Building Parallel Supply Chains: How the Manufacturing Location Decision Influences Supply Chain Ambidexterity

Abstract

AbstractThe purpose of this paper is to examine how managers can develop ‘parallel’ supply chains to overcome the efficiency/flexibility trade‐offs of offshored versus reshored/nearshored production. Primary evidence is gathered from 22 field interviews with eight companies from multiple countries, all operating in the textile and apparel industry. The interview data is triangulated using a cross‐industry focus group with 28 participants and secondary sources including company annual reports and website information. The study contributes to organizational ambidexterity theory by identifying how companies embed structural ambidexterity in their supply chains, and in so doing create ‘parallel supply chains’. Our findings show that companies partition their production in terms of width (meaning that specific product lines were relocated) and depth (meaning that specific production activities were relocated). Companies then use a mix of offshored production facilities to manufacture low‐margin, long‐lead‐time products as well as reshored/nearshored production facilities to make high‐margin, quick‐response items. The ability to swap production volumes between parallel supply chains enables supply chain ambidexterity, which in turn allows companies to exploit efficiency and flexibility benefits simultaneously. Managers are provided with an empirically informed, step‐by‐step framework for developing structural ambidexterity and building parallel supply chains.