What is Onshore outsourcing and how does it differ from Offshore and Nearshore?

Offshore, Nearshore, and Onshore all ref​er to the methods of production for businesses, specifically the choice of where to produce in relation to the target market. "What is Onshore? ”What are the characteristics of Offshore, Nearshore, and Onshore? Which is the best production choice for businesses? Let's find out with Viindoo in the following article!

1. Onshore, Offshore, Nearshore - What are those?

With the growth in business scale, sooner or later, companies need to expand their production locations to other areas. Onshore, Offshore, and Nearshore are typical production methods that help address this need.

1.1 Onshore - Onshore Production

Onshore, also known as on-site production, is a form of business that produces goods directly at the consumer market. The main purpose of Onshore production is to optimize costs, production time, and transportation of goods. Therefore, businesses often choose production locations in neighboring provinces or even right next to the company's factory area.

Onshore là gì

What is Onshore production?

For example, a T-shirt manufacturing company in Hanoi may establish its production base in Hai Duong to save on labor costs as well as production and transportation time. The advantage of onshore production is that the company can easily control the production process, schedule, product quality, and save time and transportation costs.

However, onshore production is often not the optimal choice for foreign manufacturing companies. This is because the production costs and labor in these countries are often much higher than in emerging markets, and the production regulations are also more stringent. Therefore, these companies often seek offshore production options.

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1.2 Offshore - Made in foreign markets

In contrast to onshore production, offshore production is a form of business that manufactures goods in foreign markets - places that are geographically distant from the consumer market. In fact, most of the world's major manufacturing companies such as Samsung, Apple, Toyota, Hyundai, etc., have their offshore "factories" located in third countries like Vietnam, China, India, and so on.

Onshore là gì

Offshore production

The reason is that these markets have significantly lower labor and material costs compared to onshore production. Offshore production helps companies save a considerable amount on labor and material costs. However, offshore production faces challenges related to geographical distance, leading to difficulties in communication, training of labor, and managing quality and  production schedules.

1.3 Nearshore - Made in neighboring countries

The severe impact of the Covid-19 pandemic on supply chains, along with geopolitical tensions, has turned offshore production into a burden for most businesses. Now, companies are opting to move production closer (nearshore) to reduce the risk to their supply chains.

Onshore là gì

Nearshore production

According to this, in essence, nearshore is still a form of offshore production, but businesses will produce in countries close to the consumer market instead of placing production facilities in distant locations. For example, businesses in Eastern Europe will shorten their supply sources to Western Europe and North Africa; or Asian businesses will focus on production in Vietnam, Malaysia, or Thailand.

Nearshore is considered a "win-win" solution. Because manufacturing companies can still save on labor costs, transportation, and production time without having to worry too much about geographical differences or remote control and management.

2. Should businesses choose Onshore, Offshore, or Nearshore production?

It can be seen that the types of onshore, offshore, or nearshore  production all have their own advantages and disadvantages. Therefore, there is no best choice. Instead, businesses need to come up with their own answer based on criteria such as production goals and supply chain responsiveness.

Onshore là gì

Choosing the method of production Onshore, Offshore, or Nearshore

Specifically, if the goal of the business is to optimize costs, the offshore or nearshore model will be more suitable. Meanwhile, if the business is concerned about supply chain-related risks, the onshore or nearshore production model will be better able to meet those concerns.

At the same time, on-site production will be suitable for businesses producing high-value products with unstable demand. Conversely, if a business's products have low to medium value, require high labor intensity, and have stable demand, offshore or nearshore production will help optimize costs effectively.

Viindoo Manufacturing Management - A modern, comprehensive integrated production solution on a single platform.

With Viindoo Manufacturing, businesses can easily manage all resources related to production, build comprehensive production processes from general to detailed. In addition, Viindoo Manufacturing also supports managers in automatically planning production, tracking detailed progress with a visual Gantt chart, and building and optimizing inventory and supply chain plans.

The biggest advantage of Viindoo Manufacturing is its unlimited integration capability with other management applications such as Financial Accounting , Quality Management, Maintenance , Repair, etc., to automatically calculate costs, create quality inspection orders, and maintain production machinery.

So, this article has detailed the meaning of onshore, as well as other production methods such as offshore and nearshore. It also discusses important criteria for choosing the appropriate production method for businesses. For more useful knowledge and resources, refer to Viindoo!

What is Onshore outsourcing and how does it differ from Offshore and Nearshore?
Viindoo Technology Joint Stock Company, Trần Thị Lâm Anh May 31, 2022