Outsourcing and re-shoring, a comparison between Far-East and new technologies: the case of Trademark Textiles A/S

Abstract

In the last decades technological advances had a strong impact on the mechanisms that used to drive the society and companies structures. In fact, at the beginning of the new Millennium, the industry faced the third wave of globalization powered by the spread of internet allowing a global integration of value chains: a company was able to have different activities in different countries. During this period many companies started to outsource the manufacturing especially in low-cost countries such as Far-East countries, in order to exploit the competitive advantage of this strategy aiming to create a new knowledge that could not be replicated by competitors. More recently, industrial technological advances led to the fourth industrial revolution that saw the digitalization of the processes and the introduction of intelligent products. This phenomenon forced companies to re-think about their role in the industry and Western countries started to reshore the production process to the home country where they could exploit the tools provided by the new era of automation. The thesis starts giving an overview of the fourth industrial revolution underling its impact on globalization, as it is changing the production process concept: economies of scale are being replaced by smart factories that produce smart products and smart services embedded in an Internet of Things (IoT): companies are becoming digital conglomerates. The first chapter is divided into the analysis of the two phenomenon of outsourcing and reshoring underlying reasons and risks of both of them. The second chapter focused on the sector analysis that I have decided to take into consideration: the hosiery sector, which involves a complex supply chain and its main players are Europe, Middle East and Far East. The analysis shows that the choice of most companies of this industry to outsource the production process is the Far-East countries, especially China which has a strong power in the market; and according to data, the most attractive country to reshore the manufacturing production is Europe, more specific Italy that is the third biggest exporter at worldwide level in the hosiery sector. The chapter then continues with the analysis of the Chinese and Italian hosiery industrial cluster: Datang district in China and Castel Goffredo’s district in Italy. The comparison aims to focus on the similarities and differences of the two clusters in order to understand the competitive advantage they have in the market. The third chapter focuses on a case study about company ALFA A/S which is a Danish family-owned fashion firm with a strong presence in the international scenario. Between its suppliers, the analysis considers the company Trademark Textiles A/S, located in Denmark. Its business model is based on the outsourcing of all the production processes related to socks and tights to China, in Datang district. After a description of the factory selection and the requirements needed in order to be considered suitable by Trademark Textiles A/S, the study will focus on the manufacturing process outsourced to the Chinese factories, taking into consideration their strengths and weaknesses, the order processes, the MOQ, prices, capacity, lead time which are the key driver in the choice of a factory. The study continues with an analysis of a possible reshoring to Italy, in Castel Goffredo’s district. Through interviews I have made to employees of Trademark Textiles and to Italian factories in the district, collecting data concerning the actual Chinese socks suppliers and the potential Italian ones, the thesis aims to understand if the reshoring strategy can be effective to be adopted by Trademark Textiles A/S: the study takes into considerations some Italian factories and through the analysis of key drivers and strength and weaknesses, it will be possible to establish the success or unsuccess of reshoring applied to the hosiery sector.