In an era of constant threat of disruption, nearshoring has moved from a “nice-to-have” to a strategic imperative for global manufacturers. For decades, offshoring was commonplace; companies raced to operate and/or source from the best-cost locations worldwide, relying on a stable, connected global manufacturing landscape and economy. But recent geopolitical upheavals, regulatory shifts, climate related weather shocks and post pandemic-triggered supply chain crises have changed the game entirely.
Today, the focus is squarely on resilience, flexibility and proximity to core markets. A time of exponential change has come to the global manufacturing landscape and companies are future-proofing their operational footprint. Manufacturers are reconsidering the value of location, placing operations closer to customers and suppliers, as the drivers of global manufacturing competitiveness continue to evolve.
With the outcome of the U.S. Presidential election and the anticipation of new tariffs in the coming year, Roland Berger’s research indicates that nearshoring has shifted from a strategic choice to a critical necessity. Market expectations of significant tariffs could translate into substantial economic impacts, affecting operational costs and supply chain structures. According to Roland Berger’s studies, nearshoring can mitigate these risks by reducing tariff exposure and creating excellent supply chain stability, enabling U.S. companies to manage costs more effectively while building a more resilient and agile manufacturing footprint.
This shift presents a distinct competitive advantage. Companies that commit to North American production benefit from avoiding tariff volatility and shorter supply chains, faster response times and better alignment with market demands. Roland Berger’s frameworks suggest that companies embracing nearshoring are better positioned to adapt to policy shifts and secure long-term growth. In this environment, proximity, resilience and flexibility are essential drivers for future-proofing operations and maintaining competitiveness.
The new reality has elevated nearshoring as a top priority. A recent Roland Berger study conducted with Manufacturers Alliance found that 74% of companies are expanding or piloting localization initiatives—a striking indicator of how rapidly the tide is turning. U.S. manufacturing investments have surged, growing 2.3X since 2022, with Mexico emerging as a prime destination. This shift is already reshaping the competitive landscape, as the U.S. imports more goods from Mexico than China. While Mexico can be an attractive option for nearshoring, recent factors like labor shortages, inflation and tariffs have introduced new complexities. There’s no silver bullet—companies must evaluate multiple elements as well as future scenarios to determine a comprehensive footprint strategy that captures long-term strategic advantage.
Why Now? The Strategic Drivers of Nearshoring
The global and US manufacturing sector is still reeling from system-wide failures in supply chains, logistics challenges, ongoing talent shortages and unpredictable customer demand. But nearshoring isn’t just about risk mitigation. The drive to bring production closer to home is a strategic opportunity to recalibrate operations around reliability, cost-effectiveness, sustainability and customer centricity to name a few. Shorter supply chains mean reduced transportation costs and inventory needs, faster response times, increased agility in changes in demand and an alignment with consumer preferences for more localized production. Localization also spurs progress in the customization of products to meet the needs of individual customers, including presenting regional offerings. These benefits resonate with operations leaders and customers, investors and stakeholders increasingly focused on environmental impact and regional economic growth.
A Look at Mexico and other nearby neighbors: The Competitive Edge in Nearshoring
Mexico’s proximity, cost advantage and manufacturing capacity have made it the leading nearshoring destination for U.S. companies. Recent data from Roland Berger’s report reveals that Mexico’s competitive advantages extend well beyond geography. Mexico offers a compelling alternative to offshore locations with a 35% lower landed cost than China, a robust industrial base and incentives from U.S. trade agreements.
That said, there are a number of other countries within close proximity that are also becoming attractive destinations for more localized manufacturing. Dominican Republic, Guatemala and Costa Rica have seen a significant uptick in localized manufacturing production and foreign direct investment (FDI) levels as well as compelling labor rates. Meanwhile Canada and US have one of the largest bilateral commercial relationships in the world, as Canada is the top U.S. partner for trade in goods and services. In 2023, Canada exported 78% of its goods to and imported almost half of its goods from, the United States.
Reduced transit times, lower logistics costs and enhanced supply chain resilience for companies targeting North American markets are not just attractive—they’re transformative. For instance, shipping from Central America and/or the Caribbean to the U.S. costs ~50% less than from East Asia and takes 20-30 days less. This proximity also enables collaboration and quality control, which is difficult to achieve with long-distance suppliers.
Critical Considerations for Executives Weighing Nearshoring
For executives considering nearshoring as a long-term strategy, the decision hinges on several pivotal factors, such as:
- Labor Market Dynamics: While labor costs and growing shortage of skilled talent have been impeding factors, the growing industrialization of nearby Central American’s nations, particularly as Chinese wages rise and geopolitical dynamics heat up. The shift to automation and advanced technologies further reshapes the labor equation, making an increased range of skills needed and higher skilled labor accessibility more crucial than ever. Companies need to analyze the local talent pool, wage rates and educational institutions to ensure alignment with their operational goals as well as future upskilling requirements.
- Infrastructure and Logistics: Quality infrastructure—reliable electricity, internet bandwidth and logistics networks—is essential for most manufacturing operations. Established infrastructure coupled with a network of major roadways, rail lines, seaports and international airports, supports complex supply chains that need rapid and reliable transit times. This level of connectivity can also drive down overall logistics costs significantly.
- Tax and Regulatory Environment: It is important to look at corporate tax rates, inflation trends, free trade agreements and national, regional and local subsidies available in each potential destination. The U.S., Canada and Mexico each offer unique tax structures, free-trade agreements and subsidies. All three, for instance, benefit from the U.S.-Mexico-Canada Agreement (USMCA), which makes it easier for manufacturers to meet North American content requirements and qualify for duty-free trade. Executives must evaluate how these factors align with their own organizations tax and trade strategies.
- Raw Material Availability and Local Supplier Base: Access to critical components and proximity to suppliers is crucial for industries reliant on specific materials. Companies must map the availability of essential resources against their production needs to determine location viability and broader supply chain implications.
- Next Generation Manufacturing (NGM): Digitization, sustainability and financial goals are front and center for many executives today. Nearshoring offers an opportunity to incorporate advanced manufacturing practices that support a number of key business imperatives while at the same time increasing overall competitiveness and resilience. Roland Berger’s approach emphasizes KPIs across these six dimensions—geopolitical risk, sustainability, industry disruption, localization, customization and digitization —to ensure companies select locations that fit their vision for the future of manufacturing.
A Blueprint for Navigating the Shift to Nearshoring
Nearshoring may promise significant advantages, but it is not a one-size-fits-all solution. The journey will take years for many companies, and the transformation will be complex. Roland Berger’s frameworks and expertise in localization provide a systematic approach to evaluating factors like cost, efficiency and risk. By asking the right questions, developing robust scenario planning, and paring it all with a data driven approach, companies can ensure that their nearshoring strategy delivers both immediate benefits and long-term strategic value.
One industry leader told Roland Berger, “Manufacturing isn’t just about cost; it’s a competitive weapon. We assumed that offshore was the cheapest way for years, but now we see that resilience and proximity are the real differentiators.”
Navigating Policy Shifts
Given shifts in U.S. trade and localization policies with each new administration, companies seeking nearshoring solutions must remain agile. Scenario planning is essential for anticipating the impacts of policy changes—particularly around tariffs, immigration and regulatory incentives—on operations and supply chains. For instance, with the 2024 elections affecting trade relations and localization incentives in a number of markets, nearshoring requires balancing proximity, flexibility and safeguards as the geopolitical and policy landscape continues to unfold.
Embracing Nearshoring for Strategic Growth
In a world where geopolitical, economic and environmental factors remain in constant flux, nearshoring is more than a trend—it’s a recalibration of the strategy for global manufacturing competitiveness. By moving production closer to home, companies can gain stability, responsiveness and cost savings. As this shift accelerates, nearshoring will become a central pillar for the global manufacturing landscape, positioning high performing manufacturers to thrive in a dynamic, high-stakes global economy.
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