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McKinsey Hard Operations Strategy Profitability Cost Analysis Supply Chain Optimization

US Manufacturing

#Manufacturing #Retail #Apparel & Footwear #Supply Chain
ProHub Comment

This case effectively integrates both qualitative strategic considerations (factors for onshore/offshore) and quantitative analysis, progressing from basic unit profitability to a more advanced total landed cost model that accounts for demand volatility and holding costs. This multi-faceted approach is critical for real-world supply chain decisions.

Estimated Time 15 minutes
Difficulty Hard
Source Wharton
50 / 100
A major U.S. shoe manufacturer is currently manufacturing its entire product line domestically. Because of increased labor costs and competitive pressure, the manufacturer is now interested in understanding whether it should offshore some or all of its production and, if so, where it should offshore to and what percent of its total product line should be manufactured onshore vs. offshore. What factors should the client consider as it compares onshore to offshore manufacturing?

Clarifying Information

  1. What other products does the client currently sell besides shoes? The client currently specializes in shoe manufacturing, but also manufactures some apparel as well.
  2. Where else does the client currently sell its products besides the U.S.? The client currently sells its products in developed markets (North America, Europe, and Australia)
  3. What are competitors, both domestic and foreign, currently doing with respect to onshoring / offshoring? Most of the clients’ competitors currently do not offshore their production due to manufacturing and managerial complexity.
  4. Outside of the U.S., in which markets are shoes typically manufactured? Where are high-quality shoes manufactured? Lower quality shoes tend to be manufactured in China, Southeast Asia, and Central America, high quality ones in Eastern Europe.