Backshore Once Offshored Manufacturing? : Exploring Sustainability as a Driver for Backshoring Decisions in Sweden

Sammanfattning

This master thesis has been conducted for Hanza Holding AB which is a global company with production facilities grouped into local clusters in proximity to its clients. The company has experienced an increased demand from companies seeking to relocate their production back to their home countries to be closer to their end markets. Hanza’s experience of reversed offshoring, referred as backshoring in the literature, triggered the present investigation. Offshoring is a widespread business practice among companies in developed countries that have moved production to countries with weaker environmental and social regulations to reduce operational cost. However, it has been achieved at a high environmental, social and operational cost. Backshoring is an emergent trend that has mainly been driven for improving companies’ operational performance. Despite the negative social and environmental consequences that offshoring has had at host countries, neither environmental or social aspects have been considered as the most important drivers when taking backshoring decisions. In Sweden, companies have been active in offshoring and backshoring. China has been one of the top 3 host regions where manufacturing was moved to and from. Sweden is one of the European countries where manufacturing, especially within the automotive industry, is still of importance for the country’s economy. The country is also considered a forerunner with ambitious environmental policies. These facts made it interesting to investigate if improved sustainability in the supply chain of Swedish offshoring companies could be a backshoring driver if all pillars of sustainability are considered in the decision-making process. Consequently, the present investigation aimed to explore if Sweden provides the conditions to improve the supply chain sustainability of companies in the Swedish automotive industry if offshored manufacturing of steel parts is brought back from China to Sweden. Furthermore, based on the results of the present investigation, the second aim was to provide Hanza with recommendations for how the company could contribute to improved supply chain sustainability. To achieve the purpose of the study, the Environmental Decision Making framework proposed by Sexton et al. (1999) was applied. The two options to be considered were analyzed by performing a partial life cycle assessment and by applying an own developed method to assess the decision criteria. Later on, the results were analyzed to recommend Hanza measures to improve supply chain sustainability. The results showed that Sweden has all conditions needed to improve the supply chain sustainability if manufacturing was backshored from China to Sweden. Environmental sustainability could be the most important driver followed by social and economic sustainability. Furthermore, Hanza’s manufacturing cluster strategy could be concluded to improve environmental sustainability in the supply chain by reducing emissions from transport. However, the company could implement several measures to take its contribution to a higher level.