Financial productivity issues of offshore and “Made-in-USA” through reshoring

Abstract

Purpose The purpose of this paper is to examine merchandise performance-based financial productivity of offshore vs reshore sourcing scenarios for fashion/seasonal products with higher demand uncertainty, using computer simulation software. Design/methodology/approach Using Sourcing SimulatorTM, the researchers generated a data set of 530 simulations concerning merchandising performance measures for offshore and reshore sourcing scenarios. Analysis of covariance was conducted for data analysis. Findings Results show financial productivity differs, depending on a sourcing decision between offshore and reshore sourcing scenarios as well as on the levels of volume error and assortment error. The reshore sourcing scenario through “Made-in-USA” domestic production strategy can have a better profitability, including gross margin return on inventory with service level, in cases of under-volume error and over-assortment error, than the offshore sourcing scenario. Research limitations/implications Findings from this study are based on simulation data, which may have a gap between simulations and reality concerning the competitive advantages of “Made-in-USA” domestic production strategy. “Made-in-USA” domestic production strategy can be more agile and responsive to the uncertainty of markets and customer demands when the supply chain systems are well-integrated and fully implemented. Originality/value Results from this study contribute to fill the literature gap about differences of financial productivity between offshore and reshore sourcing scenarios for apparel manufacturers and retailers. This study also offers an insight of which decision response may be better to uncertain customer demands, while satisfying financial productivity.