For decades, the logic of global sourcing was simple: manufacture where labour is cheapest, then ship to where customers are. But the pandemic, geopolitical shifts, rising logistics costs, and sustainability mandates are prompting businesses to fundamentally rethink this approach.
Defining the Terms
- Offshoring — Moving manufacturing or service operations to a foreign country, typically to access lower labour costs.
- Nearshoring — Moving operations to a geographically closer country with lower costs than your home market. For US companies: Mexico, Central America. For European companies: Eastern Europe, North Africa, Turkey.
- Friend-shoring — Sourcing from countries that are geopolitically aligned with your home country, reducing the risk of trade disruptions.
Why Nearshoring Is Gaining Momentum in 2026
- Supply chain resilience — The pandemic demonstrated the catastrophic vulnerability of relying on single-source, geographically distant supply chains.
- Rising China labour costs — Chinese manufacturing wages have risen significantly, eroding the cost advantage that drove original offshoring decisions.
- Freight cost and volatility — Long-haul ocean freight costs remain elevated. Shorter supply chains mean less freight exposure.
- Transit time advantages — Mexico to USA by road is 3-5 days. China to USA by ocean is 14-35 days.
- Carbon targets — Shorter supply chains mean lower logistics emissions, helping companies meet Scope 3 reduction commitments.
The China+1 Strategy
For businesses not ready to fully nearshore, the China+1 strategy provides a pragmatic middle ground: maintain core production capacity in China while developing a secondary source in a different country. Vietnam, India, Mexico, and Bangladesh are the most common +1 choices.
How to Evaluate Nearshoring for Your Business
- Total cost analysis — Compare total landed cost including freight, duties, inventory carrying costs, and risk premiums
- Capability assessment — Does the target country have the manufacturing capability and quality certifications you need?
- Regulatory environment — Understand import duty implications and FTA benefits
- Lead time impact — Model the inventory and cash flow impact of reduced lead times
- Transition cost and timeline — Nearshoring is a multi-year journey requiring significant investment