Benefits you Enjoy when you Go with Nearshoring
There are many companies that find outsourcing their manufacturing needs to other countries to be the best option in terms of operations and profitability. They get exposed to cheaper labor and production costs, more so once scale of economies kicks in. What you need to figure out how far you will go for the contract manufacturing service.
Offshoring is when you get the contract manufacturing service in another country situated far away. A good illustration is when a company in the US goes looking for this service from a company in China. Near shoring, on the other hand, is when that company in the US contracts a company in Mexico to do the same job. There are several benefits nearshoring presents over offshoring you need to consider.
There are the costs of manufacturing and labor to think of. As much as you get cheaper labor costs when offshoring, there are the transportation costs yet to be added. With the changing times, the transportation of manufactured goods has become a more expensive undertaking. The savings you made in labor costs can no longer justify the increasing transportation costs.
You also have to think of 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. That much trouble every time soon becomes too much for your teams. 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 also, get to communicate better since the time zones are not too contrasting.
The trade agreements and policies are also more favorable for you when you opt for nearshoring. There are trade deals and legislature formulated to ensure better relations between neighboring countries, which exposes you to even more benefits. You get to transport raw materials much easier to a neighboring country, and to receive the finished products in the same fashion. There will also be the ease of formulating better terms over time. It is hard to come up with the same agreements with a country far away.
You also have to think of intellectual property protection. When you come up with new ways through innovation, that knowledge has to be guarded against the competition. The world’s largest offshoring base, China, is normally not so keen on such protection. They are chaining that stand, but a lot of damage has been done. You are better off in a place like Mexico, where intellectual property laws are strong. There are even more benefits you will enjoy while there, apart from the intellectual property protection.