Nearshoring emerges as a strategic imperative in today’s supply chains

Nearshoring has quickly shifted from a tactical option to a strategic necessity in today’s supply chain landscape. Jordi Ciuró, Partner at Bain & Company in Mexico City, discusses the opportunities of bringing (parts of) the supply chain closer to home – and the key challenges that continue to hold companies back.

As companies face intensifying geopolitical tensions, rising logistics costs, and persistent global supply chain disruptions, the need to rethink traditional offshore production and sourcing models has become urgent. Across industries, organizations are accelerating efforts to relocate manufacturing and procurement closer to end markets, aiming for greater resilience, agility, and customer proximity.

A recent Bain & Company survey highlights the magnitude of this shift: 80% of chief operating officers plan to increase nearshoring or onshoring within the next three years, up from 63% in 2022. This shift marks a fundamental change in strategic priorities.

Where cost arbitrage once drove offshoring, today’’ decisions are fueled by the need for supply continuity, risk mitigation, and responsiveness. Nearshoring also offers added advantages: shorter lead times, improved service levels, and reduced transportation costs – factors that carry growing weight in today’s complex environment.

Yet, despite growing strategic intent, execution lags behind. Only 2% of companies have fully implemented nearshoring or onshoring strategies. While 68% are actively investing in reconfiguring their supply networks, through approaches such as split-shoring or regional diversification, most remain in the early stages. This ambition-execution gap stems from a combination of operational, financial, and regulatory hurdles.

Key challenges to address

One of the biggest obstacles is the cost and complexity of shifting operations. Relocation requires substantial upfront investment, including site readiness assessments, ramp-up management, and often the parallel running of legacy operations. Labor costs in nearshore locations also tend to be higher than in traditional offshore hubs, further complicating the equation.

However, the long-term payoff can be significant: Bain r& Company esearch shows that companies executing nearshoring well may achieve gross margin gains of up to 30%. With disciplined planning, the value is there to capture.

Visibility across multitier supply chains remains another major challenge. While many companies have improved traceability with Tier-1 suppliers, insight into Tier-2 and beyond remains limited – leaving blind spots that undermine strategic gains. Relocating assembly operations, for instance, yields minimal benefits if key inputs are still globally sourced. End-to-end transparency is essential to unlock the full potential of nearshoring.

Regulatory complexity is a further complication. Each nearshore destination comes with its own legal, tax, and compliance frameworks. Underestimating these factors can lead to costly delays. Even global leaders such as TSMC have faced setbacks, as seen in its Arizona expansion, due to unanticipated regulatory and labor conditions.

To navigate these barriers, leading organizations are embracing advanced digital tools. AI is being used to simulate nearshoring scenarios, assess sourcing alternatives, and model risk with increasing precision. IoT-enabled systems and platforms are enhancing visibility across supplier networks. Once pilot programs, these tools have become central to enterprise-level transformation strategies, accelerated by necessity and guided by foresight.

A roadmap for success

At Bain & Company, we recommend a structured roadmap for successful nearshoring. This begins with a strategic assessment of customer needs and supply chain risks. It includes integrating technologies like AI and automation to boost agility, fostering cross-functional collaboration, and building resilient local networks through supplier partnerships and talent development.

Nearshoring is not a reactive, short-term cost-saving tactic. It is a proactive strategy to strengthen supply chain resilience, improve customer alignment, and enhance adaptability in a volatile world.

While the path is complex, the rewards – in agility, efficiency, and competitiveness – are substantial. For forward-looking organizations, nearshoring is not a future consideration. It is a business imperative today.