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Trends in production relocation and backshoring activities - changing patterns in the course of the global economic crisis

: Kinkel, Steffen


International journal of operations & production management 32 (2012), No.6, pp.696-720
ISSN: 0144-3577
Journal Article
Fraunhofer ISI ()
relocation; Offshoring; backshoring; German manufacturing industry; global economic crisis; probit regression analysis; world economy; off shore investments

Purpose - The purpose of this paper is to present an empirical investigation of recent trends and changes in companies' production relocation and backshoring behaviour against the background of the global economic crisis.
Design/methodology/approach - The empirical research is based on a large data set of 1,484 German manufacturing companies as part of the European Manufacturing Survey (EMS). The paper employs a structured set of probit analyses to identify the differences of production relocation and backshoring determinants before and within the crisis.
Findings - Against common belief the paper finds that not only the relocation of production to emerging countries, but also the backshoring of once offshored manufacturing capacities to the home base is a relevant phenomenon. Since the emergence of the global economic crisis, relocation activities declined significantly, whereas the level of backshoring activities has remained stable. Far-shore destinations in Asia gain in attractiveness over near-shore locations in Eastern Europe. Particularly export-intensive companies tended recently towards (re-)concentrating of their production capacities, trying to exploit the benefits of higher capacity utilisation and a superior relation of variable costs to fix costs at their existing locations.
Research limitations/implications - Although covering a significant range of industrial sectors in Germany, more empirical evidence is needed from other branches and countries. Looking forward it is proposed to systemically integrate scenarios on the future development of the most influential environmental factors in future research frameworks for global production decisions and value chains.
Practical implications - The findings strongly recommend a revision of established decision-making schemes for production relocations based on pure cost efficiency considerations. Decision-making should integrate qualitative environmental factors and dynamic considerations using scenario-based tools. Companies need to understand and prepare for dynamic developments at different locations which can strategically necessitate backshoring after a certain time.
Originality/value - The research considerably widens the empirical knowledge on recent trends in relocation activities and their inherent risks, which in a dynamic perspective are sometimes forcing backshoring activities.