What Is Nearshoring?

If you haven't heard of nearshoring, you're probably familiar with offshoring, the practice of shipping jobs like manufacturing and assembly overseas to lower-cost markets like China, India, or Mexico. The practice, a form of outsourcing, gained momentum in the 1970s and 1980s, hollowing out once-strong U.S. industries like steel and textiles.

These days, there may be more talk about nearshoring, which is a cousin of offshoring. Rather than outsourcing jobs to distant countries, nearshoring refers to outsourcing jobs closer to home, in nearby countries.

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Inside of a factory with assembly line. — Image source: Getty Images.

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Supply Chain

A supply chain is a series of steps taken to obtain raw materials, turn them into a product, and deliver the product to consumers.

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The gap in labor costs has also narrowed since the first wave of offshoring in the 1970s, and ocean freight costs have gotten more expensive as well, further incentivizing the return of manufacturing and assembly jobs.

Nearshoring gives a company more control over its workforce, the ability to manage the work in question, and the cost of other factors of production, whether it's manufacturing or something else.

For example, it's easier for a manager in the U.S. to visit Mexico than China. The distance to ship between the two countries is closer, and while cultural and language barriers still remain between the U.S. and Mexico, they are lower than with China.

Additionally, the similarity between time zones makes communication easier, and China's regulatory environment has become more challenging for U.S. companies.

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About the Author

Jeremy Bowman has been a contributing Motley Fool stock market analyst, covering technology, consumer goods, and macroeconomic trends since 2011. Before The Motley Fool, Jeremy was a newspaper reporter, restaurant manager, and English teacher abroad. He holds a bachelor’s degree in English from Colorado College and a master’s degree in business administration from American University. One of his Motley Fool headlines was briefly featured on Late Night with Stephen Colbert.

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Jeremy Bowman has positions in GXO Logistics. The Motley Fool recommends GXO Logistics. The Motley Fool has a disclosure policy.