March 13, 2025
In today’s dynamic global economy, businesses are continuously seeking ways to be more efficient, improve resilience, and reduce risk, especially considering the changing relationship between the United States and China in response to recent political updates. One approach that is gaining increasing attention is nearshoring—a strategic shift that offers a range of benefits, from cost efficiencies to stronger supply chain control.
A trend that underscores the need for businesses to reconsider their strategy is that annual Chinese imports to the US fell to $426.9B in 2023, with China’s share of US imports shrinking from 21.6% in 2017 to 15% in 2024, according to S&P Global. Meanwhile, Mexico and Canada have outranked China as the US’s top trade partners. A recent survey conducted by the Journal of Commerce revealed that 92% of logistics executives deemed inter-America supply chains “very important.”
WHAT IS NEARSHORING?
Nearshoring involves moving production or services to a nearby country, often in the same region, rather than outsourcing them to distant locations like Asia. For U.S.-based businesses, this means shifting operations to countries in Latin America or the Caribbean. The goal is to reduce supply chain disruptions and take advantage of proximity to domestic markets.
THE KEY BENEFITS OF NEARSHORING
- Reduced Shipping Costs and Delivery Times With suppliers closer to home, your goods can travel shorter distances, which means lower transportation costs and quicker shipments. This is especially beneficial for industries that rely on just-in-time inventory systems or need to respond quickly to market demands.
- Enhanced Supply Chain Resilience In today’s global economy, supply chain disruptions are becoming more common. Events like the pandemic, natural disasters, or geopolitical tensions can wreak havoc on distant production lines. Nearshoring can help businesses avoid some of these risks by relying on nearby countries that may have more stable conditions or shorter routes for goods to travel.
- Improved Communication and Time Zone Alignment With nearshoring, businesses enjoy the advantage of being in similar time zones. This leads to more efficient communication with suppliers, better customer service, and faster problem resolution. Whether you’re coordinating production or troubleshooting an issue, the closer proximity makes it easier to keep things running smoothly.
- Access to a Skilled Workforce Many nearshoring destinations offer a highly skilled and competitive workforce. Countries in Latin America, for example, have become hubs for industries like manufacturing, IT services, and customer support. By tapping into this talent pool, you can maintain high-quality production standards while benefiting from cost-effective labor.
- Better Control and Flexibility When your supply chain is closer to home, you have more control over production processes. You can visit factories more frequently, monitor quality control, and adapt to changes more swiftly. Plus, with nearshoring, you can easily scale production up or down based on your business needs, offering more flexibility than working with distant suppliers.
- Favorable Trade Agreements Many nearshoring locations benefit from favorable trade agreements, such as the United States-Mexico-Canada Agreement (USMCA). While these agreements are currently under scrutiny from the Trump Administration, building strong relationships with suppliers who adhere to the changing standards is vital to remain compliant.
HOW NEARSHORING CAN IMPACT YOUR BOTTOM LINE
While nearshoring may initially seem like a big shift, the long-term savings and efficiencies it can bring to your business often outweigh the transition costs. By lowering shipping expenses, minimizing supply chain risks, and improving lead times, businesses can improve cash flow and reduce operational disruptions. Nearshoring can help businesses increase responsiveness to market changes. The closer proximity allows for quicker product adjustments and faster deliveries, which can enhance customer satisfaction and loyalty.
Here are some potential transition costs to consider:
- Technology Integration with New Suppliers: Fast and reliable data interchange will improve your visibility, but it takes time and money to implement.
- Frictional Costs: You will have labor costs from your team to manage a supplier transition as well as potential service gaps that could result in loss of production. It will take time to fully transition to a new supplier, and some additional time after to evaluate their performance.
- Regular Inspections and Audits: Hiring a third-party specialist to perform audits with your new suppliers is likely more cost-effective than doing it in-house but is an expense to plan for.
IS NEARSHORING RIGHT FOR YOUR BUSINESS?
If you’re looking for ways to streamline operations, reduce risk, and improve cost-efficiency, nearshoring is a strategy worth considering. It offers a flexible, reliable alternative to traditional offshore outsourcing, especially for businesses that are looking to create a more resilient supply chain and stay competitive in a fast-paced market.
At OpenRoad, we specialize in helping businesses optimize their supply chains and navigate the complexities of global logistics. If you’re exploring nearshoring options or need guidance on how to adapt to this strategy, we’re here to help.
About OpenRoad
Since 2004, OpenRoad has been empowering companies to achieve more through innovative supply chain solutions and a relentless commitment to top level service. With a full suite of logistics services and the industry’s most advanced technological tools, we partner with companies to strengthen their supply chains, enabling them to operate more efficiently, manage their transportation spend, and ultimately serve their customers better.
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