What can we learn about reshoring after Covid-19?

Abstract

While the World is still dealing with the health and safety issues raised by the Covid-19 pandemic, it is already quite apparent – and acknowledged – that this event will have a substantial impact over the national and global economies, as well as on the structure, the organization and the management of operations and supply chains, as highlighted in the June 2020 editorial (Samson 2020). In particular, a certain consensus is found among authoritative experts, analysts, and Institutions (e.g., Javorcik 2020; The Economist Intelligence Unit 2020; UNCTAD 2020; World Economic Forum 2020), that the pandemic will undermine the “Global value chain” model – a production network paradigm which has deeply characterized the World economy over the past 30 years, and one of the most visible “trademarks” of Globalization. This likely reshaping of the supply chains will be driven by both managerial (i.e., firm-level) and political (i.e., Sub-National, National, or Supranational-level) factors. At the firm level, many companies experienced dramatic exposure to supply chain disruptions during the pandemic and the subsequent lockdowns (Strange 2020) due to their reliance on offshore supplies. While the increased hazards of global operations had been highlighted in supply chain risk management literature (Manuj and Mentzer 2008), the 2020 pandemic has represented an unprecedented demonstration of how disruptive their effects could be. It is now difficult to believe that managers could simply restart to focus solely on efficiency and growth, without paying the necessary regard to risk-related practices (The Economist Intelligence Unit 2020), especially when considering that the pandemic happened as a shock in an already turbulent context of trade battles, raising protectionist policies (Javorcik 2020), and increasing pressures for more sustainable business models. Further, the pandemic unveiled in many countries their lack of self-sufficiency for needed products – like those required to hinder the spread of the contagion, such as masks and other personal protective equipment (PPE), or to ensure medical assistance to the people affected by the virus, such as ventilators) – as well as their dependency on China for several others (Gurvich and Hussain 2020). The latter include strategic supplies like pharmaceutical items but also components of key industrial supply chains (e.g., automotive, chemicals) whose stoppage can dramatically hurt the GDP of an advanced economy. As a consequence, the call for more self-reliance will – and in some cases has already started to (e.g., in the case of Japanese Government that started to incentivize relocation initiatives) – raise in the political debate, urging measures to better protect, reinforce, or even reinstate the macro-regional or national production of these goods. In particular, this editorial focuses on the “reshoring” phenomenon, defined as the decision to relocate a manufacturing activity either back to the home country (back-reshoring) or to a nearby country that belongs to the same macro-region (near-shoring).