Near-Shoring

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 Over-seas Digest, [Page 1188]an owner/manager of an IT company may want to consider the following near-shoring options: