1 Introduction
2 Literature review
Author and year | Research objective | Methodology | Evaluation criteria | Findings |
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Zhou and Li (2004) | International shoemaking industry | SWOT | OEM and R&D | Globalization and vertical integration reducing shoe manufacturing costs |
Mamic (2005) | Global supply chain vendors in the sports footwear, apparel, and retail sector | Interviews | Geographical location, product variety/quality, company size, ability to adhere to a code of conduct | Global supply chain systems applying to the sports footwear, apparel, and retail sectors |
Camuffo et al. (2008) | Italian footwear manufacturer Geox | Case study | Strategic innovation | The related notions of complementarity and performance landscape were applied to product innovation, to study strategic positioning in the footwear industry |
Chen et al. (2007) | Suppliers, manufacturers, distributors, and retailers in a multi-echelon supply chain | Data envelopment analysis | Information sharing scenarios | Information sharing can enhance the performance of supply chains and improve service levels, fulfillment rates, and order cycle time |
Liang (2012) | Supply chains under an uncertain environment | Possibilistic linear programming method | Integrated manufacturing/distribution planning decision problems | Effectively improve manufacturer and distributor relationships in a supply chain |
Sellitto et al. (2015) | Supply chain operational performance | Two-dimensional SCOR model | Source, make, deliver, return, cost, quality, delivery, and flexibility | A supply chain operations reference model to inform the global performance of the Brazilian footwear industry supply chain |
Marconi et al. (2017) | Shoe supply chain | Integrated definition method | Labor cost, the national tax affairs policy, and the exchange rate | Extends the classical concept of supply chain traceability, to communicate to each actor and consumer the exact origin of each raw material, semi-finished part or final product |
3 Grey sharing decision-making evaluation model
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Step 1 Normalize the assessment production base movement index.$$S_{ij} = \frac{{S_{ij} }}{{\sum\nolimits_{i = 1}^{m} {S_{ij} } }}, \, j = \, 1, \, 2, \cdots ,n$$(2)
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Step 2 Calculate the relative amount of the production base movement information of the assessment index.where the value of Sj is between 0 and 1; and \(S_{i} (j) = {{S_{i} (j)} \mathord{\left/ {\vphantom {{S_{i} (j)} {\sum\limits_{i = 1}^{n} {S_{i} (j)} }}} \right. \kern-\nulldelimiterspace} {\sum\limits_{i = 1}^{n} {S_{i} (j)} }},k = {1 \mathord{\left/ {\vphantom {1 {\log n}}} \right. \kern-\nulldelimiterspace} {\log n}}.\)$$S_{j} = - k\sum\nolimits_{i = 1}^{n} {S_{i} (j)\log } \, S_{i} (j).$$(3)
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Step 3 Calculate the weight of the criterion index.$$w_{j} = \tfrac{{1 - S_{j} }}{{\sum\nolimits_{j = 1}^{K} {(1 - S_{j} )} }}$$(4)
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Step 4 Calculate mapping data M.$$M \, \left( {S_{ij} } \right) \, = w_{j} \times S_{ij}$$(5)
4 Case analysis
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Step 1 Determine the research questions and purposes related to supply chain movements in the footwear industry.The research questions and purposes of this study were mainly limited to an in-depth investigation into the factors affecting the production base movement in the footwear factory, and the impact of such movement on the supply chain strategy and sustainable development of enterprises. Participating focus groups members could refer to Chopra and Meindl’s (2016) description of the supply chain infrastructure, in which the topics range from a company's competitive strategy, supply chain strategy, industrial 4.0 blockchain production technology, operational efficiency, customer response, and other drivers, to their knowledge management and sharing of inventory, transportation, equipment, information, sources of raw materials, prices. A full discussion of the production line transfer and its impact on the case company is included (Gupta 2020) (see Fig. 2).×
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Step 2 Determine the participants. Modgil and Sonwaney (2019) invited 20 experts for consultations regarding the scores for different dimensions, and determined the criteria for the SWARA. In this study, three groups—the footwear industry, government counseling units, and the academic community—participated in the discussion and analysis. A total of 20 participants were included, as shown in Table 2, including six individuals from the footwear industry (finance, procurement, manufacturing, quality control, R&D, and management departments of Zong Da Company), eight individuals from government counseling units (senior officials of the Ministry of Economic Affairs (MEA) and Metal Industries Research & Development Center of MEA), and six individuals from the academic community (professors of sport departments or faculties of colleges, or senior administrators of Taiwan's industry research institutes).Table 2Participants in the focus groupParticipating sectorParticipating organizationNumber of participantsPercentage (%)Footwear industryZong Da company630Government counseling unitsMinistry of Economic Affairs (MEA) and Metal Industries Research and Development Center of MEA840Academic communityAcademic institutions630
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Step 3 Determine the moderator for discussion of topics regarding the movement of the shoemaking base.The moderator, who plays a key role in studies employing this method, is expected to have leadership qualities, a sense of group dynamics, and a deep understanding of the footwear industry. His/her main tasks include discussing the topic of production base movement, selecting the research method for evaluation, controlling the duration of discussion, and determining the location of discussion. Therefore, the moderator of this study was an objective academic representative who had an unbiased position and had participated in many focus group discussions.
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Step 4 Develop the topics to be discussed.The following factors need to be considered for production base movement in the footwear industry: the COVID-19 pandemic, the Sino–US trade war, tariffs, exchange rate, labor costs, government counseling, supply chain, manufacturing technologies, market changes, technological innovation capabilities, and production base movement costs. In addition, the impact of the production base movement on the company’s operations needs to be analyzed. Therefore, the aim of the focus group was to allow participants to share their professional knowledge and experience in the footwear industry, and to discuss the international scenario and market changes so that they can evaluate the feasibility of production base movement with limited resources. The following two topics were proposed:
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Topic 1 Determine the criteria for evaluating production base movement, collect information on the internal and external environments of the company as well as the international scenario, and determine the criteria for evaluating the production base movement.
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Topic 2 Selecting a research method for evaluating production base movement. After determining the criteria, select an appropriate and objective research method for the evaluation.
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Step 5 Run the focus group.Topic 1: Determining the criteria for evaluating production base movement1.Organisational divisionZong Da Company has six departments: finance, procurement, manufacturing, quality control, R&D, and management. The finance department is mainly in charge of exchange rate risk management and cost analysis for production base movement. The procurement department is primarily responsible for the assessment of the supply chain. The manufacturing department evaluates the equipment required for production base movement and determines whether to purchase new equipment or replace old equipment. The quality control department evaluates the quality of the supply chain for materials that are moved to other countries. The R&D department is responsible for evaluating the transfer of technical aspects and the transfer of technology for key and innovative products together with the production base. The management department is primarily responsible for assessing the production base movement and providing empirical analysis of language, culture, labor management, education, and training. For data collection, the moderator directly asked questions to the participants and combined the answers with the information collected, including responses pertaining to the exchange rate policy, business tax rate, export tariff, domestic market, and government’s preferential measures in the country to which the production base is to be moved, during the evaluation. Data related to production and supply chains and technologies, which were obtained using the participant observation method, were also used. The moderator encouraged participants to speak actively and share their opinions in order to provide an objective and accurate analysis.2.Analysis and discussionZong Da was established in 1977, when US$1 was equivalent to NT$40. In 1991, it moved its production base to China for two reasons: (1) exchange rate fluctuations—$1 was equivalent to NT$26.8 and CNY5.34, respectively (Global Website of the Central Bank of the R.O.C. 2020; Li et al. 2011; investing.com 2020), and (2) increasing wages—the average monthly wage in Taiwan's manufacturing industry was approximately US$676 per month, while that in China’s manufacturing industry was US$78, with the former being 8.67 times greater than the latter (National Bureau of Statistics of the PRC 2020; investing.com 2020) (see Fig. 1). These two factors were unfavorable for the management and development of the footwear industry in Taiwan. Meanwhile, due to a stable exchange rate, low wages, and preferential land and tax policies in China, the company decided to move its production base to China.As the COVID-19 pandemic and the Sino–US trade war escalated, US$1 became equivalent to NT$29.27 and CNY 6.79, respectively, in September 2020; the former exchange rate fluctuated by 11.68%, while the latter changed by 27.15% compared with 1991. The average wage in Taiwan was 8.67 times higher than that in China in 1991, although this figure has reduced by a factor of 1.31 times in 2019, see Fig. 1. Exchange rates and wages have significantly reduced companies’ profits. If the production base continues to stay in China, there would be no international competitive advantage; however, this situation would still be favorable for the domestic market. Many shoe manufacturers have directly chosen to shut down factories or have begun to move their production bases to Southeast Asia. The formal launch of the China–ASEAN Free Trade Area has led to competitive threats from countries such as India, Brazil, Vietnam, and Indonesia, where the Red Ocean strategy in terms of costs is applied to low-end shoes. For high-end shoes, the Chinese footwear industry has been following the Blue Ocean Strategy by catering to well-known brands in Italy, Spain, Portugal, and other countries. A comprehensive evaluation of such competitive advantages shows that China's shoemaking costs and export prices have continued to rise, and that the Chinese shoemaking market is gradually losing competitiveness.Table 3 lists five emerging production bases, as selected by the representatives of the three focus groups: China, Taiwan, Vietnam, Myanmar, and the Philippines. Relevant data include the average exchange rate changes against the U.S. dollar from October 2016 to September 2019 and the average wage, population, population growth rate, and GDP for 2018. The exchange rate is depreciating only in Taiwan. All the other four countries have witnessed an appreciation in their exchange rates. Regarding wages, only Vietnam and Myanmar have an advantage in terms of shoemaking costs. As for the domestic market, all other countries except Taiwan and Myanmar have a population advantage. However, many shoe factories in China have chosen to shut down or move to other countries due to the effects of payroll and corporate tax rates and stringent environmental policies in China.Table 3Exchange rate changes, wages, population, and GDP of the five countries (2016–2019) for production base movementAverage change in exchange rate against U.S. dollar (%)Average wage in 2019 (USD)Population in 2020Population growth from 2016 to 2019 (%)Average GDPChina+ 2.17541398.771.39 billion0.56.7Taiwan−1.6181576.6523 million0.1152.0Vietnam+ 4.717595 million1.16.2Myanmar+ 21.6453.5552.89 million0.826.5Philippines+ 11.842100093 million1.66.9Based on the results of discussion among the participants, seven evaluation criteria were determined, to decide the countries to which the production base should be moved: labor costs, materials, exchange rate fluctuations, tariffs, supply chain, production base movement costs, and government policies. After the discussion, five alternative solutions for the sustainable operation of the company were preliminarily selected. The advantages, disadvantages, and details of the five solutions are as follows:Solution A:Shut down the manufacturing department in China, retain the R&D unit and a production line that can be used for small batch production, and outsource most of the production to other OEMs in China. The reason for this is that in 2016, China’s shoe production reached 13.11 billion pairs, accounting for 57.0% of the world's total shoe production. In 2017, it was 12.62 billion pairs, with a slight reduction compared to 2016. However, China's population advantage, sales channels, and OEM manufacturing industries are all important links in the footwear industry chain. Upstream and downstream manufacturers still have profitability due to their technologies or integration capabilities.Advantages:The company only needs to engage in outsourcing management and reduce manufacturing costs.Disadvantages:The costs of shoes sold to the U.S. will rise due to uncertainty risks such as tariff and exchange rate changes in the wake of the Sino–US trade war.Solution B:Besides Solution A, restart the original production factory in Taiwan, initiate R&D and automatic production of high-priced fitness shoes, and reduce the demand for manual labor. This is because footwear products are daily necessities among consumers. The amount of consumption increases with population growth and disposable income. Increasing awareness regarding health and the importance of sports among people is increasing participation in sports-related activities and driving consumer demand for footwear products. The global fitness shoe market is expected to maintain steady growth. When restarting the production line, the company can introduce Speedfactory, which was established in 2015 by Adidas and uses advanced 3D printing technology, to adopt a production model in which human labor is replaced with robots.Advantages:(1) Low-end shoes, using the same production pattern as in Solution A, are produced in China; however, profitability will be worse than before. (2) The production and R&D of high-end shoes are moved to Taiwan. Taiwan has well-educated R&D personnel. Automated production helps increase product value. Initial investments are high, but profitability will also be high in the long run. (3) The Taiwanese government has proposed a southward investment plan, in which the company can establish strategic alliances in Southeast Asian countries to enjoy local government subsidies.Disadvantages:(1) Insufficient basic electric power in Taiwan is a concern for the production division. (2) Business tax in Taiwan is slightly higher than that in neighboring countries, but the exchange rate risk is lower in Taiwan.Solution C:Move the production base to Vietnam.Advantages:Vietnam has a complete supply chain for the footwear industry, which can maintain its existing production and ordering models.Disadvantages:Most shoes produced in Vietnam are exported to Europe, and comply with European environmental specifications and requirements. However, the shoes produced by Zong Da Company are exported to the United States rather than Europe, and there will be uncertainties in managing distributors.Solution D:Move the production base to Myanmar.Advantages:Myanmar has a complete supply chain for the footwear industry, which can maintain its existing production and ordering models.Disadvantages:The political environment is unstable, and there are high uncertainty risks associated with exchange rates and domestic tax rates.Solution E:Evaluate the export and domestic markets and move the production base to the Philippines.Advantages:(1) The economic growth rate of the Philippines is above 6.9%, and consumption is strong. (2) Labor costs in the Philippines are lower than those in other countries. (3) The population is growing rapidly to over 100 million, providing a large domestic market. (4) The government is willing to set up industrial zones that provide tax incentives. (5) Shoes are exported to the U.S. market with a relatively stable exchange rate and tariff preferences.Disadvantages:In the Philippines, there is no complete supply chain for the footwear industry, and the wage advantage is not obvious.
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Step 6 Formulate the criteria and decision-making plans to evaluate the production base movement.Topic 2: Selecting a research method for evaluating production base movementThe participating scholars proposed a combination of GSDEM and entropy to evaluate solutions. Combining these two research methods has the following advantages: (1) GSDEM is mainly used for dealing with an event and coping with multiple decisions in the event, and can effectively optimize the method of ranking dual-situation solutions. Its advantages include objective evaluation, simple computation, clear principles, and reliable effects. (2) Entropy can be used to calculate the weights of the evaluation criteria based on data randomness. The weights of the evaluation criteria are not affected by the preferences of decision makers, thus achieving objective decision-making for the company’s sustainable operation in the future. The decision-making process for evaluating the production base movement is as follows:
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Step 6.1: Calculate the GSDEM data of the evaluation criteria for the five alternative solutions.The seven evaluation criteria include: labor costs, materials, exchange rate fluctuations, tariffs, supply chain, transfer costs, and government policies. These criteria were submitted to 20 participants based on historical data and professional judgment. Data (0–1) were analyzed using Eq. (1) and the average GSDEM values of the seven evaluation criteria for the five alternative solutions were obtained, as listed in Table 4.Table 4Average GSDEM values of participants’ evaluation on production base movementAlternativeEvaluation CriteriaLabor costsMaterialsExchange rate fluctuationsTariffsSupply chainTransfer costsGovernment policiesA0.600.350.400.750.760.480.73B0.350.400.300.690.780.300.34C0.400.600.500.620.400.580.83D0.350.700.950.680.840.900.90E0.450.760.900.450.890.950.80
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Step 6.2: Calculate the entropy weights of the seven criteria.Equations (2), (3) and (4) were used to calculate the entropy weights of the seven evaluation criteria listed in Table 3, that is, entropy = (labor cost, materials, exchange rate fluctuation, tariff, supply chain, transfer cost, government policy) = (0.1421, 0.1413, 0.151, 0.1360, 0.13917, 0.14875, 0.1415). In this equation, the exchange rate fluctuation is 0.1510, and the transfer cost is 0.14875. The participants opined that these two criteria were the most important for the production base movement.
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Step 6.3: Calculate the GSDEM evaluation data after adjustment.Equation (5) was used to obtain the entropy from Step 2 and recalculate the adjusted GSDEM matrix. The calculation results are presented in Table 5.Table 5Adjusted GSDEM dataAlternativeEvaluation criteriaLabor costsMaterialsExchange rate fluctuationsTariffsSupply chainTransfer costsGovernment policiesA0.090.050.060.100.110.070.10B0.050.060.050.090.110.040.05C0.060.080.080.080.060.090.12D0.050.100.140.090.120.130.13E0.060.110.140.060.120.140.11
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Step 6.4: Standardize the data.Among the seven evaluation criteria, the polarity of the values of two criteria, supply chain and government policies, should be as large as possible, and that of the other five criteria should be as small as possible. Therefore, the data were normalized using Eqs. (6) and (7). The obtained data are listed in Table 6.Table 6Data standardization and comprehensive GSDEM measure valuesAlternativeEvaluation criteriaLabor costsMaterialsExchange rate fluctuationsTariffsSupply chainTransfer costsGovernment policiesGrey measure valuesA0.58331.00000.75000.60000.85390.62500.81110.7462B1.00000.87501.00000.65220.87641.00000.37780.8259C0.87500.58330.60000.72580.44940.51720.92220.6676D1.00000.50000.31580.66180.94380.33331.00000.6792E0.77780.46050.33331.00001.00000.31580.88890.6823
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Step 6.5: Calculate the comprehensive GSDEM measure data of the solutions.The comprehensive GSDEM values were calculated using Eqs. (9), (10) and (11), and the results are listed in the rightmost column of Table 4. The comprehensive GSDEM measure value of Solution B is 0.8259, which is the optimal value among the five alternative solutions. This value is decided by experts and scholars from three parties (footwear industry, government, and academic community). In the future, the company will use Solution B as a strategy for sustainable operations.The footwear industry is labor-intensive. It cannot last long in any one place, regardless of location. Almost every 20 years, the shoe industry needs to move to a place where labor is cheaper. All construction begins from scratch. This is also a problem faced by Taiwanese shoe companies, including world-renowned Taiwanese OEMs who have made overseas investments. For example, the Pou Chen Group has factories in Vietnam, Indonesia, Bangladesh, Cambodia, and Myanmar; the Feng Tay Group has production bases in Vietnam, Indonesia, and India; the Ching Luh Group has factories in Vietnam and Indonesia; and the Fulgent Sun Group has investments in Vietnam and Cambodia.Therefore, the focus group concluded that Solution B can enable the company to develop sustainably. Low-end shoes should be outsourced to Chinese or other international partner manufacturers. In Taiwan, product upgrades should be conducted, and production bases should not be moved.