Nearshoring or Reshoring? Read How HRO Can Help Manufacturers

The ongoing supply chain crunch has hit the majority of the manufacturing sector. Over the past year, the supply chain crisis has become so predominant that everyone – from business owners to commoners – knows about the ongoing challenges in the supply chain. For commoners, this may be due to the difficulty in procuring home necessities and, for business owners, difficulty in buying business goods – but for manufacturers, the ongoing disruptions have emerged as one of the most substantial business challenges.

According to a McKinsey survey, 73% of respondents stated that they faced issues with suppliers during the pandemic. On the other hand, a survey noted that 67% of the respondents observed the most significant challenges to their supply chain are related to certifying new suppliers. In comparison, 57% think onboarding them is a challenge. Balancing supply levels with fluctuating demand continue to be a challenge for half of the respondents.

Given these substantial challenges, it won’t be surprising to know manufacturers are making significant changes across their supply chains. This leads to a new drive for regionalization in manufacturing – with 45% of manufacturers reshoring or nearshoring for stronger resilience and agility. It’s a hard sell – nevertheless, it’s a necessity. That being said, we must also consider looking at the economic factors associated with manufacturers reshoring and nearshoring. Here are a few:

  • Getting Closer to Customers
  • Leveraging Cost Savings
  • Building Resilient Supply Chains
  • Positioning For the Future

Now that we know how regionalization is turning out for manufacturers, we must be aware of the reality that every great thing comes with challenges. Likewise, manufacturers who are nearshoring and reshoring must acknowledge the potential challenges that are bound to come along. While there are some significant differences between nearshoring and reshoring, outsourcing your HR would definitely help with the environments that come with shoring your operations. Nevertheless, before diving deep into how HRO can help manufacturers in these circumstances, you must know what nearshoring and reshoring are. Here’s everything you must know:

  • Nearshoring:

    Nearshoring started in 1964 in Mexico and refers to outsourcing work to a company near your physical location or in a nearby country. This shoring option is more appealing for companies looking to significantly cut down on costs and potential risks while maintaining geographical proximity. In addition, nearshoring operations enable faster TATs, greater control over production, fewer cultural discrepancies and language barriers, and lower travel costs compared to offshoring. Moreover, it also eliminates a significant concern for many manufacturers – the risk of intellectual property getting stolen. Manufacturers nearshoring can promote higher customer responsiveness with continuous, customer-driven improvements and innovations.

  • Reshoring:

    Reshoring is bringing work back to the base location – an option manufacturers look into to cut down on costs. Reshoring seems to be a lucrative move for many manufacturers as the costs of operating a business overseas are increasing due to the steep tariff hikes, and reshoring tax benefit programs have much to offer when it comes to cost savings. As a result, several business owners finally realize that moving their operations to the base locations can help save the total cost of ownership (CTO). In addition, reshoring can help manufacturers eliminate potential risks associated with doing business overseas, lower transportation expenses, and cut down on labor costs.

Also Read: Payroll Processing Challenges in the Manufacturing Industry

How can HRO help manufacturers who are Nearshoring and Reshoring?

Human resource is the fundamental pillar to the success of the vast majority of manufacturing companies – to make a lasting impact, having a skilled workforce is imperative. Moreover, HR isn’t only about hiring employees and paying them for their work – HR processes incorporate a variety of tasks, including hiring, onboarding, payroll, benefits administration, compliance, and more. Moving operations is a significant change and needs the entire workforce to make sure operations run smoothly. And for employees, sailing smoothly through this transition can only be possible with a robust HR structure in place. In addition, HR outsourcing can solve the most significant challenge manufacturers face – the workforce shortage.

When manufacturers decide to nearshore, they must find new employees or relocate existing ones to the new work location. This is where HRO comes into the picture – HRO providers understand your requirements, help find the right talent for your manufacturing unit, and retain the best talent for your future projects. Nearshoring is beneficial for manufacturing companies as it reduces risks and costs, but it comes with its own set of challenges. Despite the best facilities, technologies, and a robust work culture in place, manufacturers find it challenging to establish overseas projects. A lot of factors come into play – team engagement, cultural differences, communication quality, knowledge transfer, time-to-market, and more. This is where HRO providers can be a savior. A reputed HRO provider can help businesses attract highly skilled employees, onboard them, arrange facilities and other benefits, and draft rules and regulations for knowledge transfer and the use of technology. In addition, they also help leverage team communication and engagement practices and eliminate cultural differences, enabling you to focus on core business strategies. Reshoring is no different – when you bring your production back to the base location, you need to have a better understanding of the current labor market. An HRO provider does this for you for more, simplifying your HR practices.

50% of the U.S. workforce currently works from home.

With the emergence of hybrid and remote work cultures, it is no longer necessary for all employees to work under the same roof. Employees can now work effectively and efficiently, irrespective of their geographic location – from the comfort of their homes. Managing employees working from different locations, leveraging employee engagement and communication, and increasing ROI are on top of mind for most business owners. While the current market scenario is asking to move productions, you may not necessarily be able to focus on employee management. HRO providers can be the helping hand you need under such circumstances.

It’s a wrap!

By now, you may have a fair idea of how manufacturers are dealing with the ongoing supply chain issues and labor shortages. Nearshoring and reshoring are the best practices that help manufacturing companies not only deal with the supply chain crunch but also enable them to lower the costs and risks associated with doing business overseas. Exela HR Solutions is a market leader in human resource outsourcing, helping businesses across all segments manage their workforce with ease, along with enhancing other crucial HR functions like payroll, benefits administration, hiring, onboarding, and more. Talk to our experts today to figure out the best HR practices that suit your unique business requirements!

DISCLAIMER: The information on this site is for general information purposes only and is not intended to serve as legal advice. Laws governing the subject matter may change quickly, and Exela cannot guarantee that all the information on this site is current or correct. Should you have specific legal questions about any of the information on this site, you should consult with a licensed attorney in your area.