In recent years, a significant shift has been underway in the fashion industry as brands increasingly turn their attention towards nearshoring.

Nearshoring is the practice of relocating manufacturing and processes to countries closer to the brand’s home market in contrast to offshoring, where production is outsourced to countries further away where costs are cheaper.

Below, we explore the factors that are driving the nearshoring trend and how this shift is poised to reshape the landscape of the fashion industry.

What has spurred the nearshoring trend?

For businesses worldwide, the last few years have been fraught with economic uncertainties, supply chain disruptions, and geopolitical tensions.

Such events have led to material shortages, long lead times, transportation bottlenecks and sharp rises in shipping costs.

In the wake of these disturbances, brands have sought alternative means of production and manufacturing as a way to increase supply chain efficiency.

For instance, both nearshoring and offshoring have been explored by brands globally, largely spurred by the burgeoning necessity to achieve greater supply chain agility and flexibility.

Another key driver behind the shift to nearshoring and offshoring is cost. China may still reign as king when it comes to manufacturing, but rising wages and other economic factors are increasingly forcing businesses out of the country.

Nearshoring provides brands with the opportunity to de-risk their exposure to these factors and ultimately help protect the bottom line.

What are the benefits of nearshoring?

There are a multitude of reasons why brands have quickly taken to nearshoring, such as reduced lead times. Since production occurs much closer to home, it is far quicker and more straightforward, logistically speaking, to move goods from the manufacturer to the brand.

Naturally, shorter lead times also mean that brands can respond faster to changing market trends and consumer demands, providing the agility necessary to compete in today’s market.

Offshoring has often been favoured amongst brands due to cheaper labour in distant countries; however, the overall cost-effectiveness increases with nearshoring when considering that transportation, shipping, and logistics expenses are reduced due to proximity.

Similarly, closer proximity facilitates better quality control and communication between brands and manufacturers, helping to mitigate misunderstandings and ensuring products are up to standard.

Nearshoring also aligns with the fashion industry’s increased focus on sustainability since shorter supply chains result in decreased carbon emissions, supporting brands in meeting their environmental and ethical commitments.

How are dynamics changing in the fashion industry?

The emergence of nearshoring brings about not only benefits for brands but also several transformative changes.

Chiefly, it enables closer collaboration with manufacturers in nearshoring locations, meaning more flexible production models can be explored. Examples of these include small-batch manufacturing and customisation, helping to meet the growing demand for personalisation.

In most cases, nearshoring contributes to creating more resilient and adaptive supply chains for brands. Due to the shorter supply chains, they are less susceptible to major events like geopolitical uncertainties, transportation disruptions and global crises.

It is worth stressing that nearshoring is not a definitive and foolproof method for mitigating these types of disruptions altogether but rather an approach to help lessen their impact.

The shift towards nearshoring also provides significant economic benefits to the destination country, offering employment opportunities, boosting local economies and fostering sustainable development.

Nearshoring in action

Mexico has emerged as a key player in the nearshoring trend, attracting attention from fashion brands seeking a strategic balance between cost, proximity, and manufacturing capabilities.

The country’s skilled workforce, established manufacturing infrastructure and trade agreements, such as the United States-Mexico-Canada Agreement (USMCA), make it an appealing nearshoring destination for brands in North America.

While companies in North America are experiencing tremendous benefits in outsourcing their production and manufacturing to Mexico, they still require solutions to help ensure their goods are distributed to stores in time.

In interviews with our partners Teze Solutions and Admiral Consulting, based in Mexico and the US, respectively, we discussed these trends and challenges. 

Mexico’s rise to prominence as a nearshoring hotspot has created a massive gap in the market for companies like Teze and K3 to collaborate and provide real value for companies looking to scale. 

Likewise, the relationship between Admiral and K3 will support brands in the states that predominantly need help transporting goods to ensure the right product is in the right place at the right time. 

As industry dynamics continue to change in both countries, concept-to-consumer solutions like K3 Pebblestone remain pivotal in supporting brand owners, wholesalers, and CMT companies in navigating these shifts.

If you’d like to learn more about how K3 and our partners can support you, feel free to drop us a line today.