There are a lot of trends to keep up with in the supply chain industry. From changing technology to evolving initiatives, there’s always something new to learn. Still, sometimes the best approach can be a tried-and-true method that’s known to get results. What are we talking about? Nearshoring, of course.
There’s been a lot of talk around nearshoring in the last few months, which is why we’ve decided to create a simple go-to guide on the practice. After all, we like to help ensure customers have the information they need to have successful supply chains. Is nearshoring right for your organization? Keep reading to learn more.
What is Nearshoring?
Nearshoring refers to when an organization outsources its operations, such as manufacturing, to a different country. What sets it apart from offshoring is that the country that handles the operations must be close to the organization itself or to their target market. Think of it as moving locations within a region instead of moving operations across the globe.
Many companies who incorporate nearshoring into their strategies do so because it can help save costs on transportation, tariffs, taxes, and even avoid some of the cultural and language barriers that arise when offshoring to more distant countries. For instance, businesses in the US might decide to relocate their manufacturing operations to Mexico, which could be less expensive for that organization than manufacturing in China would be.
The Benefits of Nearshoring
Nearshoring can offer several benefits for supply chains. These include:
- Faster Shipping Times: Nearshoring inherently requires cargo to cover shorter distances than offshoring does. This can improve delivery times and reduce overall logistics costs.
- Improved Quality Control: When a company chooses to nearshore, it allows headquarters to work more closely with the outsourced teams. This means quality control becomes easier to enforce equally across locations.
- Lower Costs: While cost savings are not the sole reason for nearshoring, it does offer an opportunity to save on manufacturing and shipping costs. The cost of production may be lower than it is in an organization’s country of origin.
Factors to Consider When Choosing a Nearshore Partner
When choosing a nearshore partner, supply chain managers should consider several factors. These include:
- Expertise: The nearshore partner should have the necessary expertise to handle the project and produce the required output. As with any partner, supply chain managers should do their research on the nearshore partner’s experience, references, and reputation.
- Location: The partner should be located within an appropriate distance from the company. This will enable better communication and faster logistics.
- Communication: Communication is essential when it comes to supply chain management overall, but even more when nearshoring. Organizations should be able to communicate in a common language with nearshore partners to ensure everyone is on the same page and minimize misunderstandings.
- Logistics: The nearshore partner should have the necessary resources and infrastructure to ensure the smooth transportation of goods during production.
As we said, nearshoring can potentially offer several benefits to supply chains. When deciding on a nearshore partner, supply chain managers must carefully weigh the factors mentioned above to ensure they choose someone suitable for their needs. Of course, working with a 3PL can make this easier, since 3PLs can leverage their existing relationships to find a suitable partner. If your organization is looking to begin nearshoring but isn’t sure where to start, get in touch with our team!