Nearshore vs Offshore: How To Decide Where To Manufacture | NAPS
October 21, 2015
In any company, no matter what you sell, the amount of money that you buy it for is the biggest factor that affects how much you will be able to make in profit after selling your product. Because of this, more companies are outsourcing or offshoring their work and time in order to save money.
Businesses can make more money by keeping their non-essential core activities going through third party companies. The company can then keep focus on their core values and needs rather than having to focus on the smaller things that waste time and energy. This way, money can still be made while maintaining their product line efficiently.
After the decision is made as to where a company wants their resources to go, their remaining product lines have to be delegated as well. Basically, the company has to decide whether they want to commit to offshoring or nearshoring for their company’s needs. Offshoring is the practice of hiring an organization that is not the country in which your product will be sold. Nearshoring is when a company decides to use an organization that is closer to home but not the most expensive option.
Why Choose Offshore Outsourcing?
Offshore outsourcing is much less expensive because the costs of labor and materials are very high in the US. When people get paid lower wages, the ability to spend more on actual production is more prevalent. The wages being low also makes it easier to purchase quality components for the products that are being created. As an example, if a country has advanced knowledge of a specific area in the production process, they are more likely to be able to give a company better products at a better price.
Offshore facilities allow their workers to work rotating shifts in order to allow for production and customer service questions to be answered at all times, no matter what the issue or what time it is. Another plus side to offshore manufacturing is that you do not have to be burdened with paying for the usual things for your plant at home such as utilities, staff changes and training, manufacturing costs, machine upgrades and maintenance, and similar costs that can rack up serious bills for any company over time. Most of the people that you will have working for you by choosing outsourcing are very likely to accept changes well as compared to people from your own turf who are used to different rules and regulations. They are often overjoyed to have been hired for the position and will be more polite and grateful that they have gotten a chance to work for you.
Why is Nearshore Outsourcing a Great Choice?
Offshore outsourcing may save a good bit of money as far as overall cost to the company goes, but there are occasions when nearshore outsourcing provides a better alternative for what needs to be done. One reason for this situation is that sometimes it is a good idea to keep production and manufacturing operations closer to home than some offshore organizations can be in order to maintain a lower cost for labor, actual materials, and wages. For example, France would sometimes rather outsource to Germany rather than China in order to save money in some areas such as shipping costs and wages that could be more elevated overseas.
Company owners can maintain more of an idea of what is going on during certain timeframes by staying in the same time zone as their manufacturing plants. This allows people to communicate with their workers in real time rather than trying to coordinate communication across time zones. Working with outsourcing organizations nearshore rather than offshore also allows for travel to be cheaper for workers and owners. Flying and traveling by train can get rather expensive if you are crossing the globe rather than just traveling to a neighboring country for business reasons. Nearsourcing offers far less risks to people who choose that route as well because for the most part, people tend to pay attention to what is going on in their surrounding countries. For instance, it would be safer for a company in New Mexico to nearsource to someone in Mexico manufacturing companies than to a company in Okinawa because if something threatening to the company happened, it would be easier to find out about it and travel there than having to spend an entire day getting there to deal with it.People who are neighbors tend to know about each other’s activities such as lawmaking or changes in law structure, monetary valuation changes, changes in both business and in social standpoints, or major changes in politics that could affect the production abilities in certain places. A company has to know what is going on in order to maintain control of their entire company and what should change if need be.
Culturally, nearsourcing is often more fluid than offshore outsourcing. Most of the time, cultures bleed into each other if they are situated nearby, so things are not as awkward or tense as they could be if there is a distinct cultural barrier between countries that are working together in a business sense. It is much easier to understand language, culture, and financial differences if the two sides of the fence are familiar with each other. Most of the time, neighboring countries are used to dealing with each other so they have at least a basic understanding of how certain aspects of their businesses work and what needs to be done in order to keep them working together smoothly. There is not much training needed with nearsourcing in comparison to offshore outsourcing because of the familiarity between the two countries.
Certain things are inevitably going to be challenges when working with another country in the business world because of distance no matter how close or how far away they are from each other, so in many cases it is difficult for heads of corporations to decide which choice to make for the betterment of their finances, production ability, and workers. There is no way to tell if one choice is better than the other unless both methods are tried, but switching from one to the other could prove quite daunting. It is a great idea to make sure that you weigh the pros and cons of each choice before you make a final decision about what is the best option for your company. Both will provide you with positive and negative aspects, so choosing can be difficult. Outsourcing will always serve a purpose for its company, the challenge is deciding where to have your products made so that you can achieve your desired results with as much monetary gain as possible. The risks of offshore outsourcing seem more heavy than with nearshore outsourcing, but the costs are much lower.
Companies have to decide what is best for themselves when trying to have products made and distributed, and sometimes the choice is hard to make, but with a little research and time spent, the right decision can be made and production will be quite lucrative over time. Both offshore outsourcing and nearshore outsourcing have their benefits and can help a company to thrive depending on what works best for the needs of the company. Your organization will thrive if you make the right choice between the two. Weighing the costs, risks, and other aspects of what will make your company work the most smoothly and cost effectively is a wonderful way to make sure that you carry out a successful business venture and make a good profit.