To understand Nearshoring, let me first talk about Offshoring.
Offshoring is when a company outsources part of its work to facilities in far off parts of the world.
Outsourcing is popular in the business world as it means reduced operational costs for companies.
Outsourcing to far off countries has been around for a long time but has encountered many problems. For example, companies based in Los Angeles, USA, may be outsourcing work to India. This means that the company in LA is trying to maintain communications with a country that’s time zone is practically in yesterday. This leads to a lot of confusion. Can you imagine trying to arrange a meeting for your tomorrow but their today, or visa versa?
The real problem arises when the LA Company wants to have its customer service operations outsourced to India. The American customers end up trying to explain themselves a million times over as the language barrier is too large and the poor Indian team member is probably working at 4:00 am in the morning to facilitate the time zone of the USA! This leads to a lot of angry people, which leads to a bad reputation for the American Company.
Offshoring has been going on for years and years as it is effective in cost reduction but there is another solution with reduced risks that still saves your company money.
Nearshoring is when a business outsources certain work to facilities that are located in nearby countries
For example a company located in LA, could outsource their work to Mexico. Or a company located in Maine may outsource their work to Canada.
This already brings about a big difference…time difference that is! It is much easier to communicate with your facilities if they are in the same time zone, same days, same hours. No more confusion or missed meetings.
The other huge advantage of nearshoring as opposed to offshoring is that the culture and language difference will not be as large. This will lead to happy employees and happy customers= a win win situation!
Considering the savings generated by nearshoring are as effective as the savings generated by offshoring, then this business tool is well worth it!