Advantages of Nearshoring
There are many companies that find outsourcing their manufacturing needs to other countries to be the best option in terms of operations and profitability. They get to enjoy cheaper labor and production expenses, even more so once you factor in the scale of economies. You only need to figure out how far away you will outsource the contract manufacturing service.
Offshoring is normally where you get that service in a foreign country located far away. You can see this when a company in the US seeks the service from a company in China. Nearshoring is in turn when the US company seeks the same service from a company in Mexico. Nearshoring has certain key advantages over offshoring. Let us examine them.
There are the costs of manufacturing and labor to think of. While you may enjoy cheaper labor costs if you go for offshoring, there is the added cost of transportation to think of. With the changing times, the transportation of manufactured goods has become a more expensive undertaking. What you used to save in labor costs no longer makes sense when you look at the increasing transport costs.
Another issue is proximity. You end up saving a lot of time when your goods are manufactured nearby. You also get to communicate better with a company that is based nearby. You can see this in cases where you have to travel all the way for inspection meetings. That much trouble every time soon becomes too much for your teams. You also, incur higher costs in the business over time. There will also be fewer language and cultural barriers when dealing with a nearby company. You will also have friendlier communication environments since the time zones are not too far apart.
Nearshoring also exposes you to better trade agreements and policies. You get to enjoy better trade terms due to the trade deals and other policies put in place to favor neighboring countries. Transporting your raw materials to a nearby country is much easier, as is importing your finished products. You also get to agree on better times as times change. It is hard to come up with the same agreements with a country far away.
There is also the matter of intellectual property protection. As you invent and innovate in your quest to produce the best products, you want that knowledge to be kept safe and away from your competition. The world’s largest offshoring base, China, is normally not so keen on such protection. There are efforts to curb the vice, but it is taking the time. You are better off in a place like Mexico, where intellectual property laws are strong. There are even more benefits you will enjoy while there, apart from the intellectual property protection.