In the early era of modern global trade, the logic was straightforward: chase lower labor costs, produce at scale, and ship goods around the world.

Recent disruptions, however, from the Covid-19 pandemic to geopolitical tensions in chokepoints such as the Straits of Hormuz, have shown that this traditional offshoring model is not always the most reliable approach.

A supply chain stretched across oceans is at risk. In fact, the 2026 conflict between the United States and Iran has caused ship transits to drop drastically by 95 percent, with crude oil prices increasing sharply from US$64 (€54) per barrel in January 2026 to US$90 (€60) per barrel in April 2026.

With these disruptions getting more frequent, many companies are re-thinking their manufacturing footprints. This shift is significant. A McKinsey report showed that 43 percent of United States respondents are planning to shift more of their supply chain footprint back home over the next three years, a 25-percentage-point increase from the previous year. Respondents are also more likely to be expanding their supply chain footprint in Eastern Europe, Mexico, and Southeast Asia.

The focus has now shifted from finding the lowest price to building more resilient supply chains.

Understanding onshoring/reshoring, nearshoring, and friendshoring

To choose the right strategy, it is important to first understand exactly what each term means.

• Onshoring/reshoring: bringing manufacturing and services back to a company’s home country.
• Nearshoring: Shifting production to a neighboring country or a nation in the same geographic region.
• Friendshoring: Moving manufacturing to countries that are reliable allies and share similar political values.

Distance, dollars, or diplomacy?

While onshoring, nearshoring, and friendshoring all aim to bring production closer to the brand, they offer vastly different advantages in terms of cost, speed, and security.

Here is a deeper dive into the considerations when utilizing these three strategies.

Proximity 

The most obvious differentiating factor is physical distance, which dictates how quickly businesses can get products to customers and how easily they can manage returns.

Onshoring/reshoring operates within domestic borders, eliminating the friction of international customs and unpredictability of long-distance transit. This proximity offers the fastest possible lead times, allowing a business to react to consumer trends in real-time. If a product line needs adjustment, a domestic facility can pivot operations in a matter of days rather than months.

Nearshoring shifts production to a neighboring country or a nation within the same geographic region. A 2026 example would be Yeo Hiap Seng (Yeo’s), a Singaporean food and beverage company, shifting its manufacturing operations to Malaysia, one of Southeast Asia’s biggest nearshoring hubs.

Friendshoring prioritizes diplomacy over distance, favoring political alignment over geography. For instance, Apple announced the shift of its iPhone production from China to India in 2025, a decision driven less by considerations of distance, and more by shared trade interests and political stability. As tensions between major powers fluctuate, Apple is friendshoring to a country that has a more long-term diplomatic relationship with the West. Even if shipping costs stay the same, Apple avoids the risk of sudden tariffs or political sanctions that could paralyze its production overnight.

Cost

Each strategy affects the bottom line differently. The goal is to look at the total cost of ownership rather than just the cost of producing one unit.

Onshoring/reshoring typically involves the highest labor wages. However, these are often offset by savings in international freight, duties, and insurance. Furthermore, companies can hold less inventory due to faster replenishment, freeing up capital that would otherwise be sitting on a container ship for many weeks.

Nearshoring is often the neutral zone for margins. It significantly cuts freight costs compared to traditional offshoring while still allowing businesses to capitalize on lower labor costs than at home. It is an ideal choice for companies that need to balance tight margins with a responsive supply chain that can handle high-volume returns without eating into profit. Inditex (the parent company of Zara) nearshores a large portion of its production to nearby countries with lower labor costs, with over half of its clothes made in Spain, Portugal, Morocco, and Turkey. This proximity allows them to get new designs into European stores in just weeks.

Friendshoring focuses on long-term financial security and is an insurance policy against hidden costs. While a factory in a friendly nation might be slightly more expensive than a distant high-risk hub, businesses avoid the costs of unexpected tariffs or the total loss of a shipment due to geopolitical conflict.

Working culture

Beyond the spreadsheets, the success of one's business also often depends on how well people can work together across the business.

Onshoring allows for optimal alignment across various factors. The headquarters and factory share the same time zone and language, and work within the same legal system. This is the gold standard for quality control and intellectual property protection. For example, Hermès keeps the majority of its leather goods production in Riom, France. There, artisans craft only the Birkin and the Constance bags, two of Hermès’s signature products that are difficult to replicate abroad. By keeping operations within the country, Hermès created 250 jobs and 30 apprenticeship seats for those keen to learn the craft.

Nearshoring offers high synchronization between teams. Shared or similar time zones mean workers can collaborate with the facility in real-time without resorting to off-hours meetings. This temporal and cultural proximity makes it easier to manage complex returns and refurbishments, as the feedback loop is tight and responsive.

Friendshoring relies on shared values. Because these nations are political partners, their legal frameworks and business ethics, including labor laws and environmental standards, are often more aligned with the brand’s promise. For the modern consumer who cares about how their product is made, friendshoring provides a more transparent, ethical narrative.

Don’t get stranded between shores

There is no one-size-fits-all solution, but most businesses find their ideal fit within these three strategies.

Prioritize onshoring if the business focuses on:

• High-end or perishable goods:  speed to market is the top priority or products have a very short shelf life.
• Intellectual property (IP) sensitivity: protecting trade secrets and maintaining strict quality control is more important than saving on labor.
• Brand identity: for example, being able to describe products as “locally made" is a core part of marketing strategy and customer appeal.

Prioritize nearshoring if the business focuses on:

• Fast-moving consumer goods: the business needs to balance lower production costs with the ability to restock shelves within a few days.
• Complex logistics: heavy or bulky items make transoceanic shipping too expensive, and domestic labor is also cost-prohibitive.
• Agile collaboration: teams need to communicate with the factory during the same workday to manage frequent design changes or updates.

Prioritize friendshoring if the business focuses on:

• Critical components: the business deals with essential parts, such as semiconductors or medical supplies, where a supply chain break would be catastrophic.
• Long-term stability: the goal is to avoid the financial shock of sudden tariffs, sanctions, or political shifts in high-risk regions.
• Ethical compliance: a brand must guarantee that its production adheres to specific environmental and labor standards shared by allied nations.

A hybrid strategy is a sure-fire way to build resilience

A real-world examples is Apple, which employs a hybrid multi-shore strategy to avoid being vulnerable to any single political or logistical crisis:

• Onshoring: Apple manufactures its high-end Mac Pros in Texas, United States. This allows the company to label its products "Assembled in USA" for branding and provides total control over their most expensive hardware.
• Friendshoring: Apple has significantly moved iPhone production to India and Vietnam. This reduces their reliance on China and places their supply chain in nations with stable, friendly diplomatic ties.
• Offshoring: Apple still maintains a significant footprint in China for high-volume efficiency that no other country can yet match, despite the shift to India and Vietnam.

In a changing global market, the most successful companies will likely be those that do not rely on a single strategy. Instead, the best approach is often creating a hybrid strategy that ensures goods can reach customers regardless of how global trade fluctuates.