Manufacturing location decisions and organizational agility

Abstract

PurposeThis paper aims to investigate the strategic consequences of manufacturing location decisions, with a focus on understanding the link between collocating manufacturing with other value chain activities, via reshoring or retaining and organizational agility.Design/methodology/approachThe paper uses qualitative data from 115 interviews with executives from UK high value manufacturing companies to explore the recent phenomenon of reshoring and the strategic effects of manufacturing location.FindingsThe location of manufacturing is operationally and strategically important for multinational companies. The spatial dispersion of manufacturing is determined by firm-specific and external factors, both of which are subject to constant change. The analysis shows that concentrating on manufacturing in their home countries enables firms to increase organizational agility and stimulate innovation. Better integration with and more extensive collaboration between related value chain activities, such as research and development, sales and marketing, leads to higher flexibility, speed and responsiveness to customer requirements. However, under certain conditions, firms also continue to benefit from the known advantages of offshoring.Originality/valueThis research sheds light on possible strategic downsides of global value chains, characterized by dispersed activities and intermitted processes. The results provide evidence that retaining manufacturing or bringing back manufacturing operations to a company’s home country can increase organizational flexibility, speed, adaptability, innovativeness and responsiveness to customer requirements. As these capabilities are critical for long-term survival, especially in dynamic environments, firms need to review their global factory configurations and determine whether the short-term advantages of foreign locations continue to justify offshoring practices.