Investigation of Global Supply Chain Network Redesign

Abstract

Many Japanese manufacturing companies are actively producing, selling, and trading through their overseas bases. Former Japanese companies designed strategies based on offshoring; that is, creating a global supply chain in which they set up production bases abroad to benefit from the cheap labor costs and rising demand in emerging countries. This strategy was instrumental in low-cost and competitive manufacturing. However, in recent years, there has been a change in the environment surrounding the supply chain, with rising labor costs in China, quality problems, and fluctuating exchange rates. In addition, due to the rising sophistication of consumer demand and the advancement of technology, among other factors, Japanese firms had to relocate their production bases. Thus, reshoring, by which the manufacturing industry returns to the domestic market, and nearshoring, by which the production base shifts to neighboring countries, are regarded as extremely important strategies. This study, which aims to support the determination of manufacturing allocation by multinational companies, proposes a global supply chain model consisting of offshoring, reshoring, and nearshoring. Moreover, we evaluate the influence of our variables on after-tax profit. Through simulated numerical experiments, we indicate both the strengths and weakness of each strategy.