Nearshoring, friendshoring and reshoring: what they are 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 are part of a set of business practices designed to optimize costs and increase operational efficiency. They are outsourcing strategies that have been gaining ground as companies seek to improve their processes and respond to global supply chain challenges.  

Nearshoring: advantages and challenges

Nearshoring involves transferring production processes or services to a supplier in a region that is geographically nearby, generally on the same continent, or in a country with a similar time zone. 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 responsiveness 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 shorter physical distances save on transport and storage costs, in addition to speeding up the delivery of goods. Other benefits include ease of communication resulting from similar time zones, operational flexibility and greater cultural and linguistic compatibility between the countries involved, which facilitates team integration and promotes working relationships.  

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

What is friendshoring?

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

Like nearshoring, this model arises from the growing complexity of globalization and the risks associated with offshoring; particularly, dependence on countries with unstable or culturally distant political regimes. This approach aims to establish trade relations with countries that share similar interests and democratic systems to encourage greater supply chain stability and security. Although the concept of friendshoring has become more prominent in recent years, it is not entirely new; it emerged 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 trend reversal is due to factors such as rising transportation costs and the risks associated with geopolitical tensions. The COVID-19 pandemic 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 keeping production operations in distant locations. 

Reshoring has several significant advantages, one of the most notable being improved flexibility and responsiveness to fluctuations in demand. Relocation makes it easier to cut 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. A reduced carbon footprint is another advantage, as geographical proximity to end markets means that emissions from long-distance transport are reduced, leading to more sustainable production, which is in line with consumers' growing demand for environmentally responsible business practices.