Nearshoring

In the last few years, the word nearshoring has been mentioned more and more intensively in the business plans and business communication of many European businessmen.

What is nearshoring and why is the term becoming more and more interesting and common in the business vocabulary of successful businessmen?
Nearshoring is basically the transfer of part of a company’s business located in one country (for example, in Germany or another European Union country) to companies located in neighboring countries (for example, in Serbia or other countries in Southeast Europe).

The nearshoring trend did not start with the COVID-19 pandemic, but the pandemic accelerated it enormous. A few years before the COVID-19 pandemic, numerous representatives of companies from Europe announced the return of production closer to the company’s headquarters, ie back to Europe, to countries that are only an hour or two, or three, maximum four, away from the company’s headquarters.
In this context, companies are now exploring proximity as a strategy to reduce the risk of operational weaknesses and supply chain weaknesses, risks identified during the global COVID-19 pandemic crisis, when offshore companies (suppliers from distant countries) experienced sudden closures and disturbances due to quarantine restrictions that interfered with their ability to conduct day-to-day operations. By comparison, nearshoring companies have shown exceptional resilience and rapid adaptation to market changes that were necessary due to the pandemic, probably due to their close proximity to European markets.
As a result, nearshoring is becoming a leading part of the business strategy aimed at ensuring business continuity in dealing with some future crises or supply chain disruptions.

Advantages of nearshoring:
– Working in the same time zone – One of the most important advantages of the nearshoring business model is the time zone. Working in the same time zones increases the effectiveness and productivity of associates, which affects the increase in business results and thus enables the expansion of business.
Also, traveling between locations is far simpler, and thus supervision and control of business and cooperation are much more effective according to the nearshoring model.
In our example of cooperation between German companies and companies in Serbia, there are several flights a day between Germany and Serbia with a travel duration, ie a flight, shorter than 2 hours.

– Easy communication and understanding – Communication is the key to successful cooperation. Collaborator interactions are much more effective because they happen in real time. Good knowledge of the common language of communication (English, German,…) implies a clear understanding between the parties and ensuring the results of work in relation to expectations.

– Geographical proximity, cultural, linguistic, historical, political and economic similarities facilitate joint business. Although certain cultural differences also exist within Europe, the general understanding of professionalism and the requirements of efficient work is quite similar.

– Lower costs – nearshoring means moving work to lower cost organizations, or providing affordable suppliers, but within a closer region, which allows flexibility, greater connectivity and coordination of partners and stronger control over the whole process.
In the European region, jobs are therefore moving from Central Europe to so-called low-wage countries in Southeast Europe. The European market has access to the production potential of the countries of Southeast Europe, which operates in many areas below the level of costs of Western industrialized countries.

Nearshoring is increasingly present in our business environment
Nearshoring is already present in many areas of the economy.
Currently, nearshoring is most prevalent in sectors such as IT or call center services (call centers), where nearshoring is mainly used to keep staff costs low.

Nearshoring in the field of production and supply is expanding.

An increasing number of manufacturing companies are relocating their facilities to the region of Southeast Europe, or finding and educating their suppliers in that region, thus providing reliable supply chains for their own production and sales capacities in the European Union market.