Strategic Drivers Influencing P roduction Reshoring Decision Among Manufacturing Multinational Corporations in Kenya

Abstract

The global manufacturing landscape has over the last few decades been dramatically transformed by offshoring strategies as large manufacturing entities from Western Europe and the United States of America moved their production activities to low-labour cost locations. Offshoring and outsourcing strategies have contributed significantly to the globalization of manufacturing activities. More recently since the 2007 - 2008 global financial crisis reshoring of production has gained prominence among multinational corporations with increased cases of production reshoring recorded. This study sought to explore the strategic drivers influencing production reshoring decision among manufacturing multinational corporations in Kenya and was guided by the following research objectives; finding out extent to which production cost, product quality, operational flexibility, reduced time to market and hidden cost influenced reshoring decision. The study also considered the moderating influence of market condition on the relationship between the independent variables and the dependent variable. The study adopted cross sectional research design and census method. The study targeted 96 manufacturing multinational corporations with membership at the Kenya Association of Manufacturers. The study achieved a response rate of 88.4%. Binary logistic regression model was used to examine the influence of the study variables on reshoring decision. The study found that production cost, product quality, operational flexibility, reduced time to market and hidden cost have positive and significant influence on production reshoring decision. Further the moderating variable market condition was found to have a moderating influence on the relationship between the independent variables and dependent variable. The inclusion of all the five independent variables and the moderating variable explained 78.9% of the changes in reshoring decision for every change in all the predictor variables. The study model was found to be the optimal model. The study made a number of recommendations including; need for policy interventions by the Kenyan Government on manufacturing costs in order to realize the aspirations of Kenya’s Vision 2030 on industrialization; investment in agile manufacturing by MNCs to improve production process sophistication and capacity for short production runs; investment in supportive infrastructure to improve supply chain efficiencies and enable manufacturing entities improve on customer responsiveness and overall competitiveness of the sector. Finally, the Kenyan government should strengthen intellectual property laws and enhance enforcement to reduce manufacturing losses arising due to presence of counterfeit products and intellectual property theft.