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What Is near-Sourcing?

By Kenneth W. Michael Wills
Updated May 17, 2024
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Near-sourcing is a term used to describe a business strategically placing some of all of its operations close to where its end-products are sold. Typically, the term is contrasted with and used to highlight the reversal of the trend to outsource low-wage manufacturing operations to developing nations. In cases of near-sourcing, the business firm is often responding to rising costs in supply chains as well as rising costs associated with sourcing labor in developing nations. Aside from mitigating the uncertainty of rising costs associated with outsourcing to offshore locations, there are some other advantages associated with the economic trend. Those include cultural barriers, proximity, time-zone constraints and skill surplus where available.

Covering the full scope of near-sourcing, however, does not always mean bringing operations back to the headquarters of where the firm is located. Instead, it could mean relocating or locating operations in a neighboring nation that offers some sought-after advantages. For example, a car manufacturer in the United States might decide to near-source operations to Mexico, rather than outsource offshore to China. What is inherent to the decision is finding the closest location possible to the product market that offers some or all of the aforementioned advantages, while avoiding some of the rising costs in the supply chain.

Advantages often sought after and found in the process also help to reduce expenditures and costs, while tapping into required resources that contribute to the organizations overall mission. Cultural alignment with the business firm is often more readily achieved through near-sourcing due to human capital resources having a familiarity of the culture in which the business firm is located, including proficiency with the language used in that culture. Communication on many business projects between management and the project team is an ever-growing concern. Constraints imposed by time zones makes communication a laborious process, but near-sourcing provides a solution for facilitating the communication process through eliminating or reducing time zone constraints.

Proximity also facilitates communication by allowing various actors within the business to meet on a regular basis when required. Traveling from the United States to Canada only takes a few hours depending on the location, but traveling to China or Europe often entails a much longer flight time. Coupled with access to human capital exhibiting the acquired skills needed to perform the organization’s core operations, near-sourcing effectively avoids rising costs in the supply chain and mitigates of the risks associated with offshore outsourcing.

About Mechanics is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
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Discussion Comments
By chivebasil — On Dec 21, 2012

Can someone give me some examples of some businesses or industries that use near-sourcing?

By BAU79 — On Dec 21, 2012
It seems like near sourcing is mostly about cost management, but it also has important environmental benefits. Reducing the pollution that is a result of commercial transportation is huge. If more companies made an effort to produce and distribute their goods in an efficient way it would have a significant positive impact on the earth.
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