Benefits you Enjoy when you Go with Nearshoring
It is common for most companies to outsource their manufacturing needs to other companies in other countries due to cost and operation considerations. They get to enjoy cheaper labor and production expenses, even more so once you factor in the scale of economies. What you need to figure out how far you will go for the contract manufacturing service.
Offshoring is where you access the contract manufacturing service from a country located far away. You can see this when a company in the US seeks the service from a company in China. 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. There are cheaper costs of labor in most offshoring destinations, but you need to factor in transportation costs. 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. There is so much time saved when your goods are manufactured nearby. You also get to communicate better with a company that is based nearby. Inspection exercises are a perfect example of how tiresome it is to deal with 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. There will also be fewer language and cultural barriers when dealing with a nearby company. You will also have friendlier communication environments since the time zones are not too far apart.
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. There will also be the ease of formulating better terms over time. You find it harder to reach the same agreements with countries far away.
There is also the matter of intellectual property protection. As you come up with better ways and products; you need that knowledge kept safe from the competition and other parties. A common offshoring destination, China, is notorious for leaving such intellectual property exposed. They are chaining that stand, but a lot of damage has been done. Your intellectual-property will be safer in a place like Mexico where rules exist to protect them. It is how you become exposed to this and many other benefits.