Benefits you Enjoy when you Go with Nearshoring
For most companies, outsourcing their manufacturing needs to other countries is the more economic strategy. They get exposed to cheaper labor and production costs, more so once scale of economies kicks in. 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. An example is a company in the US contracting a service provider in China to do the manufacturing. Nearshoring is best demonstrated by that company in the US getting the 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. As much as you get cheaper labor costs when offshoring, there are the transportation costs yet to be added. With the changing times, the transportation of manufactured goods has become a more expensive undertaking. You may have justified the transport costs through the cheaper labor costs, but those are no longer enough to make financial sense.
Another issue is proximity. Having your goods manufactured nearby is the best way to save so much time. You also get to communicate better with a company that is based nearby. Imagine having to go all the way for inspection meetings when you are offshoring. You do not want to have to repeat that many times over the course of years. You also, incur higher costs in the business over time. You also face minimal language and cultural barriers with a country near yours. The time zones are not so different, meaning communication times are also convenient for both companies.
Nearshoring also comes with more acceptable trade agreements and policies. Most trade deals and legislature formulated tends to consider the closer countries more because apart from trade, there are other benefits for such a strategic partnership. 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. You find it harder to reach the same agreements with countries 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. A famous offshoring partner, China, is known for being relaxed when it comes to such intellectual property protection. There are efforts to curb the vice, but it is taking the time. Your intellectual-property will be safer in a place like Mexico where rules exist to protect them. You, therefore, enjoy this and many other benefits when you partner with companies there.