What is it about?
This paper is about the decision by smaller New Zealand-based manufacturers to move some or all of their production offshore, a step avoided by many and one that can lead to costly 'backshoring' for others. Survey data on 151 SME manufacturers confirms offshoring to to be driven by the expectation of lower foreign labour costs, particularly in China, and capacity constraints at home. 'Backshoring', moving production capacity back to New Zealand was in response impaired production flexible, delivery times, and the market value of the Made in New Zealand brand. These reasons for 'backshoring' mirrored the concerns of those SME exporters who had decided against any offshoring of production.
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Why is it important?
It is important for smaller firms in particular to weigh carefully all the implications of moving production offshore, sometimes in contract arrangements with large operators. These smaller firms will then be less able to influence production schedules and delivery times, with ongoing implications for their customer relationships. "Backshoring' enables these SMEs to regain control of their operations but this can be an expensive exercise, one that would have been better avoided by a number of the firms in the study.
Perspectives
At the outset of this research we had some idea of the extent of offshoring form New Zealand, but only a few anecdotal stories of smaller firms that has offshored only to later 'backshore'. The study enabled us to quantify this area somewhat and provide of the key issues that prospective offshorers need to consider carefully before they take this step.
Professor Bob Hamilton
University of Canterbury
Read the Original
This page is a summary of: SME internationalisation: offshoring, “backshoring”, or staying at home in New Zealand, Strategic Outsourcing An International Journal, November 2013, Emerald,
DOI: 10.1108/so-06-2013-0011.
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