What Is Nearshoring: Is It Right for Your Business

What Is Nearshoring: Is It Right for Your Business

Companies within the logistics and supply chain industry have faced many challenges within the past year, from low volumes to tight margins. Cost savings and efficient operations are at the forefront of every business leader's mind. More than ever before, companies are considering nearshoring as the solution to help meet these goals. But what is nearshoring exactly, and how do you know if it's the right choice for your business? That's where Rapido can help. Here are our insights to help you decide if nearshoring is the right fit for you.

What Is Nearshoring: The Basics  

Nearshoring is the practice of outsourcing specific processes or services to neighboring countries. You can experience the benefits of nearshoring, such as cost savings, while avoiding common challenges of offshoring, including cultural alignment, language barriers, and accessibility.

At Rapido, we help connect US-based logistics and supply chain organizations with skilled talent in Mexico — allowing companies to scale efficiently, operate effectively, and provide superior customer service.

Outsourcing vs. Offshoring vs. Nearshoring

It's become common practice for companies to look outside their in-house teams to help meet business needs. Factors including budgets, inadequate hiring resources, strict timelines, and knowledge base can all influence the decision to outsource labor or services. But there are various options when considering outsourcing, including offshoring and nearshoring.

What is outsourcing?

Outsourcing is the umbrella that these other models fall under. Simply put, outsourcing uses a third-party company or individual rather than an in-house team or employee to complete a project or task. While outsourcing is not always the least expensive option — it depends on the model of outsourcing you choose — it does allow you to leverage external subject matter expertise without going through the hiring and onboarding process of a new employee.

What is offshoring?

While people often confuse offshoring with outsourcing, they aren't interchangeable. Offshoring is a type of outsourcing that relies on labor in a foreign (often distant) country. Companies typically turn to offshoring as a cheaper alternative, using countries with lower labor and production costs. However, there are drawbacks, as offshoring can mean language and cultural barriers, increased travel costs, and differing time zones.

What is nearshoring?

As we mentioned above, nearshoring is another type of outsourcing. While offshoring utilizes labor from often distant foreign countries, nearshoring taps into skilled labor pools in neighboring countries. With nearshoring, you get a cost-effective solution without sacrificing communication or operations since there are fewer language and cultural alignment issues, travel costs, and time zones.

What Are the Benefits of Nearshoring?

Nearshoring allows you to streamline operations, improve margins, and deliver superior customer service. There are various reasons for a company to consider nearshoring.

Cost savings

The cost base for labor and commercial real estate is significantly lower in countries like Mexico, allowing companies to see meaningful cost savings without sacrificing customer service or operational output.

Scalable workforce

Hiring in the US can take upwards of six months, while Rapido has shortened the process to just weeks. Mexico's population is more than double its nearest competitor in Latin America, making it the largest single national market for nearshore delivery into the US. Nearshoring is the best option to scale your team up or down to meet your ever-changing operational needs.

Cultural alignment

Nearshoring takes advantage of a country's proximity to the US and strong cultural alignment, allowing for better collaboration and shared business values. The widespread proficiency of English in countries like Mexico helps ensure effective communication with both your US-based team and customers.

Skilled talent

Nearshoring provides access to an otherwise untapped pool of skilled talent. For example, roughly half of Guadalajara's five million residents have completed high school, with over a quarter having post-secondary education degrees. And at Rapido, we provide thorough logistics education for all employees as well as company- and role-specific training.

Time savings

Nearshoring allows you to quickly build teams and hire new employees as needed. But it also frees up your US-based team from monotonous tasks, such as tracking so that they can focus on more strategic or sales-focused initiatives.

How to Know If Nearshoring Is Right for Your Business

At Rapido, we believe almost every company can benefit from nearshoring, but we understand how important the decision is to your business. There are various factors to take into account to determine if nearshoring aligns with your business goals and requirements. Here are questions you should consider when making your decision.  

  1. Is hiring time holding us back? Does it take too long to get new candidates in the door?
  2. Are there existing processes that are creating barriers for our team? Does our carrier sales team get bogged down tracking freight because we don't have a dedicated tracking team?
  3. Has our team's development hit a wall? Is our account management team unable to grow or reach new goals because they are bogged down with building and scheduling loads?
  4. Are our margins compressed? Are we not reaching our potential because our costs are outpacing our revenue?
  5. Is our attrition negatively impacting our team? Are we spending too much time and energy having to rehire or retrain for roles?
  6. Do we have an adequate training program? Can our new hires get up to speed quickly to start meeting their KPIs?
  7. Do we need help finding strong entry-level talents for all shifts? Has hiring become difficult for after-hours or weekend shifts?

What Metrics Can You Track to Decide If Nearshoring Is Right for You?

Tracking specific metrics will allow you to evaluate your operational efficiency, financial performance, and workforce hiring and training efforts to gauge if nearshoring is right for your business. These metrics will serve as essential benchmarks during the decision-making process, but you can also use them to measure your nearshore team's ongoing performance and success.

  • Revenue per head: The average amount of revenue generated by each individual
  • Loads per day per head: The average number of loads or shipments handled by an individual employee per day
  • Margin percentage: A financial metric to calculate the percentage of profit relative to revenue
  • Time to hire: The time (in days, weeks, or months) it takes for a company to complete the hiring process (from initiating recruiting to onboarding new hires); this reflects the efficiency of the hiring process
  • Ramp rate for new hires: How quickly new hires reach full productivity and begin meeting KPIs
  • Attrition rate: Employee turnover rate; measures the percent of employees who leave the company over a specific period of time
  • Revenue stagnation: When a business faces a prolonged period with little to no growth in revenue
  • Salary and payroll vs. costs: Compares the total costs associated with salaries and payroll to the overall operating costs of the company

Working with Rapido for Your Nearshoring Needs  

At Rapido, we connect hyper-growth logistics and supply chain organizations with the best talent in Mexico to scale efficiently, operate effectively, and provide superior customer service. We're led by logistics veterans with a deep understanding of recruiting and hiring within the industry and a passion for building better solutions for success. Whether you need customer and carrier support and sales, back-office administration, or technology services, Rapido can help.

We believe nearshoring is the future of the logistics and supply chain industry, so reach out to our team to learn more about how we can help drive your business forward.

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