Dual Sourcing and Smoothing Under Non-stationary Demand Time Series: Re-shoring with Speed Factories

Abstract

We investigate the emerging trend of near-shoring a small part of the global production back to local SpeedFactories. The short lead time of the responsive SpeedFactory reduces the risk of making large volumes in advance, yet it does not involve a complete re-shoring of demand. Using a breakeven analysis we investigate the lead time, demand, and cost characteristics that make dual sourcing with a SpeedFactory desirable compared to off-shoring to a single supplier. We extend the celebrated order-up-to replenishment policy to settings where capacity costs exist and demonstrate their excellent performance. We highlight the significant impact of autocorrelated and non-stationary demand series