Critical cost and risk factors in a reshoring decision - A Swedish Perspective

Abstract: Background: A growing reshoring trend has recently been discovered, when companies bring back their manufacturing to the domestic country. Reshoring has received more public attention recently and the interest in reshoring strategies is growing. The knowledge about the reshoring decision is however limited and there is not a great deal of research addressing this. The knowledge about how companies have performed their cost analysis is limited as well as the risk assessments behind the reshoring decision. Hence, there is a knowledge gap regarding what cost and risk factors that are critical to consider in a reshoring decision. Purpose: The purpose of this master's thesis is to identify critical cost and risk factors to consider in a reshoring decision within Swedish companies. Method: The research design includes a literature review to identify what cost and risk factors that already have been stated. A literature review was essential in order to demonstrate current knowledge in the field. The search included four databases involving several search terms. Since the purpose is to gain a deeper understanding about the phenomenon and to investigate in depth within a real-life context a multiple case study was viewed as a proper method to use. The multiple case study included four companies and was performed using semi structured interviews and investigations of cost analyses and risk assessments.   Findings: This thesis shows that there is a great deal of factors that are critical in a reshoring decision. However, Coordination, Inventory, Management, Quality and Transportation were the most common cost factors to consider when deciding for reshoring. The most frequent risk factors mentioned by the case companies were Control, Engineering and Innovation and Undesirable reaction. Implications: Different factors are critical depending on what type of company considering the reshoring decision. This is due to deviations in such as products, company strategy, customers and manufacturing techniques. Since each company and each product is unique it is overall important to identify which costs to include in the cost analysis in a reshoring decision for one specific company. The result of the thesis indicates that critical cost factors that are more difficult to measure and compare, so called soft factors, have a great effect on the reshoring decision. Further, companies seem to consider risks with remaining in the offshored country to a higher extent than the risks of reshoring. These risks that appear if not reshoring seem to be of an importance to consider since they generate costs. The findings of the thesis are believed to be evidential to the fact that there is a lack of research since critical factors found in the multiple case study are more than the existing literature indicates.