Geopolitical disruptions and the manufacturing location decision in multinational company supply chains: a Delphi study on Brexit

Abstract

PurposeThis study investigates the impact of geopolitical disruptions on the manufacturing supply chain (SC) location decision of managers in UK multinational firms. The context of study is the UK manufacturing sector and its response to the UK's decision to leave the European Union (EU), or Brexit.Design/methodology/approachThe study adopts an abductive, theory elaboration approach and expands on Dunning's eclectic paradigm of international production. A Delphi study over four iterative rounds is conducted to gather and assess insights into manufacturing SC location issues related to Brexit. The panel consisted of 30 experts and managers from a range of key industries, consultancies, governmental organisations, and academia. The Delphi findings are triangulated using a focus group with 38 participants.FindingsThe findings indicate that the majority of companies planned or have relocated production facilities from the UK to the EU, and distribution centres (DCs) from the EU to the UK. This was because of market-seeking advantages (being close to major centres of demand, ease of access to local and international markets) and efficiency-seeking advantages (costs related to expected delays at ports, tariff and non-tariff barriers). Ownership and internalisation advantages, also suggested by the eclectic paradigm, did not play a role in the location decision.Originality/valueThe study elaborates on the OLI framework by showing that policy-related uncertainty is a primary influencing factor in the manufacturing location decision, outweighing the importance of uncertainty as an influencer of governance mode choices. The authors find that during geopolitical disruptions managers make location decisions in tight time-frames with incomplete and imperfect information, in situations of high perceived uncertainty. The study elaborates on the eclectic paradigm by explaining how managerial cognition and bounded rationality influence the manufacturing location decision-making process.

Redesigning global supply chains during compounding geopolitical disruptions: the role of supply chain logics

“…This paper focuses on disruption risks, including operational risks (equipment malfunctions, production issues, strikes, and fraud) and risks arising from natural hazards, terrorism and political instability (Ivanov and Dolgui, 2019;Kleindorfer and Saad, 2005). We are particularly interested in geopolitical disruption risks, which encompass disruptions to normal supply chain operations resulting from instability, tensions and direct conflict between nation-states (Hansen et al, 2017;Moradlou et al, 2021;Roscoe et al, 2020). When confronted with geopolitical disruptions, managers are likely to respond to risks in different ways (J€ uttner et al, 2003;Sitkin and Weingart, 1995;Zsidisin, 2003).…”

“…We are particularly interested in geopolitical disruption risks, which encompass disruptions to normal supply chain operations resulting from instability, tensions and direct conflict between nation-states (Hansen et al. , 2017; Moradlou et al. , 2021; Roscoe et al.…”

“…In 2016, The UK voted to break ties with its largest trading partner, the EU, reversing 40 years of market and regulatory integration (Roscoe et al, 2020). Risks associated with unfavorable outcomes of Brexit negotiations led several UK companies to set up new production facilities in Europe to avoid border delays and ensure regulatory compliance (Moradlou et al, 2021). In 2018, President Trump initiated a trade war with China, pitting two of the world's largest economies against one another, with the stated objective of "repatriating" production to the USA (Charpin et al, 2021).…”

Guest editorial

“…Examples of large externally derived drivers in the early 2020s have come from the simultaneous shocks caused by the combination of tariffs and trade wars, Brexit, the COVID-19 pandemic and local disruptions with global impact such as the Suez Canal blockage in March 2021 (Leonard, 2021a, b, c). The trade war between the US and China created tariffs that impacted the availability of supply capacity, which was further impacted by the prolonged Brexit negotiations (Handfield et al, 2020;Moradlou, et al, 2021). The COVID-19 pandemic was not just a health crisis but also generally a supply chain crisis, with huge global impacts (Dolgui and Ivanov, 2021;Harland, 2021;Joglekar and Phadnis, 2021;Singh et al, 2021;Sodhi and Tang, 2021), including sudden changes in consumer buying habits, production delays and backlogs in industry, and causing simultaneously capacity shortages and slack capacity in global supply chains.…”

Global and Local Operations of Finnish Metal Industry Companies during COVID-19 and Trade Disruptions: A Case Study

“…The reshoring trend is also examined. Although studies on supply chain disruptions during the COVID-19 pandemic already exist (Fonseca & da Rocha, 2021;Mahajan & Tomar, 2020;Rönkkö et al, 2021;Shaled et al, 2021), and the effects of Brexit have also been studied (Brady, 2021;Moradlou et al, 2021;Thissen et al, 2020), there is still a need for more country-and industry-specific studies. This study aims to clarify the reasons for global operations despite the risks and identify the barriers to more local operations.…”