The global pandemic, the Russian invasion of Ukraine, attacks on shipping in the Red Sea and geopolitical instability have exposed the vulnerability of long supply chains.

"The geopolitical instability we face today poses many challenges for businesses. Supply chain disruptions, economic uncertainties due to inflation and currency fluctuations, social unrest and reputational risk are just a few examples of the consequences of war and trade sanctions. Companies must look for ways around these obstacles. We notice that companies are therefore increasingly opting for nearshoring rather than offshoring," said Gijs Klomp, Business Development Manager for Romania at WDP.

Offshoring is a business strategy in which a company moves its operations to distant and often overseas countries. An example of offshoring is a European company whose production is done in Asia. In nearshoring, companies locate their business processes, including inventories and production, in a nearby country.

Since the Covid-19 pandemic, companies are increasingly investing in new plants in nearby countries such as North Africa and Central and Eastern Europe (CEE). Between 2022 and 2023, more than $82 billion was invested in manufacturing projects in 15 of these countries. This is a record amount and 62% more than investments in the two years before the pandemic (2018-2019), according to fdi Intelligence.

"Nearshoring is a strategic necessity for the sustainable growth and competitive advantage of many companies. Nearshoring allows companies to improve operational efficiency, and reduce costs, while being more sustainable and responsive. This leads to a strong position in the market and promotes long-term growth," explains Gijs Klomp.

A balance between cost reduction and operational efficiency

Nearshoring has many advantages. First, shorter supply chains are generally less vulnerable to disruptions such as conflicts or natural disasters. With fewer major differences in time zones, real-time communication and collaboration are easier, leading to more efficient workflows and faster response times.

While nearshoring may not offer the same degree of cost savings as offshoring to distant countries with very low labour costs, it often provides a balance between cost reduction and operational efficiency. The shorter distances also reduce fuel consumption and greenhouse gas emissions.

"The proximity offered by nearshoring increases supply chain resilience and reliability and helps companies meet customer demand more consistently and efficiently, without compromising quality," explains Gijs Klomp.

Romania as a potential hotspot for nearshoring

WDP thus clearly sees a positive future for nearshoring. In terms of specific countries that qualify as good hotspots, Romania stands out with its economic potential, cultural heritage and strategic location at the crossroads of Central, Eastern and Southeastern Europe. Romania can offer companies both cost efficiency and competitiveness without being associated with high risks.

Gijs Klomp: "We still see some barriers, such as the underdeveloped road infrastructure and declining population. But all in all, Romania is an attractive nearshoring country, especially since it has become an increasingly important economic player in Eastern Europe in recent years, with the second-largest economy next to Poland. Investment in projects in Romania amounted to $6.6 billion in 2022-2023, double that of 2018-2019. At WDP, we have the necessary experience and know-how to guide companies in their nearshoring projects, for both warehousing and manufacturing. In Romania, we combine both for a broad portfolio of customers implementing nearshoring.”