International shipping is, by its very nature, risky business. So many things can disrupt a global supply chain, from sluggish port operations to geopolitical conflict to capacity shortages. Heck, even the weather can set a supply chain off its course, careening toward disaster!
As importers seek risk-mitigation solutions to steady their supply chains, one increasingly popular strategy is nearshoring, the practice of moving production operations closer to the end consumer market.
This practice, while not new, has surged in adoption over the past five years due to a series of far-reaching disruptions that laid bare the vulnerabilities of the global supply chain.
By choosing to nearshore and relocate manufacturing closer to home, businesses can enhance supply chain resiliency and enjoy reduced transit times, lower shipping costs, and greater operational efficiencies.
Anderson Trucking Service (ATS) has been helping shippers streamline and strengthen their supply chains for decades. The depth of our experience in cross-border shipping allows us to provide unparalleled insights into nearshoring as a growth opportunity for importers.
In this blog, we’ll explore the benefits of nearshoring, why it's gaining traction, and how it can drive efficiency and profitability for shippers.
You’ll walk away with a better understanding of nearshoring as a practice, its strategic advantages, and whether it could be a good fit for business.
- Nearshoring definition: What it is and why it’s trending
- What kinds of companies are nearshoring?
- Nearshoring benefits: Why choose nearshoring?
Nearshoring Definition: What It Is and Why It’s Trending
Nearshoring is a term used in supply chain management to describe the practice of moving some or all of a company’s production operations to countries closer to their consumer markets, particularly as a transition from ones further away.
Nearshoring developed as a reaction to supply chain disruptions across the global transportation industry. While nearshoring as a concept has been around for at least two decades, the practice has exploded in popularity over the past five years.
And it’s easy to see why: From COVID-19 to conflicts in the Middle East and the Suez Canal to deepening tensions with manufacturing hotbeds like China, shippers have ample reason to seek production solutions a bit closer to home.
If a U.S. company can transfer manufacturing operations from China to Mexico or Canada, the geographic closeness and elimination of overseas shipping needs can lend stability to that company’s supply chain through shortened transit times and decreased risk of interruption from global events.
Even nearshoring to U.S. neighbors further afield can help shippers strengthen their supply chains. Latin American and South American countries like Argentina, Brazil, Colombia, Costa Rica, El Salvador, and Guatemala are rapidly becoming popular nearshoring options thanks to their proximity to the U.S. and similarly skilled workforces.
Those changes can also contribute to better cost management. Overseas shipping can quickly become expensive — and with tariffs on Chinese imports dramatically increasing in 2024 with more to come through 2026, they’ll only become more expensive.
By moving manufacturing to a bordering or nearby country, U.S. shippers can avoid these expenses as well as the long vessel freight transit times caused by ship and container capacity shortages and sluggish port operations.
What Kinds of Companies are Nearshoring?
Companies of all sizes are now exploring nearshoring as a supply chain management solution for all or a portion of their business. In general, the shippers that stand to achieve the most efficiencies through nearshoring:
- Currently produce/manufacture products overseas that are destined for the U.S. market.
- Ship the same product(s) or product types consistently, with little to no specialization, variances, or customization.
- Require a workforce with similar skills to those found in U.S. neighbor countries like Canada and Mexico.
- May have U.S.-based steps in its supply chain, such as kitting or assembly.
- Seek to find efficiencies in transportation costs and logistics, i.e. via the elimination or significant reduction of overseas shipping needs, shorter overall transit times and distances, etc.
Many companies that have successfully made the transition to nearshoring operate within industries that historically relied on importing and exporting goods from Asia to their U.S. consumer base, such as:
- Aerospace and defense
- Apparel and other retail goods
- Automobiles and auto parts
- Electronics and tech
- Household goods and appliances
- Medical equipment and pharmaceuticals
- Textiles
This reliance on Asian manufacturing solutions was largely due to a lack of viable alternatives.
Manufacturing within the U.S. itself is often financially out of the question for companies with supply chains that depend on the lower cost of an international production hub.
Making products in China, Taiwan, Vietnam, or the Philippines, by contrast, is much cheaper — but it inherently requires expensive (and delay-plagued) shipping via air or sea.
Nearshoring presents a tidy solution. Manufacturing just outside U.S. borders offers the same skilled workforce, proximity to the market, and elimination of overseas shipping needs as domestic manufacturing — without the high price tag.
When the three key elements at play — workforce skills, geography, and cost — can be balanced to work in favor of the shipper, that’s an ideal nearshoring opportunity.
Nearshoring Benefits: Why Choose Nearshoring?
Why are companies nearshoring? Typically, shippers choose nearshoring to achieve increased efficiency, profitability, and supply chain resiliency.
Let’s take a look at how the logistics of nearshoring makes these three main benefits possible for shippers.
Supply Chain Efficiency
The primary draw of nearshoring is the shortened distance between production sites and end markets, which eliminates the lengthy transit times inherent to the intercontinental shipping process.
What once was happening half a world away now happens right in the shipper’s (and consumer’s) backyard, reducing the risk of delays and driving faster shipping times for improved supply chain responsiveness.
Nearshoring also facilitates real-time communication between supply chain links by bringing them into a common time zone (or at least, less dramatically opposed time zones) and making on-site visits more feasible.
This improved communication can boost decision-making speed and make shippers more agile in the face of market fluctuations, ultimately reducing operational delays that can bog down supply chain efficiency.
Improved Profitability
Enhanced efficiency doesn’t just improve the speed of a nearshorer’s supply chain — it also drives cost reductions and, ultimately, improved profitability.
Traditional international shipments have lengthy transit times and often experience major delays, which puts pressure on shippers to pay for expensive expedited shipping options.
The reduced shipping distances and faster transit times delivered by a nearshoring solution can therefore offer significant cost savings to shippers frustrated by the current state of the air and vessel freight markets.
Compare the cost of simply trucking goods from Mexico to Texas to the cost of bouncing goods from China to Vietnam to Houston to a final consignee in Dallas, for example. The shorter the distance (and the fewer the modes of transportation), the lower the cost.
Nearshorers are also finding cost efficiencies by way of their labor forces. While nearshoring hubs may not offer the extremely low labor costs of traditional offshoring locations like China, their labor rates and degree of workforce skill are still competitive, especially when compared to domestic markets.
By delivering an overall decrease in costs through better geographic positioning, nearshoring can afford shippers the luxury of a slightly more expensive workforce — a luxury that, importantly, supports rather than undermines their goals of profitability and greater operational efficiency.
Supply Chain Resiliency
Nearshoring can support shippers in building a more resilient supply chain — one that can better withstand and adapt to disruption and remain reliable in the face of unexpected challenges.
The geographic proximity created by nearshoring helps protect supply chains from global events that can throw timelines and budgets into upheaval, such as geopolitical conflict, natural disasters, and global supply chain bottlenecks.
By avoiding transit in regions prone to these issues altogether, shippers increase the reliability of their supply chains and ensure a more consistent flow of goods from manufacturer to consumer.
This approach also simplifies the supply chain by shortening it and reducing the number of “touches” (i.e. the amount of times a shipment is handled by an intermediary).
A streamlined supply chain is easier to manage and less prone to interruption. When interruptions do occur, nearshoring allows for quicker adjustments to production and logistics. This agility helps companies meet customer demand reliably and ensure consistent service.
Finally, nearshoring often involves relocating operations to countries with import and export regulations that more closely align with the U.S.’s policies, reducing the complexity and risk associated with navigating international trade laws and customs.
This alignment can contribute to smoother overall operations and fewer regulatory hiccups that may delay shipments.
Learn More About Land Border Crossings
Nearshoring offers many strategic advantages for companies seeking to enhance their supply chain management.
By relocating production operations closer to consumer markets, shippers can significantly reduce transit times, decrease the risk of global disruptions, and improve overall responsiveness.
Nearshoring also helps manage costs more effectively by minimizing expensive overseas shipping and avoiding escalating tariffs, while still benefiting from a skilled and competitively priced workforce.
The proximity afforded to shippers by nearshoring enables better communication, quicker adjustments to market changes, and a more resilient supply chain.
Ultimately, nearshoring drives increased efficiency, profitability, and reliability, making it an attractive solution for companies aiming to optimize their operations and stay nimble in today's complex global marketplace.
Now that you have a comprehensive understanding of nearshoring, check out our article on Freight Shipping Cross-Border To and From Mexico.
Consider it your ultimate guide to successfully transiting freight over the U.S.-Mexico land border. As Mexico’s nearshoring industry booms, this article will arm you with the knowledge necessary to take advantage of these opportunities and reap the greatest possible rewards for your business.
