Impacts of business environment changes on global manufacturing outsourcing in China

Impacts of business environment changes on global manufacturing outsourcing in China Purpose – Rising production costs in coastal China have caused the popularity of the “China plus one” strategy, and the hike in oil prices favors near‐shore outsourcing to reduce transportation costs. Taking into consideration supply chain strategy, this paper aims to investigate the impacts of these major business environment changes on manufacturing outsourcing in China. Design/methodology/approach – Considering costs and lead times, a bi‐objective integer programming model is developed to determine optimal supply chain configuration decisions under various business environment scenarios. A case study with a family of footwear products is used to illustrate model application and present detailed analyses. Findings – Impacts of factors could be non‐intuitive. Partial relocation may be better than relocating all manufacturing steps to lower‐cost regions. Coastal China is still attractive for products with short order lead times, because of its formation of industrial clusters and efficient logistics services. Research limitations/implications – Only tangible factors including costs and lead times are evaluated; however, they offer valuable insight for the strategic decision of selecting outsourcing locations. Practical implications – The analyses suggest differentiated outsourcing strategies depending on product and demand characteristics. The trend of moving manufacturing away from China is exaggerated. Coastal China has established industrial clusters and efficient logistics support to enable supply chain responsiveness; while inland China maintains a low cost comparable with competing Asian countries. Originality/value – Existing studies on the research phenomenon focused on cost factors alone. This paper analyzes lead times as well. The study also introduces the network perspective into the research of offshore manufacturing outsourcing. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Supply Chain Management: An International Journal Emerald Publishing

Impacts of business environment changes on global manufacturing outsourcing in China

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Publisher
Emerald Publishing
Copyright
Copyright © 2012 Emerald Group Publishing Limited. All rights reserved.
ISSN
1359-8546
DOI
10.1108/13598541211212889
Publisher site
See Article on Publisher Site

Abstract

Purpose – Rising production costs in coastal China have caused the popularity of the “China plus one” strategy, and the hike in oil prices favors near‐shore outsourcing to reduce transportation costs. Taking into consideration supply chain strategy, this paper aims to investigate the impacts of these major business environment changes on manufacturing outsourcing in China. Design/methodology/approach – Considering costs and lead times, a bi‐objective integer programming model is developed to determine optimal supply chain configuration decisions under various business environment scenarios. A case study with a family of footwear products is used to illustrate model application and present detailed analyses. Findings – Impacts of factors could be non‐intuitive. Partial relocation may be better than relocating all manufacturing steps to lower‐cost regions. Coastal China is still attractive for products with short order lead times, because of its formation of industrial clusters and efficient logistics services. Research limitations/implications – Only tangible factors including costs and lead times are evaluated; however, they offer valuable insight for the strategic decision of selecting outsourcing locations. Practical implications – The analyses suggest differentiated outsourcing strategies depending on product and demand characteristics. The trend of moving manufacturing away from China is exaggerated. Coastal China has established industrial clusters and efficient logistics support to enable supply chain responsiveness; while inland China maintains a low cost comparable with competing Asian countries. Originality/value – Existing studies on the research phenomenon focused on cost factors alone. This paper analyzes lead times as well. The study also introduces the network perspective into the research of offshore manufacturing outsourcing.

Journal

Supply Chain Management: An International JournalEmerald Publishing

Published: Mar 9, 2012

Keywords: Supply chain management; Outsourcing; China; Manufacturing network; Integer programming

References

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