Companies considering transitioning to nearshoring make this decision because of the vast advantages that nearshoring brings. However, this transition requires careful evaluation of both the pros and cons.
Although there are several hurdles in nearshoring, there are many sensible ways to navigate common hurdles so that you can make the most out of your third-party outsourcing relationship.
In this article, we dive into some of the most common challenges in nearshoring and offer solutions to ensure seamless business processes. Let’s dive in!
Common nearshoring challenges to look out for and navigate
Navigating nearshoring doesn’t come without its challenges. However, there are several smart ways for you to approach this endeavor to help your business remain competitive and reap all the rewards. Here’s our list of the most frequently encountered ones.
Unclear goals
Challenge: The first challenge in nearshoring is when the parent company has unclear goals, which then translate into miscommunicated goals to the outsourcing partner. This can cause confusion and lead to misdirected results.
Solution: The solution to this challenge includes setting very clear goals by the home business that are then clearly communicated to the outsourcing partner to ensure every team member is on the same page regarding expectations.
Quality concerns
Challenge: Nearshoring can come with quality concerns as there are few ways for a home business to guarantee the quality of production and processes of their outsourcing partner.
Solution: To counter the challenge of quality control in nearshoring, it’s necessary to establish clear quality standards and formalize these through written agreements that both parties sign and are fully cognizant of.
Infrastructure
Challenge: Sometimes, third-party outsourcing partners simply don’t have the right type of infrastructure to carry out the desired task. This can range from IT infrastructure to facilities and plants.
Solution: Before entering into an agreement with an outsourcing partner, make sure they have the infrastructure you need in place for optimal results. This may require ‘shopping around” for other partners that actually do have the infrastructure you require at the right price.
Political and economic stability
Challenge: Some outsourcing partners work within a difficult political and economic climate that makes it unsafe for nearshoring investments.
Solution: Carefully study the political and economic environment of the outsourcing partner’s home country and monitor developments regularly to keep your pulse on where industry or local fluctuations may take place. Having an exit plan in place before getting started is also a good idea.
Supply chain disruptions
Challenge: Depending on the nature of risks in the economic and political environment, it’s possible for some businesses to face supply chain disruptions.
Solution: These risks can be mitigated against by having back up plans in place. This could mean that you have several logistics partners to choose from in the event that one of them is not able to deliver on time.
Regulatory and legal issues
Challenge: Working with a foreign environment means legal compliance with a foreign country’s regulations. These can range from employee and labor laws to taxes and other factors.
Solution: Make sure to consult a legal advisor before nearshoring to understand the regulatory environment well and to have a clear grasp of your obligations when working with your outsourcing partner in their country. Careful analysis of loopholes or restrictions that could hinder your business should be carried out before entering into an agreement with the partner.
Time zone differences
Challenge: Despite the fact that nearshoring implies close proximity to the home business’ home country, even small time differences can play an influential role in the efficiency and productivity of the business.
Solution: Try to rearrange your business’ working hours in such a way that at least 50% of the workday overlaps with the outsourcing partner’s work day. Also ensure there are clear points of contact so that your team and their team can communicate effectively during the work day.
Communication and cultural differences
Challenge: Another challenge involves communication and cultural differences. Even though a country may neighbor your own, it doesn’t mean that the lingua franca is the same. Thus arise communication challenges where English may not be your outsourcing partner’s first language. There may be misunderstandings in terms of the ways people express themselves, and this is further compounded by cultural differences where offense can easily arise simply because of a lack of cultural understanding.
Solution: It’s essential to spend time with the outsourcing partner’s team at the outset of the relationship to understand communication and cultural challenges. This could mean sending your core team abroad to learn from and discuss the nature of the business relationship with the other team overseas. Once there is face to face interaction, an email or a call doesn’t just become something that’s done with a faceless person at the end of the line or computer screen. Instead, having a face and a name creates closeness and collaboration that makes for more productive working relationships.
Daily management challenges
Challenge: Because of the geographical distance between the host business and the outsourcing partner, it’s possible that there may be time lags in communication, which can pose management challenges on a daily basis.
Solution: Make sure you invest in the right communication technology to ensure that teams can collaborate at the same time, irrespective of physical distance.
Conclusion
Although there are challenges involved in nearshoring, these can be overcome with smart and sensible attention to detail prior to entering into the outsourcing relationship.
From cultural differences to regulatory y requirements and obligations, it’s essential to carry out your due diligence and research before embarking into any nearshoring project.
Doing your homework now can help you learn from the mistakes of others and give your business the boost it needs to succeed in a competitive landscape.
And if you’re on the lookout for an outsourcing partner in the Western Balkans with extensive experience in overcoming frequently encountered nearshoring challenges, StorsenDigital is the answer.
Simply reach out to us for professionalism and a helping hand that will give you the upper hand advantage over your competition.
