Procurement Glossary
Nearshoring: Definition, strategies and implementation in Procurement
November 19, 2025
Nearshoring refers to the relocation of business processes or production activities to geographically close countries with similar time zones and cultural conditions. This sourcing strategy is becoming increasingly important as companies look to combine the benefits of cost savings with reduced risk and improved communication. Find out below what nearshoring means exactly, what methods are available and how current developments are affecting procurement.
Key Facts
- Nearshoring combines cost advantages with geographical proximity and cultural similarity
- Typical nearshoring destinations for German companies are Eastern Europe and North Africa
- Reduced transportation costs and shorter delivery times compared to offshoring
- Smaller time zone differences enable better communication and coordination
- Political stability and legal certainty are decisive selection criteria
Contents
Definition: Nearshoring
Nearshoring describes the strategic relocation of business processes, production or services to geographically close countries with similar economic and cultural conditions.
Key features of nearshoring
The main characteristics include geographical proximity to the home market, similar time zones and cultural affinity. Nearshoring destinations are characterized by:
- Moderate cost savings with lower risks
- Improved communication options due to similar working hours
- Reduced transportation costs and shorter supply chains
- Political and legal stability
Nearshoring vs. offshoring
In contrast to offshoring, nearshoring focuses on nearby countries rather than distant destinations. While offshoring strives for maximum cost savings, nearshoring prioritizes the balance between costs and risk minimization.
Importance of nearshoring in Procurement
Nearshoring offers a balanced alternative between local procurement and global sourcing for the procurement strategy. It enables companies to realize cost benefits while maintaining security of supply and flexibility.
Methods and procedures
The successful implementation of nearshoring requires structured methods for site selection, supplier evaluation and risk management.
Location analysis and country selection
A systematic market analysis forms the basis for the nearshoring decision. Relevant evaluation criteria include:
- Labor costs and productivity levels
- Infrastructure and logistical connections
- Legal certainty and political stability
- Availability of qualified workers
Supplier selection and evaluation
The suitability assessment of potential nearshoring partners requires special evaluation criteria. In addition to technical skills, cultural compatibility and communication skills are decisive.
Implementation and monitoring
Structured rollout management ensures successful implementation. Continuous monitoring of key performance indicators and regular supplier evaluations ensure the long-term success of the nearshoring strategy.
Tacto Intelligence
Combines deep procurement knowledge with the most powerful AI agents for strong Procurement.
Important KPIs for nearshoring
Measuring the success of nearshoring initiatives requires specific key figures that take both financial and operational aspects into account.
Cost ratios
Total Cost of Ownership (TCO) covers all nearshoring-related costs including transportation, customs duties and coordination costs. The cost savings compared to local procurement and the capital commitment period are key performance indicators for the economic evaluation.
Quality and delivery performance
Delivery reliability, quality rate and complaint rate measure the operational performance of the nearshoring partners. Throughput times and flexibility in the event of changes in demand show the responsiveness of the outsourced processes.
Risk and compliance metrics
Supplier default risk, political stability indicators and compliance rate assess the sustainability of the nearshoring strategy. Supply chain visibility indicators enable proactive risk management and rapid responses to disruptions.
Risks, dependencies and countermeasures
Despite the advantages, nearshoring involves specific risks that can be minimized by taking appropriate measures.
Political and economic risks
Political instability, currency fluctuations and regulatory changes can affect nearshoring projects. A diversified procurement strategy with several locations reduces these dependencies. Regular country risk assessments enable early adjustments to be made.
Quality and communication risks
Different quality standards and communication barriers can lead to problems. Clear acceptance criteria and regular audits ensure compliance with requirements. Investments in language and cultural training improve cooperation.
Dependency risks and mitigation
Single sourcing in nearshoring destinations can lead to critical dependencies. Dual sourcing or multiple sourcing strategies create redundancies and increase security of supply.
.avif)
Practical example
A German automotive supplier is relocating the production of electronic components from China to Poland. The decision is based on rising labor costs in China, trade uncertainties and the need for shorter delivery times. The nearshoring strategy enables the company to reduce transportation costs by 40% and cut delivery times from 6 to 2 weeks.
- Location analysis with a focus on infrastructure and availability of skilled workers
- Gradual relocation with pilot project and gradual expansion
- Establishment of local quality assurance and supplier development
Current developments and effects
Nearshoring is experiencing a renaissance in the global procurement landscape due to geopolitical tensions, supply chain crises and technological developments.
Geopolitical influences and deglobalization
Trade conflicts and political uncertainties are reinforcing the trend towards regional supply chains. Companies are reducing their dependence on individual countries through geographical diversification. Supply chain resilience is becoming a strategic success factor.
Digitalization and AI integration
Modern technologies enable more efficient nearshoring processes. AI in Procurement supports location selection, supplier evaluation and risk forecasting. Digital platforms significantly improve communication and coordination with nearshoring partners.
Sustainability and ESG criteria
Environmental and social standards are becoming increasingly important in nearshoring decisions. Shorter transportation routes reduce the CO2 footprint, while improved working conditions in nearby countries strengthen social responsibility.
Conclusion
Nearshoring is establishing itself as a strategic alternative between local procurement and global offshoring. The combination of cost savings, reduced risks and improved communication makes this strategy particularly attractive in uncertain geopolitical times. Successful nearshoring implementation requires systematic location analysis, structured supplier management and continuous performance monitoring. Companies that use nearshoring strategically can sustainably strengthen their competitiveness and minimize supply risks at the same time.
FAQ
What is the difference between nearshoring and offshoring?
Nearshoring focuses on geographically close countries with similar time zones and cultural conditions, while offshoring aims to maximize cost savings by relocating to distant, low-cost countries. Nearshoring offers a better balance between costs and risks.
Which countries are suitable for nearshoring from a German perspective?
Eastern European countries such as Poland, the Czech Republic and Hungary are popular nearshoring destinations for German companies. North African countries such as Morocco and Tunisia are also gaining in importance. The choice depends on the industry, requirements and strategic goals.
How do you evaluate the success of a nearshoring initiative?
Success is measured on the basis of total cost of ownership, delivery performance, quality indicators and risk indicators. Soft factors such as communication quality, cultural compatibility and strategic flexibility are also important. Regular evaluations enable continuous optimization.
What are the risks of nearshoring?
The main risks include political instability, currency fluctuations, quality deviations and communication barriers. Dependency risks due to single sourcing and regulatory changes can jeopardize security of supply. Diversification and continuous monitoring are essential countermeasures.
.png)
.png)
.png)
