Location decisions and their implications on efficiency and flexibility during pandemics

Purpose Following the Covid-19 pandemic, global supply chains worldwide have experienced an unprecedented disruption that caught many companies off guard. Consequently, the lack of responsiveness to the disruptions across the world became evident as several supply chains failed to get products to the market (Esper, 2020). It became apparent that organizations must reconsider their supply chain strategies to be able to cope with unforeseen events, especially low probability-high impact events such as pandemics. This study investigates companies’ opportunities to improve their responsiveness through manufacturing location decisions, particularly reshoring. We examine the possibility of achieving operational efficiency and flexibility during pandemics by leveraging the location of suppliers and/or production facilities. Specifically, we address the following research question: how can selective location decisions engender operational efficiency and flexibility during global pandemics? Design/methodology/approach This study deploys a case study method, which is suitable because we explore a contemporary phenomenon about which little is known and over which the researchers had little control (Yin 2014). A multiple case study approach is applied to provide breadth, ensuring that views are captured from multiple organizations, which in turn increases validity and alleviates researcher’s bias (Barratt et al. 2011). In total, eight textiles and apparel manufacturing firms were included in our sample. The industry apparel and textile industries are characterized by globalized supply chains that were significantly affected by Covid-19 related factory shutdowns. Therefore, the selected cases were deemed appropriate as they would provide relevant empirical basis. Primary data were collected through 22 semi-structured interviews and a focus group with 28 participants. These data were corroborated by secondary documentation gathered from company websites, news articles and news databases including Factiva, Bloomberg, and Reuters. Accordingly, we applied a theory elaboration approach (Fisher and Aguinis 2017) through abductive reasoning (Josephson and Josephson 1996), moving in an iterative fashion between theory and the data. In line with Ketokivi and Choi (2014), the analysis involved navigating the organizational learning theory and the research context simultaneously, in a balanced manner. In terms of analysis, data from the interviews were analyzed firstly within case and then across cases. During the thematic analysis, a pattern-matching logic was adopted to code the data, with similar passages of text grouped together into codes and then aggregated to themes. The participants of the focus group offered comments and feedback on the interview findings that allowed us to corroborate, challenge and confirm the responses. Findings The analysis revealed that the case companies were compelled to juggle multiple dichotomies in their supply chain, including efficiency and flexibility, adaptability and alignment, integration and responsiveness, and exploration and exploitation to cope with an ever-changing business environment, while minimizing production cost. Further supported by the focus group, our findings suggest that the offshoring strategy is still relevant during major disruptive events and will remain a viable option for cost-sensitive products post Covid-19. In other words, companies who engage in offshoring continue to benefit from exploitation by accessing low-cost labour and material. However, excessive offshoring can lead to a lack of transparency which impacts both supply chain flexibility and responsiveness capabilities. Consequently, we have developed a framework which proposes that managers should first partition the company’s product line into low-cost commodity and high-margin, short-lead time items. Second, managers can structurally partition their SC based on product lines, with efficient, low-cost items made overseas, and high-margin, short-lead time items made at home country. Third, managers can combine the experiential learning gained from working with offshore suppliers and combine this with the new ideas that come from access to a new pool of labour and suppliers in home markets. Finally, the framework proposes that managers can achieve structural ambidexterity by building in surge capacity in offshored and reshored production facilities. Relevance/contribution to research and practice The study elaborates on organizational learning theory and the trade-offs between exploration and exploitation in a supply chain context. We show that structural ambidexterity can be achieved through swapping production volumes between parallel, offshored and reshored/nearshored, SCs. By doing so, companies gain efficiency benefits (the exploitation of old certainties), and flexibility benefits (the exploration of new possibilities) in their supply chain simultaneously. Production volume swapping allows companies to move between parallel SCs to navigate factory and supplier shutdowns and keep production running in at least one facility at a time. In terms of scholarly contribution, the study fills the gap in the extant literature by responding to Van Hoek (2020) who called for research to investigate companies’ opportunities to improve their responsiveness through manufacturing location decisions.