Nearshoring Best Practices: Harnessing Geographical Proximity for Outsourcing Success

Published: September 1, 2023
An image shows about 9 Colombian executives smiling. The caption reads Top 6 Nearshoring best practices.

The pandemic left lasting economic damages in its wake.

With the lockdown came the shutdown of businesses and layoffs that reverberated across industries, including logistics and manufacturing. This, in turn, disrupted global supply chains and complicated trade relations. 

The unfortunate result is unstable job market, exacerbated by rising prices and delayed production even after the economy shows signs of bouncing back.

Increasingly, more businesses seek innovative solutions that drive growth and success to curb COVID-19’s economic blow. Among these strategies, nearshoring has gained traction as more companies leverage it for the proximity and time zone advantage. Not only does this fortify operational resilience, but it also helps them gain a much-needed competitive cost advantage. 

In this blog, we delve deep into this business strategy, uncovering nearshoring best practices that will empower you to harness its advantages fully.

Factors Driving the Surge in Nearshoring

A mini infographic shows market trends requiring nearshoring best practices.

Before we discuss nearshoring, it’s crucial to understand the underlying factors propelling the adoption of this strategy, especially in the U.S.

Labor Shortage

Despite growing concerns that the artificial intelligence revolution will take over jobs, displacement is not the biggest issue the labor market faces. 

While tech drives automation, AI and machines lack the human critical thinking skills required to gauge problems, set goals, make informed decisions, prepare for unexpected shifts, and foster genuine connections.

As such, businesses that want to stay competitive in a rapidly changing landscape need access to a broader pool of human talent. Unfortunately, despite its immense potential, the workforce has become scarce in this rigid market.

While the labor participation rate did rise from 62.2% in 2022 to 62.6% in 2023, it has yet to return to pre-pandemic levels. Over 50 million workers resigned from their respective jobs in 2022. Job openings have soared since then, leaving a massive gap between the talent pipeline and workforce demand. At its current rate, even if all jobless individuals get employed, roughly 3.9 million job vacancies will remain unfilled. 

The growing retiring population is also exacerbating the labor crunch. A forecast revealed that the number of working-age people (aged 15 to 65) will fall by over 3% over the next decade – and this trend will continue to persist beyond that.

On top of that, one study predicted that the global job market will suffer from a shortage of over 85 million people (approximately the population of Germany) by 2030. Without any intervention, this could lead to a loss of $8.5 trillion in annual revenues.

Businesses can leverage nearshoring, a strategy allowing them to diversify their pipeline and tap into talent-rich markets beyond their local borders. 

Supply Chain Issues

The fragile supply chain is knocking retailers off-balance.

With thousands of vacancies in the transportation and logistics sector, many businesses fail to deliver goods on time, resulting in a massive decline in customer satisfaction. Amid a record-high 20% spike in consumer spending, almost half (47%) of businesses struggle to keep pace with demand. 

The Russia-Ukraine conflict further aggravates supply chain bottlenecks. 

A shortage of gas and oil (among Russia’s main exports) triggers energy scarcity, which, in turn, drives up fuel costs and inflation rates. On top of delays, consumers are also forced to shoulder the extraordinarily high cost of deliveries.

Some companies have taken the initiative and adopted nearshoring to cushion the blow. With the support of their nearshore partners, companies can source talent and supplies from neighboring countries to speed up product delivery and mitigate the risks of single-point failures.

Read More: Nearshoring vs. Reshoring: Which Is the Practical Response to Supply Chain Disruptions? 

U.S.-China Trade Relations

The bilateral trade relations between the two countries began to tense up in 2019. While the U.S. economy profited highly from China’s low-cost products, the imports from China outpaced the U.S. exports to China, causing a huge trade deficit. 

Worse, this fierce import competition forced millions of Americans to quit their jobs.

To counter this so-called “unfair trade standard,” the U.S. introduced a tariff system for Chinese imports, which backfired, escalating the tension between the two nations. In response, China imposed a retaliatory tariff, further reducing U.S. export activity.

A year later, China was still the United States’ largest trade partner, with a whopping $559.2 billion in trade revenues – but the U.S. trade deficit with China was $310.3 billion.

Partnering with countries with solid diplomatic ties with the U.S. is crucial to navigating geopolitical crossfires and avoiding hostile trade relations that can harm your business. With its strategic location, highly skilled workforce, diverse economic opportunities, and cultural affinity with the U.S., Colombia presents itself as an ideal nearshoring destination.

6 Effective Practices That Will Guarantee Your Nearshoring Success

Amid these business challenges, there needs to be an effective and innovative strategy in place to ensure sustainable business growth and competitiveness. 

The solution is nearshoring to a leading technological hub such as Colombia.

But to make nearshoring a successful venture, businesses must adopt exemplary practices that will help maximize its benefits. As such, let’s explore strategies to ensure a smooth and prosperous partnership.

Choosing the Right Nearshore Partner

Since no two businesses have the exact needs and goals, there is no one-size-fits-all approach to nearshoring. Your goal shouldn’t be to find the perfect nearshore company (because there isn’t one) but to work with one that fully aligns with your brand’s identity and vision. 

The fact of the matter is strong collaboration leads to better performance. A study echoes this sentiment, highlighting that companies that have great synergy adapt well to business challenges (79%), generate sustainable revenue streams (79%), and satisfy customer expectations (87%). 

An ideal nearshoring partnership can foster a collaborative and productive working relationship, leading to successful project outcomes and long-term business growth. 

Here, we’ve compiled a set of guidelines in hopes that can help you narrow down your search for a reliable, compatible, and highly qualified partner:

  • First, determine your company’s technical requirements. This can include your KPI metrics, success rates, and monthly performance goals.
  • Allocate a budget for your nearshoring strategy.
  • Identify your non-negotiables – your partner’s must-have qualities (such as experience, expertise, or IT security restrictions).
  • Then, look for other desirable attributes that set them apart (like flexibility, level of professionalism, or communication capabilities).
  • Consider your network’s recommendations and never underestimate word-of-mouth referrals.
  • Read reviews and client testimonials to learn about the experiences of past and existing clientele.

Here’s a pro tip: Take your time when assessing their capabilities. When you rush into a decision, you’re more likely to miss specifics affecting your company’s bottom line. 

Remember: The devil is in the details.

Also, determine whether they are culturally fit, have technological proficiency, and comply with legal and regulatory standards. Through careful and thorough vetting, you are sure to meet a partner who can deliver the highest quality of work at the fastest turnaround possible.

Building Strong Partnerships

Trust is the foundation of a long-lasting and successful partnership, and transparency is critical to earn trust. This is why working with a service provider that communicates every little progress with you is crucial. 

When the lines of communication are open and transparent, you’ll know that your partner means business and only wants what’s best for your company. In the long run, you’ll develop a seamlessly transparent work culture – the perfect foundation to improve work productivity, employee engagement, and the company’s bottom line.

Clear Communication Channels

A common pitfall of outsourcing is ineffective communication, especially when partners are working remotely.

In situations where communication is lacking between both parties, they will often be left confused. Over time, this uncertainty will drive them away from their shared goal. Furthermore, this communication breakdown can lead to leadership problems such as micromanagement, a common underlying cause of organizational issues.

As such, direct and consistent communication is a must to strategize growth, identify pain points, and address issues requiring urgent attention. Establishing a culture of open communication can also encourage team members to share ideas, raise concerns, and seek clarification, leading to better problem-solving and improved productivity.

Here are some ways you can effectively communicate with your virtual team members to enhance collaborative efforts and gain trust:

  • Conduct regular check-ins through video conferencing platforms like Zoom or Google Meet for the convenience of all remote and on-site parties. 
  • Meet everyone in person from time to time to build strong ties. 
  • Use professional communication tools like Slack, Discord, or Microsoft Teams to monitor progress.

Maintaining Business Control and Quality Assurance 

The truth is some customers will swear off brands even after just one bad experience. What can we take away from this? Consistency is huge for success.

Developing high-quality standards is a critical stepping stone for businesses to clinch markets and drive repeat business. While many companies are hesitant to relinquish tasks to third-party vendors for fear that the quality of their products and services will suffer, this will not be an issue when they work with a nearshore BPO. For one thing, these experts will work closely with you to formulate a comprehensive and detailed service-level agreement (SLA) that ensures the high standards of their performance.

An SLA is a legally binding contract that delineates business expectations, pricing models, performance metrics, project timelines, and the obligations of both parties. Each clause is clearly and carefully worded to eliminate ambiguity and misinterpretations.

Often adhering to the plain meaning rule (the usual and ordinary meaning of the legal text), the contract enables both parties to preserve their integrity and interests. Furthermore, a liable party can easily be held accountable when products and services don’t meet the prescribed standards in quality. This fuels the need for outsourcing firms to upskill their teams and educate them on the necessary quality control procedures. 

Prioritizing Data Security and Compliance

Cyberattacks and hacking are slowly turning into an epidemic in the U.S.

In 2021, the Identity Theft Resource Center (ITRC) recorded a total of 1,862 cases of data breaches

Let’s take a closer look at one recent example:

Using data scraping techniques, a financially-motivated hacker with the name “God User” managed to exploit a networking site’s API and leak up to 700 million customer databases on a dark web forum in exchange for profit.

This sudden spike in data breaches has made many businesses reluctant to work with third-party providers. But, on the contrary, data breaches are less likely to happen when you partner with BPOs in Latin America, an emerging tech hub just south of the U.S. border. 

Colombia, dubbed the Silicon Valley of the region, is a big player in the IT market and home to some of the most innovative cities in the world. BPOs in the country ensure tight control of your sensitive data with stringent privacy policies, regular security audits, secure data transfer, and storage practices

Additionally, you can mitigate potential risks by preparing and signing a non-disclosure agreement (NDA) with your outsourced partner to prevent unauthorized breaches and safeguard your collaboration. 

Managing Costs and Budgets

Every penny matters when you’re running a business. As much as possible, you want to track your financial liquidity and strike down any extra expenses – or else, it can negatively impact your bottom line.

Proper financial management skills are required when choosing a nearshoring partner. One way to do this is through conducting a cost analysis.

Delegating your business functions to a BPO provider offers many financial benefits, but it isn’t without risks. Even if you’ve chosen a partner with an outstanding reputation, you still need to weigh the pros and cons.

Let’s break down the analysis into four simple steps:

  • Step 1: List down what business roles you want to outsource.
  • Step 2: Compute the costs if you keep those roles in-house. 
  • Step 3: Calculate the overall outsourcing costs.
  • Step 4: To calculate your savings, deduct the outsourcing costs from the projected cost of maintaining the roles in-house.

If the outsourcing cost exceeds your budget, take the opportunity to re-negotiate payment terms and ask for a more cost-efficient rate. By adopting these financial practices, you can make informed business decisions, ensure stability, and maximize the benefits of your nearshore partnership. 

Embracing Cultural Diversity and Inclusion

An illuminating McKinsey study underscores the importance of workforce diversity, revealing that businesses with ethnically diverse team members outperform (36% increase in profits) their competitors.

However, some challenges come with workforce diversity. A lack of knowledge about cultural differences and other nuances can cause potential problems such as the unintentional mistreatment of outsourced workers.

For this reason, businesses need to deeply integrate diversity, equity, and inclusion (DEI) principles into their HR practices. Doing so empowers all employees, laying the foundation to cultivate an engaged, motivated, and high-performing workforce. 

Businesses need to train both in-house and nearshore teams on cultural awareness and sensitivity for better collaboration and reduced chances of misunderstandings. They also need to ensure that their nearshore team has access to the same opportunities for growth, skill development, and career advancement by offering training, mentorship, and leadership pathways. 

Through these simple strategies, businesses can rest assured that their nearshoring endeavor is aligned with their commitment to DEI for a harmonious and productive partnership.

Why Choose Colombia As Your Nearshore Partner?

With an outstanding top score of 85.1% in the 2022 Offshore BPO Confidence Index, it is no surprise that U.S. businesses see Colombia as a go-to nearshore destination. 

Let’s look at six reasons why nearshoring to Colombia is an excellent strategy to combat labor shortages and supply chain issues.

Cost-Effectiveness

Due to its low living cost, Colombia is an ideal choice for businesses seeking quality services at a competitive cost advantage. 

To illustrate, let’s compare the costs of Colombia and the U.S. across several areas:

  • The average monthly salary in the U.S. is $6,228, whereas in Colombia, it’s $1,142.42.
  • Americans pay $429.33 per month for utilities, while Colombians only spend $71.47
  • The cost of living in the U.S. ($2,317) is 258% more expensive than in Colombia ($646).

Skilled Multilingual Workforce

Around 559 million individuals speak Spanish across the globe. With 13% of the U.S. population speaking Spanish at home, it is also considered the most spoken non-English language in the country. 

Fortunately, with Spanish as the official language in their country, you can overcome language barriers, expand your customer base, and tap into an international market with a reputable Colombian nearshore team at your side. 

However, just because Colombians are native Spanish speakers, it doesn’t mean that their English skills aren’t up to par. Thanks to an education reform aimed at developing their English mastery, the country has positioned itself to be globally competitive.

Bottom line: Nearshoring to Colombia is an excellent way to facilitate seamless touch points with Spanish- and English-speaking clients.

Proximity and Time Zone Compatibility

While outsourcing offers immense benefits to U.S.-based companies, the massive time difference with distant countries can sometimes be a substantial stumbling block to this endeavor.

The workaround is nearshoring to Colombia.

Located at the northern tip of the LatAm region, the nation’s proximity to North America offers excellent convenience for travel. It also overlaps an entire workday with the U.S., making virtual interaction and collaboration possible in real-time.

Say you reside in New York and want to attend a business meeting in Bogotá, Colombia’s capital city – the direct flight only takes about 6 hours. Besides, the one-hour time difference between these two key cities can minimize the risk of any impending delays.

Cultural Affinity

Since Colombia’s independence from Spain, the LatAm nation has fostered a solid diplomatic relationship with the U.S. 

Being a massive advocate for bilingual education, Colombia opened its arms to academic exchange with a renowned American university to strengthen cooperation, explore mutual interests, and diversify learning modules. Regarding business engagement, Colombia invested $4.1 billion in the U.S. in 2020, opening up at least 5,000 more American jobs.

This cultural integration boosts the camaraderie between the two countries – and as a result, nearshoring processes become increasingly smooth and seamless. 

Government Support

In addition to its strategic location, Colombia managed to preserve its political stability – providing U.S. companies with smooth logistics for goods and services.

In 2019, the Colombian government introduced nearshoring, driving $1.072 billion in investment capital from 60 well-established firms. The government continues to show strong support for the sector – with ProColombia, the nation’s investment promotion agency, receiving praise for its campaign on favorable BPO regulations.

Looking ahead, the future is promising for the BPO industry in Colombia. As the new administration takes office, BPO leaders are confident that the government will further consider proposed reforms to strengthen its foothold in the competitive market.

Diverse Business Environment

The country has five major business centers: Medellín, Bogotá, Barranquilla, Cali, and Cartagena. Each city offers unique market opportunities that cater to specific industries.

Let’s put Bogotá and Medellín side by side, for instance. 

With medicine as Bogota’s principal export, healthcare companies will find nearshoring in the city beneficial. Medellín, on the other hand, is a hub for tech companies, with a significant portion of its revenues being fueled by IT services.

So, if your company is IT-based, you may opt for nearshore software development in Medellín.

Transform Your Business With Nearshoring Best Practices

When done strategically, nearshoring can be a game-changer, leading to sustainable growth and increased competitiveness in the global marketplace.

By adopting these best practices, businesses can maximize the benefits of collaborating with nearshore partners – building solid relationships, overcoming challenges, and embracing diversity to unlock massive success.

SuperStaff, a leading outsourcing firm with a strong presence in Colombia, is your gateway to top-tier talent and exceptional services. With our skilled workforce, cutting-edge technology, and dedication to excellence, we can transform your operations and drive unprecedented growth.

Posted by
Jaymee Cichon
CLIENT BUSINESS SOLUTIONS, SR. EXECUTIVE
Jaymee is an experienced Client Solutions Officer with a proven track record of building and maintaining strong client relationships. Leveraging over a decade of experience, she develops effective sales strategies that drive revenue growth. Jaymee is also responsible for providing clients with customized solutions that meet their unique requirements.

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