Some businesses engage in offshoring, which is a practice that involves moving a portion of the company’s operations overseas, usually in an effort to reduce costs, obtain tax advantages, avoid local regulations and more.
Another option for businesses today is something called nearshoring. If you’ve never heard of this term, let’s look at what it is and the potential benefits it can provide.
What is nearshoring?
Nearshoring is a business practice that, like offshoring, involves moving a portion of the company’s operations overseas. However, with nearshoring, the overseas facility is relatively close to the original company’s location. If the business originally participated in offshoring, nearshoring may involve taking operations from a country that is further away and moving them to one that is closer in geography.
Potential nearshoring benefits
Nearshoring offers companies a few potential advantages. These include:
- Faster speed to market
- An improved ability to react to changes in consumer demand with greater swiftness, allowing the business to either capitalize on increases in demand or minimize the impact of demand reductions
- Greater control and oversight of the outside location’s operations and manufacturing processes
- The ability to visit the outside site with greater ease, and greater frequency
- Fewer challenges related to language differences or differences in cultures
- Improved communication since the outside site is closer to the business’s time zone, if not in it
- Less time and lower costs associated with transporting the finished or partially finished products and goods to the business’s home country
- Reduced expenses related to duty and customs charges
Determining whether nearshoring is right for you: Questions to ask and answer
Like any other business practice, nearshoring isn’t a one-size-fits-all solution. Even though it offers a list of potential benefits, it may not provide enough benefits for your business to make it worth considering.
If you’re wondering whether nearshoring may be a good decision for you, here are a few questions to ask:
- Do you have a need to expand? Put another way, is your business growing to the point where you need a new location anyway—regardless of where that new location is?
- Are you comfortable with not having all your operations on-site, where you can’t oversee them with as much diligence as when they are on your original property?
- What type of processes would you need to put in place to ensure open lines of communication and functional communication speeds?
- Can the nearby location provide the same level of quality that you expect when it comes to the manufacture or partial manufacture of your products and goods?
- What are the tariffs and duty costs associated with returning your goods to your location?
- What does the transport process look like for those goods? Is the new location on the same continent, allowing for the goods to be transported on the ground or would they need to be transported by water or air? What are the associated costs?
- How much will the outside location pay its workers? Are you okay with these rates?
Answering questions such as these can help you decide whether nearshoring is right for you. If you want to explore your options for staffing your current location and keeping your operations within your current facility (or a nearby town or city), we are here to help
