What is Nearshoring and How Does it Benefit American Shippers and Logistcs Stakeholders?
Controlling financial costs is an ongoing struggle for most American shippers, brokers, and logistics providers. Narrow capacity across several modes has driven up freight transportation rates while a shortage of key warehouse space in primary and secondary markets has caused a steady rise in storage costs.
While U.S. shippers and their various service providers often have little choice about keeping physical storage and transportation operations and assets within the confines of the United States, many have begun to realize the benefits of nearshoring certain logistics functions to places like Colombia.
The term “nearshoring” refers to the practice of moving operations to a convenient nearby country to gain some sort of financial or operational benefit. Nearshoring is often confused with offshoring, wherein American-based businesses seek to access cheaper labor markets and reduce operational costs by relocating operations in a far-away country. Nearshoring offers most of the same financial benefits as offshoring without the many inconveniences, such as vast time differences and cultural barriers.
The Benefits of Colombian Nearshoring for American Shippers
American logistics stakeholders have begun realizing a wide range of benefits by nearshoring administrative back-office functions to Colombia. Some of the top advantages include:
- Available skilled labor. The Bureau of Labor Statistics reported an astounding 3.7% unemployment rating in the United States in July 2019—and the unemployment rating for logistics jobs is even lower. Many U.S. shippers and logistics-related firms are struggling with a shortage of available labor and their job postings go unfilled for months at a time. Meanwhile, Colombia has a substantial pool of educated and skilled workers to draw from, which means workers can be recruited and hired very quickly.
- Shared time zones. When offshoring to common far-off places such as The Philippines or India, the time difference can become a major challenge to operational efficiency. Medellin, Colombia is on Central Standard Time, which means that nearshored employees can operate on the same schedule as American businesses. Communication and collaboration occur in real time without requiring night shifts on either side of the relationship.
- Cultural similarities. Colombian business culture is very similar to that of American companies—in fact, many business leaders and other professionals in Colombia were educated in the United States. In addition, Colombians celebrate many of the same major holidays, so nearshoring partners will share common times off without inconvenience to operations.
- Easy travel. Flying from anywhere in the United States to Medellin, Colombia takes about the same amount of time as an average flight between destinations in the United States. By comparison, a flight to New Delhi, India can take as much as 20 hours (depending on the point of origin in the U.S.), while a flight to Manila, Philippines may take as long as 16 hours. Nearshoring offers significant benefits in this area, especially for organizations that may want to incorporate frequent in-person meetings or training into the nearshoring relationship.
- Cost effectiveness. The labor costs alone make Colombian nearshoring a viable option, with savings often in the range of 30–40% when compared to U.S. industry wages. American companies will also see substantial savings from reduced real estate requirements, less human resources activity, and lower utility costs.
- Even with the substantial labor savings achieved by nearshoring to Colombia, the pay rates are fair for the market and provide a good quality of life for Colombian workers. This is not always the case in many offshoring destinations.
- Nearshoring activities can typically be easily expanded or contracted depending on business needs and market fluctuations. With the readily available workforce on hand, nearshoring operations can grow alongside the American business in whatever way is necessary.
Optimizing Logistics Administration with Linkoast
Linkoast makes it easy to nearshore administrative tasks to Medellin, Colombia. We’ve been helping our partners outsource a variety of functions to Medellin for more than 15 years, including:
- Air and ocean documentation
- Customer service
- Inside sales
- Lead generation
We handle the entire recruiting process and all human resources functions so you don’t have to. To see how you can drive cost savings and efficiency improvements by outsourcing back office functions to Medellin, please contact us through the form at the bottom of our homepage.