Nearshoring, friendshoring and reshoring: What are they and what are their advantages?

January 2025 by André Themudo

These concepts are part of a set of business practices designed to optimize costs and increase operational efficiency, and have been gaining ground as companies seek to improve their processes. But what exactly do they consist of?

The concepts of nearshoring, friendshoring and reshoring integrate a set of business practices aimed at optimizing costs and increasing operational efficiency. These are outsourcing strategies that have been gaining ground as companies seek to improve their processes and respond to the challenges of global supply chains.  

Nearshoring: advantages and challenges

Nearshoring consists of transferring production processes or services to a supplier located in a geographically close region, generally within the same continent or in countries with similar time zones. This approach differs from offshoring, which involves subcontracting to more distant regions, where labor costs tend to be lower, but where cultural, linguistic and time differences can pose significant barriers. The concept behind nearshoring is based on limiting the complexities associated with long distances and improving coordination between contracting companies and their suppliers. The result is a more agile workflow and greater ability to respond to sudden changes in demand or supply chain bottlenecks. 

The advantages of nearshoring go beyond geographic proximity. The benefits of this strategy include a significant reduction in logistics costs, as the shorter physical distance allows savings on transport and storage costs, in addition to speeding up the delivery of goods. Other benefits include the ease of communication resulting from the alignment of time zones and operational flexibility, together with greater cultural and linguistic compatibility between the countries involved, which facilitates team integration and promotes working relationships.  

The challenges are essentially related to competitiveness and the availability of specialized labor. 

What is friendshoring?

The etymology of the term friendshoring translates the central idea of the strategy: the transfer of business activities, such as production or the provision of services, to countries considered allies or "friends", with a common base of values and interests.  

Like nearshoring, this model arises from the growing complexity of globalization and the risks associated with offshoring, namely dependence on countries with unstable political regimes or culturally distant countries. This approach aims to establish trade relations with countries that share similar interests and democratic systems, promoting greater stability and security in supply chains. Although the concept of friendshoring has emerged more prominently in recent years, it is not entirely new, emerging as a response to the growing political and socio-economic uncertainty resulting from global crises and geopolitical conflicts, which have significantly affected global supply chains. 

Reshoring, a consequence of rising transportation costs 

The concept of reshoring, or the practice of bringing production and services back to the country of origin or to nearby regions after they have been transferred to lower-cost countries, has been gaining momentum in recent years. This reversal of the trend is due to factors such as rising transport costs and risks associated with geopolitical tensions. The COVID-19 pandemic has highlighted the vulnerabilities of companies that rely on remote suppliers. Transportation disruptions, delays and high trade tariffs have significantly increased costs. Supply chain management, quality control and trade barriers such as customs duties are other factors that have led companies to reconsider the viability of maintaining production operations in remote locations. 

Reshoring has several significant advantages, one of the most notable being improved flexibility and responsiveness to fluctuations in demand. Relocation facilitates the reduction of delivery times and improves the ability to adapt to new market conditions. By being closer to consumers, companies can adapt more quickly to their needs. Another advantage is the reduced carbon footprint - the geographical proximity to end markets means that emissions from long-distance transport are reduced, leading to more sustainable production, in line with the growing demand for environmentally responsible business practices from consumers.