These Industries Have Turned to Nearshoring to Drive Growth
When it comes to outsourcing, many American companies across a broad range of industries are turning away from offshoring to distant places like India, the Philippines, or China. These areas were once popular outsourcing destinations because of their affordable labor costs, but problems such as managerial issues, cultural conflicts, language barriers, incompatible time zones, and other factors have made offshoring less appealing than it once was.
As a result, many industries have turned to nearshoring as a more reliable means of accessing more affordable labor without the other problems associated with more distant outsourcing methods. The following industries have benefited significantly from nearshoring:
Global trade has been turned on its head in the past couple of years as an ongoing trade war with China and the associated tariffs threaten increased expenses for the many American companies that rely on Chinese contract manufacturers to create their products. Safety concerns in other popular areas such as Bangladesh and Vietnam have also created a consumer demand for American companies to manufacturer goods in safer areas.
This has caused many U.S. companies to bring manufacturing closer to home. For example, Mexico has become quite popular as a nearshoring destination for automotive OEM and aftermarket part manufacturers thanks to its shared time zones, affordable labor, and convenient shipping distance. Other key U.S. manufacturing verticals relying on Mexico include critical verticals such as aerospace, electronics, and medical devices.
For several decades, India ruled the business world as the epicenter of call centers. This trend seems to be winding down as many U.S. business leaders have begun moving customer care call centers to Latin America to benefit from cost reductions, easier site visits, and time zones that line up with their customer bases.
Customer care represents the front line of communication for a business, which makes timelines and proximity of extra value—especially for time-sensitive functions such as logistics (see below) where customer service involves engaging not only customers, but operational counterparts. If workers are on overnight shifts to talk to American customers halfway around the world, they are more likely to be tired or distracted and may seem disinterested to the customer.
IT and Software
The U.S. technology industry has faced a significant skilled talent gap for more than a decade. Seeking other pools of the talent, the information technology sector was an early adopter of nearshoring—so much so that Medellin, Colombia is now often referred to as the Silicon Valley of Latin America. Other Latin American tech hubs—such as Guadalajara, Mexico, and San Jose, Costa Rica—are also luring tech businesses away from places like India and the Philippines.
Another early nearshoring trendsetter, the financial sector has been operating call centers and collections agencies out of Latin America and the Caribbean for many years. Nearshoring has spread further into the financial sector as financial technology firms (FinTech) and insurance technology (InsurTech) firms compete with broader technology companies for skilled talent.
Supply Chain and Logistics
Logistics operations tend to think in terms of physical presence—after all, you can’t load and move a truck shipment from Texas to California from your office in Medellin. However, there are many administrative tasks that can easily be conducted from a nearshore facility.
The logistics sector came to the nearshoring game later than most of the other industries mentioned here, but shippers, freight forwarders, 3PLs, NVOCCs, and other supply chain stakeholders have begun reaping the benefits nearshoring has to offer. Nearshoring offers an ideal solution for cutting costs on back office and administrative functions, such as billing and invoicing, inside sales, documentation, auditing, lead generation, customer service, and much more.
Logistics Nearshoring with Linkoast
Linkoast has been helping logistics stakeholders set up successful nearshoring operations for more than 15 years. In 2018 alone, we saved our clients more than $355,000 in real estate costs and almost $2 million in labor costs. If you’d like to learn more about how nearshoring to our facilities in Medellin, Colombia can help your logistics operation, please contact us through the form at the bottom of our home page.