1. Reshoring and Industry Cluster Optimization
By Noppadol Champ Tuksakulvith
INTRODUCTION
Businesses are required to change over periods of time. Practices that we
use today may or may not be used in the future. A problem that has arisen
in the last couple of years is the price fluctuation of petroleum fuel. Firms
who outsource to developing countries suffer devastasting losses due to
high logistics costs. A new practice, reshoring or inshoring, is slowly
emerging in today’s business world. Reshoring is the practice of relocating a
company’s business facility close to where the consumers are or back to the
original location. Labor costs, logistics costs, and foreign currencies are
three primary forces that make reshoring an ideal practice in the 21st
century.
KEY FACTS
The Midwest is known as an automobile hub. Aisin Seiki is a good case
study of the relationship between an automobile supplier and
manufacturers. Aisin Seiki is a Japanese corporation which develops and
produces components and systems for the automotive industry. Aisin Seiki
has factories spread throughout the Midwest and Southern Illinois, giving
the firm a competive advantage for supplying their products to various
automobile manufactureres in a timely manner. Locating near their
consumers give companies an advantage on working collaboratively with
their consumers on product development and solving problems that may
arise.
PURPOSE
An industry cluster database was developed, using information provided by
StatsAmerica. The purpose of the industry cluster is to identify those areas of
the economy with a dominate presence in the region. Lastly, a location
quotient is generated as a benchmark for comparing local existing industries
to industries around the nation, providing a better understanding of a region’s
innovation performance and potential.
LESSONS LEARNED
With technology driving up opportunity cost, location will play an important role
in business success. Excellent demand planning, supply chain networks, and
logistics systems will be critical game changers. Clusters rely on an existing
infrastructure and a relationship with suppliers and customers. Clusters result
in firms’ collective efforts to improve their products or services with a potential
to reduce logistical problems.
Advanced Materials
Agribusiness, Food Processing &
Technology
Arts, Entertainment, Recreation &
Vistor Industries
Biomedical/Biotechnical (LifeSciences)
Business & Financial Services
Chemicals & Chemical Based Products
Defense & Security
Education & Knowledge Creation
Energy (Fossil & Renewable)
Forest & Wood Products
Glass & Ceramics
Information Technology & Telecommunications
Transportation & Logistics
Fabricated Metal Product Mfg
Machinery Mfg
Electrical Equipment, Appliance & Component…
Transportation Equipment Mfg
Printing & Publishing
-0.5
0
0.5
1
1.5
2
2.5
3
3.5
4
-100.00% -50.00% 0.00% 50.00% 100.00% 150.00% 200.00%
2012LocationQuotient
Percentage Change in Location Quotient (2006-2012)
Location Quotient: White County, Illinois
Figure 1: Cluster of industries in White County, Illinois