What is Nearshoring and How Does It Affect Supply Chain?

When the global pandemic struck the world, supply chains all over the world were affected and faced with massive product and materials shortages from global suppliers. In response to these issues, businesses began wondering if they should bring manufacturing closer to home with nearshoring. Nearshoring allows companies to get to get product within their region, making it more efficient and cost effective.

Nearshoring vs Reshoring

Often times, nearshoring and reshoring are terms that are used interchangeably; however, these two terms are vastly different. Nearshoring happens when your business partners with suppliers, manufacturers, and other necessary channels that are located within your company’s region. For example, a U.S company may partner with a supplier in Canada or Mexico instead of China or Japan. Reshoring, however, would be if your company brought manufacturing and production services back to the country or region where the company operates. In this instance, a company centered in Missouri might practice reshoring by partnering with a company in California.

Improves Control of the Supply Chain

Nearshoring allows your business to have better control over your supply chain and allow you to source materials in closer area which can increase supply stability. When a company nearshores, they now have easier access to the supply chain by being sourced closer to domestic markets and will now be able to handle disruptions easier in the event the delivery stalls. When nearshoring, materials will also move over land rather than air or water, therefore, if global disruption puts air and water shipments to a stop, your company will not be affected as your shipments will be moved via truck and you will be able to communicate more effectively with your supplier as you will be in roughly the same time zone.

Greater Speed to Market

Like supply chain control, nearshoring allows your business to be able to have a greater speed to market your products. Whether your business is partnering with a supplier, a manufacturer, or a third-party logistics, getting the goods from one place to another will take a shorter amount of time as it does not need 6-8 weeks to come from overseas. Having product come from within your region allows you to plan easier when putting product up on the market and can help you mitigate any disruptions along the way.

Nearshoring Isn’t for Everyone

Though nearshoring has quickly made its way into the United States and has been beneficial for many businesses, nearshoring isn’t for everyone. Before taking this approach and moving your business to a nearshoring strategy, you must consider the risks and obstacles that come along with it. It is important to take all options into account when deciding if nearshoring is the correct approach for your company, if your company is functioning well with your global partners then it may not be the appropriate move to start the nearshoring process but instead weighing your options and plan ahead.

Deciding whether your business should transition to nearshoring can be stressful, but it doesn’t have to be! As a reputable 3PL, NewStream understand just how difficult it can be to implement something new into your business. With over 30 years in comprehensive supply chain management, our team is equipped with the knowledge and expertise to handle your details so that you can focus on the development of your business!

Ready to partner with a reputable 3PL? Let’s talk, our experts are ready to help!