Offshoring or reshoring: the impact of tax regulations on operations strategies.

After decades of outsourcing to low-cost countries, companies are restructuring their production footprint globally. Especially having experienced supply chain disruption caused by the unprecedented Covid-19 pandemic for the past several years, many multinational companies are considering bringing their operations back home (i.e., reshoring). At the same time, the U.S. government proposes using tax penalties to motivate companies to reshore. In this paper, we study how a global supply chain adjusts its offshoring and reshoring production decisions under two different circumstances: (1) under traditional corporate tax regulations; (2) under the proposed tax penalty regulations. We analyze cost variants, tax structures, market access and production risks to identify conditions where global companies decide to bring manufacturing back to their domestic countries. Our results show that multinational companies would be more likely to relocate the production from the main foreign country to an alternative country that enjoys even lower production costs under the proposed tax penalty. As identified by our analysis and as well as numerical simulations, reshoring can only occur in rare situations such as when the production costs in the foreign countries are close to that in the domestic country. Besides potential national tax reform, we also discuss the impact of the Global Minimum Tax Rate proposed by the G7 on global companies' offshoring/reshoring decisions.

GLOBAL SUPPLY CHAINS AND THE EU IN THE NEW ERA

The Covid-19 pandemic had already changed the course of world history, opening up a number of scientific and political debates, when the war in Ukraine erupted. With the help of a broad literature, we go into depth about how much these events will influence the reshoring process that was already under way before the pandemic, and more generally the development of global supply chains (GSCs), especially in the EU. We discuss the definition, the data and the main sources of the reshoring process and how they will mix with the new situation to favour politically influenced and more regional supply chains. Finally, we debate the alternatives that policymakers face, concluding that trade wars will be fiercer and more frequent in a period of decoupling among economic blocks. © 2022 Vita e Pensiero. All rights reserved.

Outsourcing or reshoring? A manufacturer?s sourcing strategy in the presence of government subsidy

Multinational firms can outsource to contract manufacturers in low-labor-cost regions. However, in recent years, several developed countries and regions have subsidized their local manufacturers (LM[s], she) to encourage reshoring for external benefit (e.g., creating more domestic jobs or improving industrial struc-ture), especially after the COVID-19 pandemic started. This paper investigates the sourcing problem of an LM with brand premium in the presence of government subsidy and differences in labor costs. An LM faces three options: producing in-house, outsourcing to an original brand manufacturer (OBM, he), which sells competitive substitutes without brand premium, or outsourcing to a non-competing contract manu-facturer (NCM). We find that, first, the LM chooses reshoring if the external benefit or brand premium is sufficiently high. Second, if the LM decides to outsource, she chooses the OBM (NCM) if her brand pre-mium is high (low). Third, the government prefers to subsidize LM reshoring or outsourcing to an NCM. If the government intends to induce LM to reshore, the subsidy should be at a moderate level. Interestingly, when the LM has a low brand premium but chooses outsourcing, the government still subsidizes her to improve her competitiveness.(c) 2022 Elsevier B.V. All rights reserved.

Reshoring from China: comparing the economic statecraft of Japan and South Korea

This article examines the Japanese and South Korean governments' reshoring and diversification policies of supply chains especially away from China since the early 2010s, with particular attention to the measures taken under the 2020–21 pandemic. The article also explores how much Japanese and South Korean reshoring from China, a subset of foreign economic policy, counts as economic statecraft as a deliberate government attempt to achieve geopolitical objectives using ‘economic' means. One would expect these governments, which innovated proactive industrial policies and guided the private sector to catch up with developed economies in the 20th century, to have an easy time encouraging businesses to re-shore. While these two governments have employed various policy instruments to shift their economic dependence away from China, there is only limited success in motivating businesses to return to their homeland. This leads to an intriguing departure in our understanding of the capacity of those two Asian nations, which used to be considered prototypical ‘developmental states' where governments have significant influence over business behaviour. This research brings more nuance and complexity to prevailing state-as-unitary-actor assumption of the economic statecraft literature and advocates closer attention to domestic sources of foreign economic policy. © 2023 Informa UK Limited, trading as Taylor & Francis Group.

Can we "Claim” the Workforce? A Labor-Focused Agenda for Economic Development in the Face of an Uncertain Future

The COVID-19 pandemic accelerated three trends that were already transforming economic development theory and practice. A backlash to economic restructuring and inequality, driven by globalization and technology, is now manifesting in reshoring and union movements. The resurgence of small and midsized cities, originally driven by increasing housing costs in coastal cities, has been reinforced by a rise in remote work. The uncertainty of today's complex economy is exacerbating long-term challenges of tracking economic change, making "shoot anything that flies” more important than ever. These trends highlight the need to focus economic development on building and supporting the workforce.

The importance of innovation in reshoring processes: a literature review

Some global phenomena such as globalization, the US-China trade war and Covid-19, have led companies around the world to consider reshoring strategies - backshoring and/or nearshoring - with the purpose of configuring more efficient supply chains and less susceptible to these events that generate disruptions in the world economy. Based on the foregoing, research has been developed in order to determine the factors that motivate companies to make reshoring decisions, finding the innovation factor as reiterative in many of these research works, in fact, it has been found that It is a factor that influences other factors. In this sense, this article aims to recognize the importance of innovation in companies' reshoring processes, through a narrative literature review where some background on location decisions is explored, the main relocation trends are described, and the importance of innovation within these relocation processes is established based on the work of different theoretical references. Among the main results of this review, it was found that i) innovation in transportation systems led many companies to have broader geographic scales to locate their operation and configure global supply chains;ii) access to innovation is a factor that is usually taken into account for the creation of reshoring government policies;iii) Innovation is a factor with a degree of transversality, since it affects other variables that are taken into account for reshoring. (English) [ FROM AUTHOR]

Decision Criteria for Partial Nationalization of Pharmaceutical Supply Chain: A Scoping Review

(1) Background: Any disturbance in the pharmaceutical supply chain (PSC) can disrupt the supply of medicines and affect the efficiency of health systems. Due to shortages in the global pharma supply chain over the past few years and the complex nature of free trade and its limitations when confronted by a major global health and humanitarian crisis, many countries have taken steps to mitigate the risks of disruption, including, for example, recommending the adoption of a plus one diversification approach, increasing safety stock, and nationalizing the medical supply chains. (2) Objective: To scope findings in the academic literature related to decision criteria to guide national policy decisions for the "Partial Nationalization of Pharmaceutical Supply Chain” (PNPSC) from the viewpoints of the three main stakeholders: industry, payers (government and health insurance), and patients. (3) Methods: These consist of a scoping review of the peer-reviewed literature. (4) Results: A total of 115 studies were included. For local manufacturing decisions, five criteria and 15 sub-criteria were identified. Weighting, decision-making, risk assessment, and forecasting were the main data analysis tools applied;(5) Conclusions: The findings could serve as a baseline for constructing PNPSC frameworks after careful adaptation to the local context.

The pros and cons of reshoring to address the problems of shortages in global pharmaceutical value chains: the case of antibiotics

PurposeAntibiotics shortages have become an increasingly common problem in Europe because of several reasons, including the offshoring of the production of active pharmaceutical ingredients for many of these products to low production cost countries, such as China and India. The problem has deteriorated because of the Covid-19 crisis that has put most global value chains (GVCs) under great stress. This situation has boosted extensive discussions among academics, practitioners and policymakers on possible changes to the configuration of GVCs. This paper aims to focus specifically on antibiotics supply chains from the perspective of a small country (Sweden), and analyse the pros and cons of backshoring and nearshoring alternatives, as a means to reduce drug shortages. Design/methodology/approachThis work adopts a systemic perspective to capture the implications of reshoring for the different stakeholders involved in the antibiotics field. The present meso-analysis, focusing at the industry level, is based on multiple sources of primary data collected between 2014 and 2021, including participation in policy-related projects and interviews with over 100 representatives of key stakeholders in the antibiotics field. FindingsThis paper shows how reshoring can address the problems of drug shortages and reduce availability risk in antibiotics' GVCs. However, the authors show that no simple and best solution exists because both alternatives of reshoring, i.e. backshoring and nearshoring, entail pros and cons for different stakeholders. The authors conclude with implications for policymakers and managers. Research limitations/implicationsThe analysis of pros and cons of both backshoring and nearshoring for various stakeholders offers relevant implications for research on operations and supply management, international business and economics/political science. Originality/valueThis paper looks at reshoring as a policy-driven decision and provides an innovative systemic perspective to analyse the implications for different stakeholders of two reshoring options concerning the antibiotics supply chain.

Can we “Claim” the Workforce? A Labor-Focused Agenda for Economic Development in the Face of an Uncertain Future

The COVID-19 pandemic accelerated three trends that were already transforming economic development theory and practice. A backlash to economic restructuring and inequality, driven by globalization and technology, is now manifesting in reshoring and union movements. The resurgence of small and midsized cities, originally driven by increasing housing costs in coastal cities, has been reinforced by a rise in remote work. The uncertainty of today's complex economy is exacerbating long-term challenges of tracking economic change, making "shoot anything that flies" more important than ever. These trends highlight the need to focus economic development on building and supporting the workforce.

The Value Chain Configuration in the Digital Entrepreneurship Age: The Paradoxical Role of Digital Technologies

This chapter analyzes the configuration of global value chains in the digital entrepreneurship age by clarifying past contributions, examining work resulting from the Covid-19 pandemic, and outlining suggestions for future research. First, we provide a conceptual framework to understand how digitalization has driven its transformation. Specifically, we discuss the main changes in the slicing of value chain activities, the control and location decisions of these activities, and the paradoxical role played by digital technologies in shaping the way entrepreneurs organize them. In doing this, we highlight the location paradox, which rests on the idea that digital technologies help firms expand their geographical scope and reduce co-ordination costs in large and dispersed networks (which favors offshoring), while reducing the importance of the location of activities and shortening supply chains (which favors reshoring). Second, we critically review the research on value chain configurations that has appeared because of the Covid-19 pandemic. Lastly, we discuss some promising areas of research that could yield insights that will advance our understanding of value chain configurations in the digital entrepreneurship age. © 2023, The Author(s).

Outsourcing or reshoring? A manufacturer's sourcing strategy in the presence of government subsidy

Multinational firms can outsource to contract manufacturers in low-labor-cost regions. However, in recent years, several developed countries and regions have subsidized their local manufacturers (LM[s], she) to encourage reshoring for external benefit (e.g., creating more domestic jobs or improving industrial structure), especially after the COVID-19 pandemic started. This paper investigates the sourcing problem of an LM with brand premium in the presence of government subsidy and differences in labor costs. An LM faces three options: producing in-house, outsourcing to an original brand manufacturer (OBM, he), which sells competitive substitutes without brand premium, or outsourcing to a non-competing contract manufacturer (NCM). We find that, first, the LM chooses reshoring if the external benefit or brand premium is sufficiently high. Second, if the LM decides to outsource, she chooses the OBM (NCM) if her brand premium is high (low). Third, the government prefers to subsidize LM reshoring or outsourcing to an NCM. If the government intends to induce LM to reshore, the subsidy should be at a moderate level. Interestingly, when the LM has a low brand premium but chooses outsourcing, the government still subsidizes her to improve her competitiveness.

Reshoring and plant closures in Covid-19 times: Evidence from Italian MNEs

This paper provides new evidence on the reorganization of global production exploiting a novel dataset of Italian multinational firms surveyed throughout 2020 and 2021 as well as consolidated data sources. We find that Covid-19 did not spur large waves of reshoring nor plant closures. Even though the pandemic caused severe losses to firms, including multinationals, most did not stop foreign production nor are willing to do so in the near future. Trade policy uncertainty, conversely, is more likely to induce reshoring and plant closures. This evidence is consistent with a simple multi-period model, illustrating how offshoring, on the one side, and reshoring, on the other side, are asymmetric in important ways. In the presence of sunk costs, reshoring requires sufficiently large and permanent shocks to demand, trade and foreign production costs to induce behavioural changes. Covid-19 was a major shock, but it was mostly perceived as temporary, while persistent trade policy uncertainty, especially if combined with other shocks, is more likely to induce firms to revise their internationalization strategies.

Disruption in Resource-Intensive Supply Chains: Reshoring and Nearshoring as Strategies to Enable Them to Become More Resilient and Sustainable

Disruption in many supply chains has shown the vulnerability of global supply networks, especially resource-intensive ones, due to the simultaneous effects of pandemics and geopolitical crises. Reshoring and nearshoring strategies are the possible responses of manufacturing companies to disruptions in order to adapt to unforeseen events. The supply chain for the Italian ceramic sector, which is characterized by a high intensity of natural and energy resource consumption and a sourcing system with a high geopolitical risk, is examined in this study. The functional decomposition technique was used to analyze the supply chain;then, three scenarios were developed as potential remedies for the unexpected termination of Ukrainian plastic clay supply. The study also showed that complex issues require multifaceted analysis approaches, which is why a transdisciplinary approach was chosen. In addition, the analysis of the ceramic industry showed that nearshoring and reshoring strategies can reduce supply risk and have a positive impact on the environment. The study also showed how bringing extraction sources closer to factories significantly reduces CO2 emissions to the atmosphere from transportation. The main contribution of this paper is the analysis of the complexity of supply chains in times of disruption, configuring reshoring and nearshoring options through transdisciplinarity.

The changing contours of global value chains post-COVID: Evidence from the Commonwealth.

The COVID-19 pandemic emphasised the global value chains (GVCs) debate by focussing on whether gains from GVC participation outweigh firms associated risks of demand and supply shocks amid rising protectionism. This paper bridges the gap between the international trade and management literature by examining the impact of COVID-19 on Commonwealth countries, an area that has received scant attention in academic literature. Using the Eora database, we simulate scenarios to examine Commonwealth countries' participation in GVCs post-COVID. We draw on the transaction cost economics (TCE) theory to develop a framework that investigates whether growing protectionism, associated with reshoring, decoupling and nearshoring, could potentially affect the constellation and participation of Commonwealth countries in GVCs post-COVID. Results show that trade protectionism is likely to impact the supply chains and lead to GVC reconfiguration, which could offer opportunities for the Commonwealth countries and firms to potentially gain following the geographical redistribution of suppliers.

Globalisation in reverse? Reconfiguring the geographies of value chains and production networks

Standing at a crossroads, where ongoing 'slowbalisation' coincides with new forces such as the outbreak of the Covid-19 pandemic, heightened geopolitical tensions, the emergence of disruptive technologies and the increasing urgency of addressing environmental challenges, many important questions remain unsolved regarding the nature and impact of the current economic globalisation. This special issue on 'Globalisation in Reverse? Reconfiguring the Geographies of Value Chains and Production Networks' aims at showcasing recent work that seeks to contribute to, and advance, the debates on economic globalisation and the reconfiguration of global value chains and production networks. This introductory article has three objectives: first, based on a broad literature review, we aim to identify four key forces, as well as the fundamental relatively stable capitalist logics contributing to the complex reconfiguration of global economic activities. Second, we will position the papers included in this special issue against the four main forces identified and discuss the contributions of each article to capture some emerging cross-paper patterns among them. Finally, we outline the contours of a research agenda that suggests promising avenues for further investigation of the phenomenon of value chain and production network reconfigurations in times of uncertainty.

Reshoring by small firms: dual sourcing strategies and local subcontracting in value chains

This article assesses how the reshoring of manufacturing activities by micro and small enterprises (MSEs) affects the performances of co-located subcontracting networks and the reconfiguration of global value chains (GVCs). We utilize quantitative microdata of Italian MSEs operating in the clothing and footwear industries during the 2008-2015 period. Empirically MSE reshoring does not have a significant impact on domestic subcontractors' birth rates and survival chances, whereas it is positively associated with their productivity growth. Most MSEs in our sample adopt a dual sourcing strategy, expanding their global production networks while preserving their local supply base. Local and global production networks are not two alternative paradigms of industrial organization;they can be complementary and mutually reinforce each other.

When does the manufacturing reshoring strategy create value?

Reshoring has gained a lot of attention recently by academics and practitioners alike, and is promising to become even more relevant in the aftermath of the COVID-19 pandemic. Building on earlier research on the effects of reshoring announcements on the short-term market value of the firm, this work employs an event-study methodology and aims to understand under which circumstances the market perceives reshoring as potentially more (or less) value-creating. The analysis of a sample of 64 reshoring instances from 2005 to 2019, announced by 54 firms from eight developed economies, suggests that investors are more confident in the firm's future cash-flow potential when: a) it invests in productive activities at home, instead of overseas, i.e. ‘kept-from-offshoring’ (as opposed to actual relocations of activities, i.e. ‘back-reshoring’);b) the reshoring instance is communicated as a ‘plan’ (rather than a fixed ‘decision’);c) no state- or government-induced financial incentives are involved;d) the motivations are primarily ‘cost-efficiency seeking’ (rather than ‘customer perceived value seeking’).

The reshoring decision under uncertainty in the post-COVID-19 era

Purpose: Using insights from the supply chain resilience perspective and the international business literature, this study aims to investigate the determinants of firms’ decisions to reshore manufacturing under the high levels of uncertainty brought about by the ongoing US–China trade war and COVID-19 pandemic. Design/methodology/approach: The proposed conceptual framework is tested using survey data collected from 702 Taiwanese firms with manufacturing in China. The firms were drawn from a database compiled by Taiwan’s Ministry of Economic Affairs. Findings: The results show that two supply chain factors (tariffs and supply chain completeness) and two non-location-bound factors (labor cost and material cost) are critical determinants of the decision to reshore under uncertainty. Originality/value: This research elucidates and empirically validates several factors that influence the reshoring decision in uncertain environments. The findings provide valuable theoretical, practical and strategic insights into how firms should manage their value chains in the post-COVID-19 era. © 2021, Emerald Publishing Limited.

Reshoring Decisions for Adjusting Supply Chains in a Changing World: A Case Study from the Apparel Industry.

Global conditions for manufacturing are evolving rapidly and the myopic financial factors that once made overseas locations attractive for offshoring are now in favor of revising it. Besides, the COVID-19 pandemic has highlighted the need for restoring the previously offshored competencies. As a strategic decision, reshoring requires a balance of short- and long-term financial and non-financial considerations. This study extends the reshoring literature by exploring the underpinnings of the decision. For this purpose, the extended fuzzy Decision-Making Trial and Evaluation Laboratory (DEMATEL) is used to study the interrelationship among the decision criteria and explore the sequential effect of the prominent criteria on reshoring decisions. Data from the UK apparel industry is used as a baseline to provide insights for other industry situations. Findings are supportive of the supply process complexity as the prominent considerations with the highest potential impact on the financial criterion. Along with supply process complexity, environmental sustainability appears to have had the highest influence on cost-efficiency as the major driver of past offshoring decisions. Overall, the research findings provide insights for deeper analysis of the manufacturing location decisions for a globalized setting.

In and Beyond COVID-19: US Academic Pharmaceutical Science and Engineering Community Must Engage to Meet Critical National Needs.

The supply of affordable, high-quality pharmaceuticals to US patients has been on a critical path for decades. In and beyond the COVID-19 pandemic, this critical path has become tortuous. To regain reliability, reshoring of the pharmaceutical supply chain to the USA is now a vital national security need. Reshoring the pharmaceutical supply with old know-how and outdated technologies that cause inherent unpredictability and adverse environmental impact will neither provide the security we seek nor will it be competitive and affordable. The challenge at hand is complex akin to redesigning systems, including corporate and public research and development, manufacturing, regulatory, and education ones. The US academic community must be engaged in progressing solutions needed to counter emergencies in the COVID-19 pandemic and in building new methods to reshore the pharmaceutical supply chain beyond the pandemic.