Why in the world did they reshore? Examining small to medium‐sized manufacturer decisions

TLDR

SMEs are reshoring manufacturing from low‑cost to high‑cost countries, reversing earlier offshoring trends. The study evaluates nine product‑line decisions—six reshoring and three remaining offshore—to understand why SMEs are reshoring. Researchers codify four empirical observations from these decisions and integrate them with literature to build a system‑dynamics model of SMEs’ offshoring and reshoring choices. Reshoring decisions are not fully explained by cost changes; the authors propose propositions and discuss managerial and policy implications through a heuristic decision‑making lens.

Abstract

Abstract Small to medium‐sized enterprises (SMEs) are moving their manufacturing operations from low‐cost countries back to high‐cost countries, reversing earlier offshoring decisions. These reshoring decisions cannot be completely explained by changing location‐related costs. To better understand why SMEs are reshoring, we evaluate nine product‐line decisions – six to reshore and three to remain offshore – and codify four empirical observations. We then integrate these observations with relevant literature to develop and analyze a system dynamics model of SMEs' offshoring and reshoring decisions. Synthesizing the above, we articulate propositions regarding SMEs’ reshoring decisions. We conclude by discussing these decisions through the lens of the heuristic decision‐making literature, providing managerial and policy implications.