Bring it back? An examination of the insourcing decision

Abstract

Purpose Discussion regarding the implications of and antecedents to the decision to outsource manufacturing functions has dominated both the academic literature and popular press for over 30 years. However, economic and competitive landscapes across the globe have changed such that the tenability of outsourcing is being re-evaluated by many organizations. Using the rich body of literature regarding the decision to outsource as a starting point, the purpose of this paper is to investigate the reasons why firms insource and the associated implications thereof. Design/methodology/approach This case study research captures data from 12 firms in the manufacturing industry that have insourced a previously outsourced function. Data were collected via interviews with executives, researcher observations, and archival records over a nine-month period. Findings The findings suggest that the primary drivers for insourcing were predominantly the same as those cited for outsourcing. However, insourcing decisions are often made in response to a specific, external trigger event and not necessarily in concert with long-term, strategic goals. This is in contrast to firms’ desires to make more strategic location decisions. The findings also show that insourcing/outsourcing location decisions require continuous evaluation in order to optimize competitiveness and align with long-term firm goals. Research limitations/implications This research contributes by not only assimilating and gaining an understanding of key factors affecting insourcing decisions, but also by establishing a baseline for future investigation into this burgeoning area via the presentation of testable propositions. Practical implications This paper provides insights for supply chain, logistics, and operations management professionals who seek to better understand the critical factors that should be considered when deciding whether or not to insource. Originality/value The benefits of insourcing are being considered to a greater extent across industry, yet there is a dearth of academic or practitioner literature that business leaders and academicians can use as the basis for examining this decision. This research provides both the basis and motivation for developing knowledge in this area of increasing importance.