Near-shoring (also nearshoring) means moving jobs to a nearby foreign country. It is part of the “X-shoring” constellation of terms that include off-shoring (sending work to an overseas location), multishoring (sending outsourced work to several overseas locations based on the job to be done and the relevant skills available), and two-shoring (using both an offshore location and a domestic one).
Near-shoring should be part of a company’s global strategic considerations because it can generate many direct material benefits, depending on market conditions:
- It allows a firm to upsize or downsize and to spread risk to other parts of the production chain.
- Wage and costs differentials in near-shore countries make the company more competitive in the home market.
- Nearby countries may have higher-quality workers with multilingual capability.
- Rather than extend operations to a country around the world, a company that employs near-shoring can reduce costs and time to market because of the closer proximity to the home market.
- Time-zone advantages mean easier synchronous communication.
- Nearby markets open new consumer markets.
The question facing owners and managers is how to select a near-shore location. This selection usually is usually made through a high-medium-low market selection matrix for making comparisons. Considerations include size and composition of the near-shore market; economic conditions such as growth rate, tariffs, and trading blocs that the country is part of; labor-market factors, such as skilled employees, wage costs, and employee protection regulation; infrastructure issues such as transportation, electricity, and telecommunications; risk factors such as susceptibility to natural disasters; political stability and corruption; and intellectual property protection.
Especially important for near-shoring decisions are wage costs in important labor sectors. Using the rankings of the top near-shoring destinations from BusinessWeek and comparative salaries from Overseas Digest, an owner/manager of an IT company may want to consider the following near-shoring options:
- Atlantic Canada Opportunities Agency, Nearshoring Industry in Atlantic Canada (Atlantic Canada Opportunities Agency, 2007);
- Stefan Bock, “Supporting Offshoring and Nearshoring Decisions for Mass Customization Manufacturing Processes,” European Journal of Operational Research (v.184/2, 2008);
- “International Salary Report,” Overseas Digest, www.overseasdigest.com (cited March 2009);
- “Nearshoring: A Competitive Advantage in a Global Economy,” Trade & Industry Development, www.tradeandindustrydev.com (cited March 2009);
“Top Countries for Outsourcing,” BusinessWeek, bwnt.businessweek.com (cited March 2009).
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