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IEEE ENGINEERING MANAGEMENT REVIEW, VOL. 46, NO.

2, SECOND QUARTER, JUNE 2018 87

Reshoring and Industry 4.0: How


Often Do They Go Together?
—ALESSANDRO ANCARANI Abstract—This paper investigates the linkages between the reshoring of
DICAR, University of Catania, Catania, manufacturing to high cost countries and the adoption of technologies labeled
95125 Italy Industry 4.0. Using a large database of reshoring initiatives to either the U.S.
or Europe, results show that the adoption of technologies, such as robotics
—CARMELA DI MAURO and three-dimensional printing, is relatively limited among reshoring
DICAR, University of Catania, Catania, companies, and often confined to reshoring strategies where the cost focus
95125 Italy
that originally motivated the relocation offshore is still retained. Reshoring
firms with quality-oriented business strategies, and for which cost containment
is not the top priority, engage in capital investment in new technologies mainly
when they are involved in new product development.

Key words: Reshoring, strategy, Industry 4.0, 3D printing, automation


IEEE DOI 10.1109/EMR.2018.2833475

1. INTRODUCTION labor cost gap between China and


Western countries, and to rising
I N the last thirty years, offshoring – logistics costs (Kinkel, 2014; Simchi-
Levi et al., 2012). Coordination costs
the relocation of production and other
value chain activities to low cost and low product quality offshore
countries, has emerged as one of the (Ancarani et al., 2015), the value
most widespread strategies customers attribute to “made in”
implemented by Western products (Ancarani et al., 2015;
manufacturers in order to maintain or Grappi et al., 2015), need for greater
to improve competitive advantage. In flexibility (Kinkel, 2014) and customer
the last decade, while offshoring has responsiveness (Moradlou et al.,
continued, many offshore operations 2017) have also been emphasized.
have been relocated back to their
home countries or in their proximity, The relocation of labor-intensive
giving rise to the so called “reshoring” industries to high cost countries may
of manufacturing (Ellram et al., 2013; be encouraged if labor-saving
Fratocchi et al., 2016; Kinkel, 2014). production technologies are adopted
to complement the relocation. Driven
Although reshoring is not a mass by advancements and falling costs in
phenomenon, it is a momentous digital technology (Fitzgerald et al.,
topic, not only because of the political 2014; McAfee et al., 2012), recent
emphasis placed by some progresses in robotics and
governments on protectionism and digitalization contribute to
anti-globalization actions, but also manufacturability and producibility,
because reshoring has emerged as a reduce time and improve quality in
bottom-up initiative in those countries production processes (Arlbjùrn and
where there is no institutional Mikkelsen, 2014). Despite the
pressure or support for reshoring. importance of this topic, the
Because of policy and managerial investigation of the links between
interest, research on reshoring is reshoring and technological
steadily increasing (Fratocchi et al., innovations of production processes
2016). has been neglected so far.

Many contributions have linked Currently, evidence on the extent to


reshoring initiatives to the shrinking which reshoring manufacturers adopt
88 IEEE ENGINEERING MANAGEMENT REVIEW, VOL. 46, NO. 2, SECOND QUARTER, JUNE 2018

new production technologies is 2. RESHORING AND connected to the business strategy


scarce. Building on an extensive data AUTOMATION underlying reshoring. Recent
set of reshoring initiatives obtained research points to the fact that a clear
from secondary sources, this article There is agreement among scholars strategic intent drives reshoring
sets out to investigate the following that reshoring entails not simply a initiatives (Di Mauro et al., 2018;
research questions: relocation of operations, but “a Robinson and Hsieh, 2016). By
reconfiguration of systems” (Mugurusi classifying reshoring firms based on
RQ1. To what extent do and de Boer, 2014, p. 275). System- typical business strategies (cost-
reshoring manufacturers adopt wide changes concern the transfer of oriented, flexibility-oriented, and
Industry 4.0 and other labor critical resources from the offshore quality-oriented), we try to
saving technologies as part of location to the home country, the conceptualize why and how reshoring
their return to high cost acquisition of new resources, the manufacturers may embrace specific
countries? Is reshoring possible restructuring of the supply chain, the Industry 4.0 technologies according
without altering the labor change in production processes and to the business strategy.
component of production? products and the ensuing change in
the degree of control. Manufacturers 2.1. Cost-oriented reshoring In
RQ2. What are the drivers of evaluating reshoring have to assess the last thirty years, production has
reshoring strategies for the challenges of the disintegration been offshored (and often
manufacturers that are (e.g., closing down of existing outsourced) to low cost countries in
associated with the adoption of contracts and relations), of the order to exploit the advantages of
Industry 4.0? relocation (actual dispatch of economies of scale and low labor
activities from offshore), and of the re- costs. However, the recent closing of
RQ3. Is there a tendency integration stages (relocated activities the labor cost gap between the US
towards insourcing (i.e. in house are linked to remaining value chain and China, rising costs of transport
production) of activities from low activities) (Jensen et al., 2013). The and of inventories, falling costs of
to high cost countries when adjustments involved make reshoring energy in the US (Simchi-Levi et al.,
reshoring takes place? If so, is it a complex decision. 2012; Tate, 2014), and quality issues
more evident for firms investing with products have all reduced the
in new production technologies? The rapid technological progress has location advantages of some low cost
opened up a range of new countries. According to Manning
The paper is organized as follows. opportunities to address or bypass (2014), external challenges that are
Building both on interviews with some of the challenges tied to the beyond the control of the organization
senior managers of reshoring relocation to high cost countries. The (e.g., adverse changes in labor or
companies as reported by press “Industry 4.0” label is often used to other production or transport costs)
sources and on scholarly research, refer to a high-tech strategy are more likely to lead to the
Section 2 discusses the possible encompassing the integration of relocation decision, with respect to
rationale for the adoption of robotics robotics, 3DP, big data analytics and internal challenges (e.g., decreased
and other Industry 4.0 technologies IoT (Gress and Kalafsky 2015; productivity, loss of managerial
for reshoring manufacturers. Section Hofmann and Ru €sch, 2017). The control), which are more likely to be
3 presents the methodology and the higher maturity of ICT and falling tolerated or mitigated without
database. Section 4 addresses the costs of hardware and software have relocation.
research questions, by providing led to an accelerating pace of design
evidence on the adoption of and manufacturing capabilities In this light, reshoring firms may find
Industry 4.0 by reshoring firms enabled by these technologies, the new generation of automated and
and crossing it with business making their adoption suited to digital technologies “equalizers” of
strategies underlying reshoring simultaneously handle demands for location costs that may render the
and governance modes. Section 5 cost-efficiency, quality, flexibility, return of manufacturing to high cost
summarizes lessons to be learned adaptability, and sustainability. countries feasible and sustainable in
for companies evaluating reshoring the medium-long term, by reducing
initiatives and for policy makers Why reshoring manufacturers may the necessary labor component,
exercising institutional pressure want to engage in the adoption of improving productivity and reducing
on national companies to reshore. robotics and other Industry 4.0 scraps (Bals et al., 2016).
Section 6 concludes with open technologies? In order to understand
questions and suggestions for it, we posit that investment in new The following statements from senior
future investigations. manufacturing technologies is strictly managers illustrate the fact that
RESHORING AND INDUSTRY 4.0: HOW OFTEN DO THEY GO TOGETHER? 89

robotics is considered a necessary advantageous. Firms that have which holds when firms move into
condition for reshoring for cost- increased product variety have more sophisticated product lines, with
focused companies. enjoyed a growing aggregated an increase in the overall knowledge
demand for their products, while content/value added of operations
“We can’t just blow up our cost facing a falling demand and (Humphrey and Schmitz, 2002).
structure; the only way to make it increased sales volatility for individual Product upgrading not only increases
work in America is with robotics. variety (Cachon and Terwiesch, the value-added of operations but
(Monster Moto President, Interview). 2012). However, variety increases also implies that operations are more
logistics costs, because the likely to be coupled with other
“In Europe robots and automation are production unit has to deliver each functions, such as R&D and
the driving forces of moving the product in smaller batches and retain marketing, therefore requiring cross-
production home, as they keep the extra inventory to account for functional information exchange and
payroll down,” (vice president of the unforeseen variation in consumer collaboration. In this instance,
Confederation of Danish Industry, demand across varieties. reshoring may represent the rational
Robotics Business Review, solution, because of coupled
December 29, 2016). By lowering the costs of flexible production-development systems and
production (Lu, 2017) and making buyer-supplier interdependence in
“We wanted to accomplish two things variety affordable, robotics may be new product development (Ketokivi
with the $35 million investment: beneficial for reshoring initiatives with et al., 2017).
modernize our production facility, and flexibility oriented strategies. Other
bring manufacturing that was being technologies such as 3D printing are The words by John Shook, a
done in China back to Montreal. The already changing the business model manufacturing expert and CEO of the
goals were in fact related—we of global logistics companies, by Lean Enterprise Institute, in
needed new injection molding and turning them into co-creators of Cambridge, Mass., aptly summarize
counting equipment to make it cost- products with key customers, and the advantages for innovative firms to
effective enough to justify reshoring allowing customization at point of bring production back: “There was a
production.” “We were able to come delivery. herd mentality to the offshoring”, “but
back to Quebec in large part because it was also the inability to see the total
today’s automated counting The following case illustrates the costs—the engineers in the U.S. and
equipment made it possible. We’re benefits of reshoring and automation factory managers in China who can’t
also closer to most of our market for a flexibility-oriented firm. For talk to each other; the management
here, which saves transport costs, OtterBox, a producer of tablet and hours and money flying to Asia to find
and much closer to our design center phone cases, time to market for out why the quality they wanted
in Montreal.” (Jean-Francois Albert, releasing and refreshing products has wasn’t being delivered. The cost of all
vice president of manufacturing of become much faster than a decade that is huge.” “But many of those
Mega Brands, a Canadian children’s ago and this has been one of the hidden costs come later. In the first
toy company). motives for moving some of its blush of cheap manufacturing, it’s
production to the U.S. “In a very fast- easy to overlook the slow loss of your
“Automation is the great equalizer. flowing market, where there’s lots of own skills, the gradual
Automation allows us to take new devices released on an ongoing homogenization of your products, the
products and move them to other basis, being able to have your corrosion of quality and decline of
places in the world – places like Fort product available on the first day that innovation”.
Worth, TX” (President of Flextronics’ the smartphone is available in the
High Velocity Solutions, GeoCache, store is pretty critical to our business” These companies may not benefit so
July 15, 2014). “With some automation and much from robotics but rather from
manufacturing techniques, you can the adoption of 3D printing or cyber-
2.2. Flexibility-oriented come pretty close to being able to physical systems connecting
reshoring Other firms are manufacture competitively” (Otter’s production and development. An
relocating to high cost countries not supply chain director. The Denver example is Thinklabs, a company
so much because of the falling cost Post, October 12, 2012). producing stethoscopes. The
advantages of low cost countries but company outsourced production to
because the growing demand for 2.3. Quality-oriented China in 2003. “China is the default
customization makes flexible reshoring Quality-oriented choice if you have a completed
production (in terms of low volumes reshoring is generally closely product design ready for production,”
and variety) and shorter value chains associated with product upgrading, claimed the firm’s CEO in an
90 IEEE ENGINEERING MANAGEMENT REVIEW, VOL. 46, NO. 2, SECOND QUARTER, JUNE 2018

interview. Meanwhile, by fall 2013, the “It is extraordinarily difficult to learn European high-end fashion
CEO was convinced that, with careful how to use the old machines for producers moved production
design, they could mass-produce producing our hats and they cannot offshore, thereby underestimating the
stethoscope parts using 3D printing. be replaced. Through a combination impact of this decision on consumers’
This would make the entire design of state grants, online fundraising and perceptions of product quality and
process software-driven, and company investment, we have demand for “made in” products. In the
significantly increase design and bought and shipped the Kangol last five years, some of them have
production flexibility. Thinklabs knitting machines from China to repatriated production. A well-known
started manufacturing in the US in Adamstown. While some Kangol hats case concerns Burberry in the United
January 2014. Workers 3D print are still produced in offshore facilities, Kingdom: “For a company whose
components in house, and perform U.S. based production looks brand image is so closely tied
final assembly and electronic testing increasingly attractive”. “Britishness” UK manufacturing plays
prior to packaging. “I wanted the a part in its brand currency.”
flexibility to design new products and The above discussion argues that, (Business of Fashion, 2016).
develop them rapidly. This ability to whatever the business strategy
innovate on-the-fly enables us to underlying reshoring, returning Another case illustrates the problem
expand our customer base to meet companies may benefit from the of “hidden costs” of offshore
other specialized health care needs.” adoption of new design and production. The president of Dazor
production technologies as part of Manufacturing Corp. St. Louis, a
Advantages for innovative companies their relocation. Table 1 summarizes global manufacturer of professional
will further increase as 3DP the relation between strategies, task lights, lamps, and digital
technologies mature (Deloitte, 2017), motives for investment, and microscopes, tells the story of his
as the following example illustrates. technologies sought. company’s offshoring and
WC Bradley, a sixth-generation subsequent return home as follows:
company, produces outdoor torches, 2.4. Strategy or failure? Although “We needed to look for ways the
wax candles and indoor oil lamps. the above discussion suggests that company as a whole could pull costs
Until 2013, it built in China but has reshoring initiatives represent out of the product, and one way was
since brought production back to purposeful, strategy-led relocations, to outsource a number of the
Wisconsin by investing in a $22,000 in some cases they may constitute operations that we historically had in-
3D printer. Ron White, director of the correction of prior, biased, house”. However, the company soon
engineering at Lamplight, says on offshoring decisions that the firm found out that “The indirect costs
April 4, 2014 “The in-house made due to lack of knowledge about associated with holding larger
prototyping costs a little more than the foreign destination, inability to quantities of inventory, the constant
using Chinese prototypes, but the accurately quantify some important communication issues, and
quality is better and the close location-specific factors, and noncompliant parts for which you
proximity to the firm’s engineering suboptimal decision-making process may not receive credit are all
and design teams brings time and (Gray et al., 2013; Kinkel and Maloca, significant variables in a total cost
creativity benefits.” 2009). Both quality-oriented and cost- equation” (JobShop, 2013).
oriented value chains may fall into the
However, if the key benefits of the reshoring “failure-correction” How to tell “reshoring as strategy”
value-focused strategy consist of category. For instance, some from “reshoring as failure of
the possibility of charging a
premium price and gaining higher Table 1. Reshoring Strategies, Rationales for Capital Investment, Technologies
margins, then process innovation Reshoring Rationale for investment Technologies sought
needs not accompany the reshoring business in technology embodied in
initiative. Many reshoring initiatives strategy capital assets and/or ICT
in the fashion and textile industry Cost-oriented  Reduction of labor component Robotics
return to high cost countries seeking  Increase in labor productivity
 Reduction in scrap and re-work
highly skilled workers and the Flexibility-oriented  Customize at low costs Robotics, 3DP
possibility of boasting the “made in”  Achieve cost-effective flexible production
label on their products. Don  Customize at point of delivery
Quality-oriented  Rapid prototyping 3DP, Cyber-Physical-Systems,
Rongione, the CEO of Bollman Hat  Effective integration of design, Digitalization integrating buyer
Company, argues in favor of the use development, and production and supplier
of old machinery to produce the  Buyer-supplier integration in
new product development
famous Kangol hats:
RESHORING AND INDUSTRY 4.0: HOW OFTEN DO THEY GO TOGETHER? 91

offshoring”? The length of stay issues, assuming those labor customers to “Made in” products
offshore provides hints. Plausibly, competences can be substituted by (18.3%), rising logistics costs (20.2%)
firms will try to reverse mistakes as machines. On the other, especially in and total costs of sourcing (20.0%),
quickly as possible, so that short the case of small and medium long delays in delivering to markets
offshore stays may signal mistakes. suppliers, their limited digital (19.9%), and need to produce in
However, once firms have destroyed capabilities may severely limit the proximity of customers (19.4%). In a
their competences and supply base degree of system integration allowed significant number of cases,
at home, the return home may take a by Industry 4.0 technologies, even in reshoring initiatives are part of a
far longer time than it took to offshore. case of extensive investment by the global reorganization of the firms’
For Dazor Manufacturing Corp. “It buyer (Schupp and Rehm, 2018). network of operations (18%). In some
took about five years to return cases, and especially for US firms,
production back to the United States institutional pressures either in the
after the Chinese price mystique
3. METHODOLOGY AND SAMPLE form of public sector financial support
quickly faded”. In order to answer the research for relocation (12%), or pressures
questions we set forth and to search from large business buyers (as in the
2.5. Reshoring, robotics, and for evidence of the links between case of Walmart) (6%), have favored
insourcing One of the reshoring strategies and investment reshoring.
reasons why reshoring companies in Industry 4.0 technologies, we used
may resort to technology lies in the data concerning 840 reshoring With respect to new technologies in
destruction of skills and of supply initiatives, and obtained from association with reshoring, we
chains created by the offshoring secondary sources (newspapers, identified 115 cases explicitly
wave. Actually, one of the main magazines and other web sources). claiming the adoption of robotics and/
challenges reshoring companies face Cases were identified by searching or 3D printing. Among these, 66 firms
is to find suitably skilled employees or for specific keywords (e.g., reshoring, reshored to USA, 47 to Europe, one
suppliers. backshoring, manufacturing to Canada, and one to Australia. Most
insourcing) on press archives and the of them are large firms (53) but
“When business picked up after the main internet search engines. The medium (24) and small firms (38) also
great recession, companies couldn’t database contains information on the feature.
get China to deliver goods fast industry the firm belongs to, size
enough”, they explain at FANUC (whether small, medium or large),
America, Rochester Hills, Michigan. year of reshoring, governance mode
As growing concerns over intellectual both in the offshore and inshore
4. FINDINGS
property security in China, as well as location (whether insourcing or Below, we report the main findings
a desire for greater pushed firms to outsourcing), and main motives from the analysis of the data
reshore, these companies found underlying the reshoring initiatives. collected. Findings are organized in
domestic suppliers’ workforces had order to provide answers to the three
withered in the interim. ‘We need to The industries that feature research questions of the paper.
highly automate our factories,. . .,plus prominently among reshoring firms
there was a big labor shortage.” are Textile and Apparel (17.0%), RQ 1 – Do reshoring firms adopt
Electronics (14.3%), Machinery and Industry 4.0?
In the same vein, “The lack of skilled metal parts (16.9%), and Automotive
workers interested in manufacturing (11.9%). The sample is made up of Our first research question asked
is “a massive concern” for Todd large (52%), medium (23%), and whether reshoring per se gives rise to
Shelton, an East Rutherford, N.J.- small companies (25%). Half of the capital investment in automation,
based clothing manufacturer. companies reshore from China 3DP, and other technologies of the
Manufacturing workers “can’t just (50%). In terms of governance mode Industry 4.0 family. Within our
zone out on Facebook but are at home, most firms choose to database, 13.7% of reshoring
committed to a task all day”. produce in house (79%), rather than initiatives explicitly refer to
source from external suppliers. automation and/or additive
On the one hand, reshoring firms manufacturing. No other technology
return to a country where some labor Consistent with previous literature usually labelled as Industry 4.0 (e.g.,
competences may no longer exist findings, frequent motivations for IoT, digitalization) is mentioned
and where suppliers have moved reshoring are quality issues with explicitly in the original sources but,
offshore. In house process offshore production and suppliers given the complementary among
automation allows bypassing both (21.2%), the importance attached by some of these technologies, their
92 IEEE ENGINEERING MANAGEMENT REVIEW, VOL. 46, NO. 2, SECOND QUARTER, JUNE 2018

adoption cannot be ruled out (De perceived complexity of controlling motivations consistent with different
Backer et al., 2018). offshore operations, and those strategies was mentioned in the
motivated by the need to speed source (292 initiatives). For the vast
Matching this proportion with deliveries. Conversely, quality and majority of cases, motivations were
information on firms adopting Industry innovation oriented reshoring inferred from the direct quotation
4.0 in the survey of manufacturing strategies were signaled by reshoring “between brackets” of the person
companies in Europe and the US motivations such as IPR protection, interviewed.
carried out by the Boston Consulting search for high quality, value attached
Group in 2016, the two proportions by customers to a “Made in” product Table 2 shows that cost- and quality-
appear to be roughly comparable and product innovation. Finally, we oriented strategies are the ones most
(19% in Germany and 16% in the US posited that flexibility-oriented frequently tied to reshoring initiatives,
in the BCG survey). Tentatively, strategies would be signaled by the while flexibility-strategies motivate
reshoring companies do not seem to quest for customer proximity and reshoring less often. Among
make use of capital investment in production flexibility. We labeled reshoring firms adopting Industry 4.0
technology more often than generally “pure strategies” those for which technologies, those including cost
done in manufacturing. This state of reshoring motivations belonged to a control motives are slightly higher
things may only be temporary, of single reshoring strategy (either cost than those including quality-motives.
course. Actually, 9 cases concern or flexibility or quality) (342 These latter are very often also firms
reshoring initiatives between 2005 initiatives), while “hybrid strategies” involved in new product development.
and 2009, 40 cases between 2010 are those were a combination of Hence, our sample partly confirms
and 2013, and 66 cases from 2014
onward, thus supporting the idea that
reshoring associated with the
adoption of new technologies is
gaining momentum.

Figure 1 describes the distribution of


reshoring initiatives and of reshoring
initiatives with Industry 4.0. The figure
shows that while reshoring spans a
wide range of industries, both
labor- (e.g., textile) and capital-
intensive (e.g., automotive),
investment in manufacturing
technologies is sensibly lower for
labor-intensive sectors.

RQ 2 – Does the adoption of Figure 1. Reshoring and Industry 4.0 by manufacturing industry.
Industry 4.0 by reshoring
manufacturers depend on their
business strategy? Table 2. Strategies Underlying Reshoring and Industry 4.0
Motivations % % adopting Industry 4.0
In order to answer this question, we Cost Total costs of sourcing 26 15
searched the sources for indications Labour costs
Logistics and labor costs
of the motives underlying reshoring Offshore control complexity
and classified them according to Delays in delivery
whether they matched quality- Quality IPR protection 19 18
oriented, flexibility-oriented or cost- Product innovation
High quality
oriented reshoring strategies. Made in
Specifically, as shown by Table 2, we Flexibility Production flexibility 8 2
classified as cost-oriented strategies Customer proximity
those motivated by the perceived CostþQuality 21 35
increase in labor, logistics costs, and CostþFlexibility 9 13
QualityþFlexibility 6 4
total costs of sourcing from offshore QualityþCostþFlex 11 13
locations, those motivated by a
RESHORING AND INDUSTRY 4.0: HOW OFTEN DO THEY GO TOGETHER? 93

the arguments developed in between strategic and error with automated facilities. Figure 3
Section 2, since investment in new correction reshoring. Rather, the short illustrates that the percentage of
technologies by reshoring firms is duration of offshore investments companies switching from external
motivated by the need to substitute signals the realization by the firm that suppliers to in house production
the labour component, which still offshoring is incompatible with the (OUT IN) following reshoring is 23%.
exhibit unit costs three to sixfold costs firm’s business strategy. Of interest is However, this figure climbs to 37% for
in China, and to create a closer also the fact that short durations of reshoring firms adopting automation.
coupling of production and offshore operations are never On the one hand, in house production
development when new product associated with the adoption of new is chosen to take into account that
innovation is involved. technologies when the company massive offshoring in the past have
returns home. This suggests that nullified some labor competences.
Among reshoring initiatives that robotics and other technologies are On the other hand, it may be easier
cannot be reconciled with any of the called to compensate for the to acquire in-house competencies in
previous strategies, contextual destruction of skills and supply base advanced technologies, rather than
factors, such as the global economis at home. relying on suppliers’ technology.
crisis (48 cases) and the global One reason is that, especially small
reorganizations of the firms’ RQ3 – Do reshoring firms and medium suppliers may have
operations network (93 cases) play a automate in insourcing mode? limited digital capabilities.
major role. Interestingly, reshoring is
associated with new production The analysis of the governance mode Therefore, when evaluating reshoring
technologies only in one of these following reshoring shows that firms initiatives, firms must weigh the costs
cases, signalling that production is that adopt automation tend more of relying on home suppliers and/or
being relocated at home due to frequently to automate in house, training home labor force to re-create
untapped production capacity rather than seek external suppliers  vis capital investment
lost skills vis a
determined by the reduction of
market size.

In order to throw some light on


whether reshoring represents the
correction of mistaken offshoring
decisions, we plot the frequency
distribution of the duration of
offshoring, calculated as the
difference between the year of
reshoring and the year of offshoring.
The analysis is based on about half of
the reshoring initiatives in the
database (437), for which information
on duration was available. The
contention is that “failure” reshoring
will be signaled by a short stay (< ¼ 5 Figure 2. Length of stay offshore.
years). Conversely, the longer the
stay, the more likely that reshoring
responds to changes in competition,
in supply markets, or in institutional
conditions. Figure 2 shows that a
length of stay of five years or less
affects about 30% of cases.

In 95% of these cases, the short


length of stay offshore is associated
with clear motivations that can be
reconciled with one of the strategies
discussed above. This finding
suggests that there is no real conflict Figure 3. Governance mode chosen by reshoring firms.
94 IEEE ENGINEERING MANAGEMENT REVIEW, VOL. 46, NO. 2, SECOND QUARTER, JUNE 2018

in technology and the recruitment of robotics when the old supply offshoring, unless a technological
knowledge workers for handling that base has vanished, and because superiority of western countries
technology. of a shortage of skilled workers. innovation systems can be assumed
in the medium term. For example,
China, one of the preferred offshore
5. IMPLICATIONS 6. CONCLUSION locations for western companies, has
Based on the results of this article New technologies can play a role in adopted policies to contrast the
several implications for managers reshoring initiatives by enhancing potential outflow of manufacturing.
and manufacturers can be competitiveness from the cost Further, the China 2025 plan is
suggested. perspective, therefore laying the exerting pressure on Chinese
1. Robotics is not a necessary ground for the long term viability of manufacturers to increase capital
ingredient of reshoring. The manufacturing relocations to high investments with particular emphasis
majority of reshoring cost countries. In this exploratory on automation and digitalization,
manufacturers has not adopted research, we show that new although China still lags behind other
robotics and labor saving technologies characterize a limited countries in terms of robot density.
technologies. Especially proportion of reshoring, suggesting The medium term projection of this
reshoring companies with that these technologies has not been state of facts is that the locational
quality-oriented strategies rely on so far a key enablers of repatriations. advantages of Industry 4.0 for high
the premium price that the higher Future research on the performance cost countries may be short-lived. In
quality of products made in high of reshoring firms will show whether fact, components produced through
cost countries can guarantee. there will be a significant performance automated processes may continue
2. Cost-oriented companies adopt differential between firms engaging in to be produced in Asia and shipped to
robotics. Because the labor cost labor saving technologies or western markets.
gap with respect to offshore digitalization and others that do not.
production weights relatively Conversely, Industry 4.0 may
more on these companies, they As Industry 4.0 technologies mature, sustainably drive reshoring in all
need to plan to adapt their future research should also ascertain those instances in which the
technology when repatriating the impact of these technologies on geographical reintegration of the
production. global sourcing and global production value chain is important for product
3. Industry 4.0 supports networks. Actually, different Industry development, prototyping, etc. In
manufacturing reshoring when 4.0 technologies may have different these cases, the co-location of
design and product innovation impacts on the location of production and development may
are involved. 3DP is allowing manufacturing activities. For become a source of value creation,
swift modifications of design and instance, big data analytics and while new manufacturing
fast prototyping, at costs slightly digitalization improve the capability to technologies may contribute to curb
higher than those borne in China. coordinate activities remotely, and production costs. Technologies such
4. Technology is called to fill the may therefore make location in low as additive manufacturing, which
void created by labor cost countries attractive again. allow for extensive product
competences destroyed by the Further, the growing diffusion of customization, become an effective
offshoring process. robots in manufacturing and their enabler of sustainable reshoring
Manufacturers planning to digitalization interfaces may not per moves.
reshore may need to resort to se change the advantages of

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Alessandro Ancarani received the Ph.D. He is an Associate Professor in management


 di Catania, Catania, Italy. He has authored or coauthored in leading
engineering with Universita
journals such as British Journal of Management, International Journal of Production Economics,
and International Journal of Production & Operations Management. His research interests
include the analysis of intangibles in public service organizations, public procurement, suppliers’
performance evaluation, behavioral operations, and manufacturing location decisions. He was
the Co-Editor-in-Chief for the Journal of Purchasing and Supply Management (2010–2015). He
is the Editor-in-Chief for the Journal of Public Procurement. He was the President of IPSERA
during 2009 and 2012 and the Founding Member of EDSI.

Carmela Di Mauro received the D.Phil. degree in economics. She is an Associate Professor
in management engineering with the University of Catania. She has authored or coauthored
more than 25 articles in Scopus-indexed journals, and is currently involved in research projects
on the reshoring of manufacturing and the role of human behavior in operations management.
Her research has won awards both at home and internationally. She is an Associate Editor for
the Journal of Purchasing and Supply Management, and a member of the Board of Directors of
the Decision Sciences Institute (2018–2020).