — becoming more common in recent years.

"Our report finds that the business performance of indirectly re-shored companies is better than companies who off-shored, only directly re-shored, or made no shoring decisions.

“The global economic crisis in 2008 forced companies to re-evaluate their manufacturing-location decisions and was perceived to have accelerated the trend towards re-shoring manufacturing back to the UK.

"This report presents the results of a survey of 262 UK manufacturing companies — conducted at the end of 2016 — to understand the different types of shoring decisions they have taken since 2008.

“The survey shows that: 70% of companies have undertaken some form of shoring activity since 2008; 40% of companies offshored; and only 13% of companies undertook direct re-shoring. However 52% had indirectly re-shored — increasing capacity at home instead of abroad.

“Over the last nine years, there were 594 cases of indirect re-shoring and 127 cases of direct re-shoring. There are more shoring case than number of companies, as companies can make multiple shoring decisions.

"Looking forward, this trend reverses with 70% of respondents likely to consider direct re-shoring, while only 20% would consider indirect re-shoring.”

Baroness Burt, Patron of Reshoring UK (www.reshoringuk.co.uk), said: “The report by WMG — along with the development of the Reshoring initiative — is intended to encourage engagement with our manufacturing supply chain and to recognise the strength, skills and innovation available to manufacturers in the UK.”

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