Nearly 1 in 2 organizations are planning to turn toward nearshoring as a solution to supply chain headaches. Nearshoring benefits are real and achievable: move operations to a nearby country and gain access to favorable trade agreements while avoiding geopolitical tensions.
But success isn’t automatic, it requires appropriate planning and paying close attention to the associated risks. Organizations are realizing that moving closer comes with expensive surprises in upstream operations, including labor market volatility driving costs higher than the distant manufacturing they were meant to replace, infrastructure limitations, and rising cargo theft.
1. Market volatility
Nearshoring is often promoted as more stable and predictable than offshoring to distant hubs, but market volatility (especially in labor and local demand) creates problems that eat into those advantages. These include:
· Popular nearshoring destinations like those in Latin America are experiencing rapid wage growth as demand for workers outpaces supply, eroding cost advantages. For example, Mexico applied a 20% minimum wage adjustment in 2024.
· Exchange rate swings can quickly turn profitable operations into loss-makers, especially in emerging markets with less stable currencies.
· Regional economic disruptions, extreme weather events, or policy changes can create sudden spikes in raw material costs that may not affect global suppliers.
· As more companies nearshore to the same regions, local suppliers face overwhelming demand, driving up prices and extending lead times.
· Rapid industrialization in nearshoring hubs creates boom-bust cycles where skilled labor becomes scarce and expensive, then oversupplied as training catches up.
2. Infrastructure limitations
Aside from market volatility, nearshoring destinations often present infrastructure challenges that can disrupt even well-planned supply chains.
· Limited highway capacity, congested border crossings, and unreliable rail networks create delays that offset proximity advantages.
· Long overland trucking journeys create additional vulnerabilities such as:
- Extended exposure to theft
- Multiple border crossings with varying customs procedures
- Reduced shipment visibility compared to established shipping lanes
· Smaller ports, outdated warehouses, and scarce maintenance networks force companies to invest heavily in new facilities or accept reduced efficiency.
3. Cargo theft
Organizations that have been operating for decades in established manufacturing hubs are suddenly dealing with new, sophisticated cargo theft operations as they move manufacturing to Latin America destinations, such as Mexico or the Dominican Republic.
TT Club and BSI Consulting’s Freight Crime in Mexican Supply Chains report shows cargo theft figures for the first quarter of 2025 have already surpassed all of 2024, indicating that criminal activity remains elevated. Transit theft accounts for 30% of incidents, forcing organizations to invest in GPS tracking, security escorts, and specialized insurance to mitigate risks - costs that didn't exist with established shipping routes.
Overcoming issues by integrating teams
Successfully navigating nearshoring to overcome added challenges requires the same integrated approach we've discussed throughout this series. You can't manage these risks in silos.
· Logistics and transportation teams need to work closely with security teams to understand route-specific risks and develop appropriate mitigation strategies.
· Sourcing and procurement teams must collaborate with suppliers, vendors, and in-country teams to assess supplier preparedness for local risk environments.
· Security teams need to provide country and regional risk assessments that inform sourcing decisions from the beginning.
· Operations teams require training on new risk indicators and escalation procedures specific to nearshoring destinations.
The strategic approach
Organizations that succeed at nearshoring treat it as a full supply chain transformation, not just a geographic relocation. It’s approached with clear-eyed analysis of opportunities and challenges, ensuring solutions don't cost more than the problems they solve.
The fragmented approach - where teams operate in isolation - guarantees organizations will miss critical risks until they become expensive crises. Moving production closer to home delivers significant advantages, but only with comprehensive risk assessment and integrated coordination from day one.
