Nearshoring, or moving your business operations to a nearby country, has many benefits over offshoring or strictly hiring employees in the US only.
You hire local employees. You work with local services. In pinch, you might use services from another state.
It's a practical measure that limits complexity and demands on your time. As your business grows, though, you'll start seeing the limitations of always working with local resources. If you don't relish the idea of shipping parts of your business to the far corners of the earth with offshoring, nearshoring offers a middle ground.
Not sure what nearshoring entails or gains you? Read on for a breakdown of nearshoring and its benefits.
In essence, nearshoring means that you send one or more business processes to a nearby country. For US businesses, that typically means somewhere in Central or South America. Commonly outsourced processes include manufacturing and software development or closely related IT processes.
With that basic explanation of nearshoring out of the way, let's look at some of the benefits of nearshoring.
The ongoing supply chain woes are problematic for major corporations and SMBs alike. While the reasons for the supply chain issues remain complex, distance is a major factor. Many small businesses and e-commerce businesses, in particular, rely on or relied on imports from companies based overseas.
The supply issues are only compounded when you import from overseas. You must deal with internal supply chain problems of both the US and the country of origin. Plus, you must factor in two to four-week ocean voyages for trans-Pacific shipping.
With nearshoring, you eliminate some of those problems through sheer proximity. Anything coming from overseas by boat must go through the horribly backlogged US ports. Things coming from Central America, for example, may well come overland by truck.
While still subject to customs, they will likely face a shorter wait. All of which reduces your supply chain troubles.
Let's say that you want to either offshore or nearshore some of your manufacturing. One of the big considerations is the pure accessibility of the manufacturing facility. While traveling to Central or South America takes some planning, it's a much simpler prospect than traveling to Asia.
Depending on your location, you can get from the continental US to South America with a 6 to 8-hour flight. A similar trip from the continental US to China, for example, can take double to triple that amount of time.
All of that makes visiting the facility a much less time-intensive prospect when you work with nearshoring companies. The same holds true for face-to-face meetings that you just can't get away with doing with a Zoom call.
The main reason any business offshored or nearshores a process is that they can get it done cheaper. Labor costs remain persistently lower in Asia and Latin America. The rising costs of shipping, however, make nearshoring a more desirable prospect these days.
You especially see cost savings for programming. The cost of a lone programmer in the US is often enough to secure three programmers through a nearshoring partner.
One of the biggest stumbling blocks with traditional offshoring is the time difference. Noon in the eastern time zone is the literal middle of the night in China or Japan. That makes real-time collaboration tough at the best of times.
It becomes even less practical if you're looking for a partner to do something like staff augmentation for your software development project. While some asynchronous communication is natural, it's a killer when all communication happens with a significant time gap.
With nearshoring, you often work with companies in the same time zone or at least companies with a substantial overlap in their working day. Your staff and their staff can communicate via chat programs or video calls to solve problems.
Latin American countries certainly have their own, distinct cultures. For example, lateness is fairly common and unremarkable in Brazil. Despite these kinds of differences, there is substantial crossover in the general norms and values.
You're far less likely to accidentally offend someone from Latin America than you are to accidentally offend someone from Thailand.
As a general rule, you'll probably have an easier time finding someone who speaks one of the main Latin American languages of Spanish, Portuguese, or French. These are languages that people routinely take in high schools in the US. You might even discover you have someone on staff with passable skills in those languages.
Odds are far worse that you'll just have someone on staff who speaks Filipino, Bengali, or Chinese.
Let's say that you set up an offshoring arrangement five years ago. It worked great until Covid came along and kicked over everyone's finely tuned processes. Some companies dealt with those problems by reshoring or returning those offshored processes back to the US.
Reshoring is one potential solution, but so is nearshoring. In the reshoring vs nearshoring debate, you must balance a number of factors. Right at the top of the list is whether you get more benefits by having the process close to home.
In many cases, you'll discover that nearshoring provides similar or even superior benefits to those you got from your old offshoring arrangement. You get to hang onto lower costs, but you also benefit from real-time collaboration, accessibility, and fewer communication problems.
As your business grows, you will discover that always working with local resources often means a number of pitfalls. Right at the top of the list is higher costs. It's why so many small businesses once relied on offshoring options for things like manufacturing and even customer service.
Nearshoring offers a viable alternative for your business. You can see cost savings without many of the pitfalls of full-blown offshoring to the Far East.
Ingenia Agency specializes in nearshore solutions for web development, digital marketing, and staff augmentation. For questions or more information, contact Ingenia Agency today.