Offshoring, Overshoring, and Reshoring: The Long-Term Effects of Manufacturing Decisions in the United States

Companies must adapt their strategies to changing market conditions. Global supply strategies have become the source of competitive advantage over the last several decades, particularly in the manufacturing industry, as US firms offshored manufacturing operations to low-cost locations such as China. The rationale was based on cost savings and other location opportunities. In the quest for a cost advantage, many firms departed from conventional outsourcing wisdom and began offshoring higher value and specialized activities such as engineering, design, testing, and research and development. As market conditions changed and cost advantages eroded, firms who offshored high value activities discovered strategic costs and unintended consequences. The extent of the challenges became more apparent as US firms began reshoring manufacturing to reposition in rapidly changing market conditions. The purpose of this research is to provide insight into the decision making process of offshoring and reshoring, to introduce a new concept to understand progressive offshoring, and to build supply chain knowledge by establishing a theoretical understanding for reshoring and strategic costs.