From China to Europe : Determinants of reshoring

Reshoring, whether concerning back-reshoring or near-reshoring, is a recent phenomenon. Numerous communications in the media, and white papers published by consulting firms deal with re-shoring, but academic research questioning the determinants of reshoring remains rare.  Of this research, two schools oppose each other: for some researchers, offshoring was a strategic mistake and reshoring is the correction of this mistake, usually shortly implemented after the offshoring decision. For others, reshoring is the consequence of changing socio-economic conditions in host countries (such as increasing  local costs), which makes it less attractive than in the past, and justifies the change in location of production, and/or supplies, usually taking place many years after the initial offshoring decision.

Our research seeks to propose a typology of the determinants of reshoring. We therefore carried out a qualitative research studying in depth of 13 French companies, which after offsharing in China, sometimes for decades, have chosen to relocate all or part of their production and / or their supplies in France or in a closer geographical area (Central and Eastern Europe, Mediterranean Rim, Western Europe). We met purchasing managers, and interviewed them face-to -face to trace their offshoring experience and understand their motivations for reshoring. Companies in our sample belong to various industrial sectors (textile, sports equipment, bicycles, appliances, machinery and equipment for industry…).

Our research allows us to propose a typology of reshoring decisions. Beyond cases of strategic mistakes in offshoring decision and cases of relocating companies due to changing financial conditions in China (in particular rising labor costs and higher purchasing prices following the depreciation of the Euro against the Dollar), we underline a third determining category : firms facing changing customers’ expectations in their home country, which induces a change in strategies (moving upmarket). For these companies, purchasing price is regarded as a less important criterion than responsiveness and quality, leading them to reshore in France and in neighboring countries.

The contribution of our research is to complete existing research by offering a complete typology of the determinants of reshoring, allowing a comprehensive understanding of this new phenomenon.