Impact of skeleton imports on hollowing out production bases outside Japan

Many Japanese manufacturing companies have moved their production facilities partially or completely to China and other Asian countries, and the products produced at such oversea production bases are reversely imported into Japan. While this hollowing out production bases outside Japan enables them to reduce the labor and other operation costs, it incurs the extra logistics costs. In addition, the market lead time becomes inevitably longer, resulting in the increased inventory costs. In order to compensate these negative effects, certain Japanese companies have been implementing the SI (Skeleton Imports) strategy, where a variety of products in small quantity would be designed in such a way that a common frame (called Skeleton) can be used for all the products and various product specifications can be mounted onto the common frame to produce a variety of products in small quantity efficiently. The purpose of this paper is to analyze the positive effects of the SI strategy via simulation.