Blog
Nearshoring is on the Rise
June 27th, 2014
As much as Americans like to bemoan the businesses’ tendency to send jobs overseas, there are signs that say the trend is reversing. According to “Manufacturing Today,” nearshoring—the process of moving personal and activities closer to a business’s home country— is on the rise.
There are a lot of reasons for this movement. First and foremost is the shrinking cost benefit of outsourcing for certain companies. Rita McGrath explains, “rising inflation and wage expectations have decreased the cost advantages the country’s manufacturers enjoyed over U.S. firms and some estimate that by as soon as 2015, the U.S. could be in a cost parity situation with Chinese manufacturers.” One study has shown an average labor savings of only around 10%. The same study found that 28% of the businesses that offshore find themselves with higher end costs.
Other nearshoring advantages include greater patent protection, less risk in regards to trade barriers and currency fluctuations, more procedural and product control, less supply chain complexity, certain tax advantages, and in many cases, a higher quality product.
Of course, not all American manufactures will not receive an overall benefit by moving closer to home. However, businesses would be wise to do a cost-benefit analysis of the manufacturing locations and to not let preconceived notions about outsourcing blind them to opportunities in their back yard.
