How Nearshoring Makes Logistics More Competitive
Profit margins in the logistics sector are often very narrow, leaving businesses constantly seeking new and creative ways to improve the bottom line. Implementing cost saving policies and practices doesn’t just improve profits for a business, it also allows them to pass the savings on to their customers. American third-party logistics (3PL) providers, non-vessel operating common carriers (NVOCCs), freight forwarders, shippers, and carriers across all transportation modes are saving money by nearshoring back office tasks to Latin America.
Gaining a Cost Advantage Through Nearshoring
Skilled white collar labor in the United States can be exceedingly difficult to source and retain. A growing logistics talent gap has stakeholders across the supply chain investing significant time and resources into recruitment initiatives. These recruiting programs are often prohibitively expensive, as is the cost of onboarding new employees.
This level of investment comes with a certain level of risk, considering that top talent will be courted throughout their career by other similar companies. As rival businesses continue to compete for a finite pool of talent, the costs for employee benefits packages and salaries will keep rising steadily as well.
This is where nearshoring offers its largest competitive advantage. While the U.S. might struggle with a logistics talent gap, several nearby nations have a plethora of bilingual, college-educated workers prepared to take on white collar jobs for American companies. While plenty of logistics jobs require a physical presence, many back office processes and administrative functions can be done from just about anywhere.
Partnering with a nearshoring provider to outsource certain functions to Colombia, for example, can realize labor cost savings of 30–40%. Additional savings come in the form of lower HR and administrative costs, cheaper office rentals, lower utility costs, and more.
Significant savings such as this will drive competitiveness as the additional cash flow enables the business to invest in assets, service improvements, and other core competencies. Meanwhile, 3PLs, NVOCCs, freight forwarders, and carriers can offer more competitive rates without harming their profit margin. These alone may seem like good reasons to nearshore some logistics tasks, but the overall competitive edge offered by nearshoring isn’t solely a financial one.
Other advantages that improve competitiveness may include:
- Through nearshoring, shippers and providers have fully staffed teams handling functions ranging from invoicing to inside sales to compliance documentation. These dedicated teams can streamline process efficiency in myriad ways, ultimately ensuring better service and customer satisfaction.
- While the U.S. talent pool has established a concerning job-hopping trend in recent years, workers in Colombia and other nearshoring destinations tend to embrace more long-term employment—especially when working for American companies. This means that workers will only become more intimately familiar with the business over time, facilitating ongoing advances in areas such as customer service, process improvements, and productivity.
- Shared time zones. While some companies have seen success in outsourcing back office responsibilities to more distant places such as the Philippines or India, business that choose to nearshore to countries that share time zones with the United States will maintain a severe competitive advantage in terms of speed and service.
Nearshoring to Colombia With Linkoast
Linkoast has been helping 3PLs, NVOCCs, freight forwarders, carriers, and shippers to nearshore a wide variety of logistics functions to Medellin, Colombia for more than 15 years. Some of the most common services we assist with include:
- Air/ocean documentation
- Import/export customer service
- Inside sales
- Lead generation