Week 4 / Reshoring

Question 1

Reshoring definition

Answer 1

Reshoring is a reversion of a previous offshoring
decision.

Example: Apple inc. once offshored their production to China but now produces locally in California

They come back to their home nation

Question 2

Reshoring Options

Answer 2

In house, In house: In House reshoring
In House, Outsourced: Reshoring for outsourcing
Outsourced, In House: Reshoring for insourcing
Outsourced, Outsourced: Outsourced reshoring

See slide 6 in ppt deck for graph clarity

Question 3

Offshoring Pros and Cons

Answer 3

Benefits:
Low cost materials
Low cost labour
Access to qualified labour
Access to resources, knowledge and expertise
Focus on core competencies
Access to new / broader markets
Beneficial trading conditions
Organizational flexibility
Access to technology 

Disadvantages:
Supply chain complexity and loss of control
Visibility of processes and practices
Quality of materials and production
Loss of skills / manufacturing in ‘home’ country
Loss of core competencies
Geographic distance, longer lead-times and delays
Quality of communication / cultural differences
Increased inventory
Environmental and social standards

Question 4

For a crazy ass graph see slide 12 / 41

42 reasons for reshoring

Answer 4

Discussed the internal environment, external environment and cost efficiency and customer perceived value

Question 5

SME cases

Answer 5

See slide 13/31

Question 6

Aku Background

Answer 6

Aku is a medium sized company operating
in the outdoor and mountain shoe sector. The company evolved from a workshop to the current establishment, which was established in 1991. The headquarter is located in the “mountain shoe” district of Montebelluna in the North-east of Italy.

Question 7

Aku Offshoring:

Answer 7

Having gained sufficient knowledge of the
local production culture, in 1999 Aku opened an own plant in Romania (Cluji Napoca), an offshoring location supported by the availability of skilled manpower.

• Cost reduction
• The quality of human resources

Question 8

Aku present / today

Answer 8

Medium-end trekking outdoor are produced and
assembled either in Italy or in Romania, while light shoes continue to be outsourced to Asia, given that these low-end segments are more sensitive to price and have a low-technology content.

Question 9

Reshoring in Aku

Aku’s CEO:

Answer 9

“A company like ours produces a highly technical
product that encompasses also a craftmanship
component. In order to remain globally competitive,
we must be able to tell our customer an authentic
story and be able to claim that yes, we make the
shoes by ourselves, and our knowledge allows us to
make the shoes differently from other
competitors…”.

Question 10

Fitwell Background

Answer 10

Fitwell is a small company operating in the sector of outdoor and mountain shoes and whose headquarter is located in the shoes district of Montebelluna in North-East Italy.

Question 11

Fitwell offshoring

Answer 11

In 1999 Fitwell began outsourcing its production to Eastern Europe, first in Hungary and in the Czech Republic and then in Romania, where there was a tradition for shoe manufacturing.

• Pressures from the key customer Lafuma, asking for more competitive costs
• benefited from a looser country legislation with respect to labour and contracts with suppliers, and more favourable taxation with respect to Italy

Question 12

Fitwell present / today

Answer 12

Currently, only the upper boot for medium range
products is still manufactured in Romania, given their
higher sensitivity to price competition.

The company argues that it would be nearly impossible to backshore production stages now carried out in Romania, because over the years local competences and know-how have dwindled: “There is a scarcity of specialized manpower and this makes a full scale backshoring impossible”.

Question 13

Made in Italy

Fitwell’s CEO

Answer 13

We came back because we are rooted in the territory, because we are able to manufacture a product but in order to make it a quality product we must produce it in Italy” and “With the concept of made in Italy we have gained as far as quality is concerned, but we have also regained the pride to produce here at home”.

Question 14

Roncato Background

Answer 14

Roncato is a medium sized company specialized in suitcases and travel accessories. The heydays of
Roncato go back to the ‘40s when the small craft company began production, while the industrial set up dates back to the ‘70s. The company boasts a record
of innovation in the sector: first to use an assembly line for suitcases, first to develop a trolley, first to build light
hard-shell suitcases made of polypropylene.

Question 15

Roncato Offshoring:

Answer 15

The company started relocating production
offshore already in the early ‘70s, by outsourcing the
production of soft shell suitcases (approximately 65% of
the turnover) to suppliers in South Korea, followed by a
further transfer of production to China.

•savings in terms of labour costs and total costs of
ownership

Question 16

Roncato Backshoring:

Answer 16

Starting in 2009 Roncato began the reshoring of high end productions of hard shell suitcases previously taking place in China.

•The strategic repositioning of the brand
•It was motivated not only by the quest for legitimacy in
the eyes of foreign customers but also by the need to be able to improve product quality with respect to offshore production and boost innovation potential.

Question 17

Roncato Backshoring:

Answer 17

In Roncato CEO’s words “If you want to grow abroad,
well it is a different world with respect to Italy where price drives the purchase. Abroad, Italy is seen as an icon of good taste, style, quality, so for foreign buyers a product that is made in Italy not only provides a guarantee of quality, but also has a greater appeal.”

“We’ve come back for reasons tied to quality control and know-how of production and technological innovation. It is not possible to develop certain (high quality) products in the Far East yet. Control of quality is easier in Italy than in China. Although quality on average has risen in China in the last few years, it is still lower than in Italy.”

Question 18

Roncato

Answer 18

Following backshoring, turnover has remained constant
at around 40 million euros per year, while employment
has risen due to the new production lines relocated in the Italian plant.

Question 19

SKA Background

Answer 19

Ska Italia is a medium sized company producing zippers for the fashion sector. The company was
founded in 1999 out of a previous company in the same sector

Question 20

Ska Offshoring

Answer 20

Ska Italia located its production facilities in China in the area of Canton, while only high value added activities such as R&D remained in Italy.

•Labour cost advantages
•Lower total cost of ownership
•To reap the benefits of proximity to
customers

Question 21

Ska present / today

Answer 21

Following reshoring in 2010, turnover has remained constant and around 4 mln euro per year, while
employment has risen due to the production lines relocated in Italy. The new plant is still to produce profits, due to the high initial investment.

Question 22

Rightshoring

Answer 22

What right-shoring suggests is that there are a set of
variables that should be considered when selecting the ideal manufacturing geography. Those variables will likely include volume, technology, lead-time, price, certification. There are actually a whole lot of variables that need to be considered.

Question 23

Rightshoring background reasoning

Answer 23

Re-shoring means a wholesale shift of manufacturing back to the US, exiting China regardless of the value proposition that manufacturing there offers.

•But we don’t want to build China’s manufacturing ecosystem in the US. What we want in the US is the right manufacturing and the manufacturing jobs. That means re-shoring the right industries and the right products.

Question 24

VIDEO

Offshoring vs reshoring in US Video

Answer 24

Important points: If we have reshoring, it is impossible to have 20 million jobs to return to the manufacturing in US

While there is trends for reshoring, we should not be too optimistic about it

Question 25

VIDEO

Future Trends in Reshoring

Answer 25

Nearshoring or reshoring will continue to raise, but offshoring is bound to rise too (tech companies specifically)

Question 26

VIDEO

Is the reshoring of U.S a myth

Answer 26

Key takeaways:

There is an unprecedented amount of restructuring going on, companies are addressing how and where to produce products, with lots of new and old factories opening and closing

The changes are not all the same. Not everyone is offshoring to the same places or all reshoring to the US

Question 27

VIDEO

How will we live in 2050

Answer 27

2 critical questions:

Will as much stuff be travelling today?
Will it be as far?

Big ships move millions of containers all over the world

The change in cheap labour due to advances in robotics

Nearshoring is forecasted too (Mexico)