Case A: Reshoring Manufacturing: Coming Home
Q A1: If you are the Chief Supply Chain Officer (CSCO) of a manufacturing company, what are the three major factors that you would argue to convince the Board of Directors in support of moving manufacturing back to Canada? Justify your answer.
As the Chief Supply Chain Officer of a manufacturing company, the three major factors of moving manufacturing back to Canadawould be: the excess costs, the quality flaws as well as the distance between the manufacturer and the company.
Initially, businesses outsourced their production mainly because labor was cheaper in Asia. However, according to the International Labor Organization, labor wages have increased by 7.1-7.8% between 2000 and 2008 in Asia, while costs in America only increased by 0.5-0.9% (The Economist, 2013). So, considering that wages in China now either match or exceed those of America, it would be more beneficial to reshore production in Canada. This would help restore the American economy while decreasing transportation fees and avoiding additional costs due to potential delays. For instance, Sleek Audio, a high-end earphone company was severely affected by delivery delays from China, which cost the company millions of dollars (Koerner, 2012).
More recently, the rising costs of labor in China are making companies rethink their production strategies (Koerner, 2011). A survey, conducted in January 2010 by the consulting firm Grant Thornton, resulted in 44% of respondents feeling that they received no benefit from outsourcing overseas. Additionally, 7% of them felt that offshoring caused damage to their company. The problem mainly arose from the fact that China has a large demand for outsourced production. In other words, China prioritizes their biggest clients and consequently, the factories put less effort into assembling products for...
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Coming home. (2013). Economist, 406(8819), 6-9.
Koerner, B. I. (2011). Coming Home. Saturday Evening Post, 283(5), 56-60.
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