NAVIGATING THE WATERS OF SHORING: UNDERSTANDING NEARSHORING, FRIENDSHORING, AND STRATEGIC SHORING

As companies seek to adapt to a changing global environment, concepts like nearshoring, friendshoring, and strategic shoring have gained importance. These strategies not only allow organizations to optimize their operations but also provide flexibility to tackle challenges such as political instability, cost fluctuations, and supply chain disruptions. In this context, understanding the differences and benefits of each approach is key to making informed and competitive decisions.

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What are they? And their differences

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Nearshoring is a strategy that involves moving factories from the country of origin to a country closer to the final market, where costs such as wages, electricity, fuel, supplies, and even taxes are lower. Geographic proximity facilitates supply chain management and allows for faster response times, which is essential in industries that rely on agility in delivering products and services.

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Friendshoring refers to the reorientation of supply chains towards countries perceived as political and economic "allies" or "friends" rather than countries with geopolitical tensions or risks. This approach not only minimizes the risk of trade disruptions caused by political instability but also strengthens strategic alliances and ensures greater security in business transactions and operations.

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Strategic shoring is a production and service localization strategy that involves moving processes to specific countries or regions to optimize the supply chain and improve competitiveness. Unlike the previous approaches, strategic shoring takes into account multiple strategic factors, such as talent availability, technological infrastructure, and market conditions, providing greater flexibility and long-term resilience.

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In which countries are they implemented?

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Nearshoring, friendshoring, and strategic shoring practices are implemented in different countries depending on the objectives of each strategy:

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• Nearshoring: An example of nearshoring is its implementation in Mexico. North America is one of the main destinations for nearshoring, and because this region includes the world’s largest importer, the United States, nearshoring in Mexico has gained favorable ground for investments. The main reasons for this include the difficult relations between China and the U.S.; the USMCA, which facilitates trade between Mexico, the U.S., and Canada; Mexico's proximity to the U.S.; low labor costs in the country; and the strong performance of the national industry, especially in the automotive sector. According to Deloitte, more than 100 nearshoring projects have been announced in the country, with a total estimated investment of 30 billion dollars.

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• Friendshoring: An example of friendshoring is the recent efforts of the United States and the European Union to strengthen their trade relations in the context of semiconductor production and supply. In response to the global semiconductor shortage, both regions aim to reduce their dependence on Asian manufacturing hubs. In 2021, both the U.S. and the EU announced significant investments in semiconductor production in their territories. In 2022, the U.S. passed the CHIPS Act, while the EU launched the Digital Compass plan with the goal of doubling its share of global semiconductor production by 2030. These moves reflect a strategic approach toward friendshoring.

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• Strategic Shoring: Germany and Singapore have been key destinations for strategic shoring implemented by multinationals seeking to optimize their global operations. In Germany, companies like BMW and Siemens have leveraged its strong industrial and technological infrastructure, along with the adoption of Industry 4.0, to enhance efficiency and distribution in Europe. Meanwhile, Singapore has become a strategic hub for companies like Apple and Unilever, thanks to its advanced logistics infrastructure, pro-business environment, and leadership in technologies such as IoT and automation, facilitating operations in the Asia-Pacific region.

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In conclusion, nearshoring, friendshoring, and strategic shoring are key strategies that enable companies to adapt to a constantly changing global business environment. Each approach has its own characteristics and benefits, and as companies seek to strengthen their resilience and competitiveness, the implementation of these practices in countries such as Mexico, the United States, Germany, and Singapore is becoming increasingly relevant, demonstrating the importance of strategic planning in managing global supply chains.