Understanding the Value of Reshoring: Customer Perspectives on Local Manufacturing

We are accustomed to having a wide array of goods to choose from. For instance, when browsing in children toys stores, some stuffed animals are manufactured in distant countries, while others are produced locally. Naturally, the prices and quality of these products vary. How do customers decide what to purchase? What factors do they truly value and consider important? Until now, research on this topic has mainly centered on cost models and global sourcing decisions. We have opted to delve deeper into the significance of locally produced goods. In doing so, our research fills a significant gap in existing studies by examining how customers value products based on their origin.

To understand customer preferences, we employed a choice-based conjoint (CBC) analysis in two steps: Step 1: Online Survey and CBC Analysis. We conduct an online survey to gather initial data on customer preferences. This survey includes scales to measure customer's attitudes towards sustainability and ethnocentrism, helping us understand the broader context of customer choices. Specifically, participants are asked to state their agreement to certain statements like “Only those products that are unavailable in [country X] should be imported” or “[People] should not buy foreign products, because this hurts [our local] business and causes unemployment.” Step 2: Incentivized CBC in a Laboratory Setting. We follow up with a laboratory-based study where participants make real purchases. This approach ensures that our data reflects both stated and revealed preferences, minimizing biases like social desirability.

Our research will shed light on differences in customer's willingness to pay across product categories. For example, customers might show a stronger preference for local manufacturing regarding products that they buy frequently or perceive as essential. These insights lead to several practical tips: First, businesses should conduct market research to gauge their customers' WTP for locally manufactured products. This understanding can guide pricing and marketing strategies. Second, emphasizing the local origin of products in marketing campaigns can attract customers who value sustainability and local economies. Third, businesses should recognize that preferences for local manufacturing can vary significantly among different customer segments and product categories. Fourth, as sustainability becomes a critical factor in consumer decisions, integrating local manufacturing with sustainable practices can further enhance product appeal.

Our research provides valuable insights for logistics, supply chain management, and operational leadership. Reshoring can reduce transportation costs and lead times, improving overall supply chain efficiency. Understanding customer preferences helps in making informed decisions about supply chain strategies and inventory management. Leaders can leverage this data to make strategic decisions that align with consumer trends, ensuring that their operations remain competitive and customer-focused.