ANALYSIS
Nearshoring Without Integration:
Why Industrial Value Networks Do Not Change
Analytical feature based on a keynote contribution at the
IoT Focus Tech Conference, Minsk (2019). Originally presented as “Entering Industrial IoT Value Networks”.
Revised and contextualized for current industrial nearshoring dynamics.
Published: January 2026
Introduction
Nearshoring has become a central response to supply chain disruptions, regulatory pressure and geopolitical uncertainty. Production locations are adjusted, suppliers relocated closer to European markets, and new Industrial IoT providers are considered as potential integration partners.
What is often overlooked is that nearshoring changes geography, not structure.
This feature examines why nearshoring initiatives frequently fail to alter the underlying logic of industrial value networks—and why technically capable suppliers remain structurally peripheral despite proximity, certification efforts and pilot project.
The analysis builds on field-based analytical work conducted in 2019 in the context of Industrial IoT market entry and value network integration (conference keynote on "Entering Industrial IoT Value Networks"). At that time, Belarusian technology and Industrial IoT providers were still operating within comparatively open European cooperation frameworks.
Since then, the external conditions for Belarus-based technology firms have changed fundamentally. Market access, trust requirements, compliance exposure and reputational thresholds have been redefined. This feature does not assess these developments politically. They are treated as structural boundary conditions that further reinforce the mechanisms described below.
The purpose of this feature is not to revisit a historical case, but to show why the same integration constraints persist—and have become more restrictive—under today’s nearshoring dynamics.
The focus is not on technology readiness, but on industrial power, control and access within value networks.
Nearshoring Misconceptions: Why Proximity Does Not Equal Integration
Nearshoring is commonly framed as a logistical and geographic adjustment. In practice, however, industrial power is not organized spatially, but contractually and institutionally.
Key control points remain unchanged:
• interface definitions
• standards and certification regimes
• data ownership
• customer access
Physical proximity does not translate into strategic inclusion. Suppliers may be closer to production sites, but remain distant from decision-making authority.
How Industrial Value Networks Integrate New Suppliers
Industrial value networks are designed to stabilize existing production systems, manage liability and quality risk, and preserve control over system architecture.
New nearshored suppliers are typically integrated as:
• capacity extensions
• cost buffers
• narrowly defined functional providers
They are rarely integrated as:
• system owners
• data controllers
• strategic partners
The logic of integration is conservative by design. New actors are assessed primarily as risk factors, not as innovation carriers.
Industry 4.0 and Industrial Integration: What Changed and What Did Not
Industry 4.0 initiatives increased internal transparency, process efficiency and coordination within established value networks.
They did not:
• lower structural entry barriers
• redistribute control over interfaces or data
• weaken incumbent dominance
Digitalization optimized existing value networks. It did not reconfigure them.
As a result, nearshoring today often operates on top of highly optimized—but still exclusive—industrial structures.
Value-Based Services as a Control Layer in Industrial Value Networks
Control in industrial systems increasingly concentrates in:
• machine-related services
• system-level optimization
• predictive and preventive functions
• data-driven coordination
These layers are typically controlled by OEMs, system integrators and platform operators.
Nearshored suppliers remain confined to:
• components
• narrowly scoped functions
• replaceable roles
Upward movement in the value chain is structurally constrained, regardless of geographic proximity.
Testing and Simulation as a Structural Entry Point
One exception to the general integration constraints lies in testing, simulation and validation-related activities.
These functions are close enough to core systems to be strategically relevant, yet sufficiently decoupled from liability, certification and system ownership to remain accessible for new entrants.
Testing and simulation:
• reduce direct production risk
• operate upstream of final system responsibility
• provide measurable value without requiring control over interfaces or customers
Already in integration-focused analyses conducted in 2019, testing and simulation emerged as one of the few viable entry points into German industrial value networks for external technology providers.
Subsequent developments have reinforced this logic rather than weakening it. Under today’s nearshoring conditions, testing and simulation remain structurally more accessible than system design, R&D ownership or full integration roles.
This does not eliminate integration barriers, but it defines a realistic zone of engagement within otherwise restrictive value networks.
Certification, Reputation and Liability in Industrial Supplier Selection
Industrial integration is governed less by innovation potential than by:
• certification regimes
• reference portfolios
• liability structures
• long-term contractual reliability
These mechanisms are rational from an industrial risk perspective. They function as filters, not as neutral evaluation criteria.
In nearshoring contexts, these filters tighten rather than loosen, reinforcing incumbent advantage and limiting the scope of integration for new suppliers.
Why Nearshoring Policies Underestimate Industrial Network Constraints
Many nearshoring programs focus on:
• relocation incentives
• infrastructure
• financing
• workforce availability
They largely ignore:
• contractual power asymmetries
• data and interface control
• governance of value networks
As a result, activity increases, but structural dependency remains.
Nearshoring Changes Location, Not Industrial Integration
This feature does not argue against nearshoring.
It argues that
nearshoring without structural integration leaves industrial value networks fundamentally unchanged.
As long as control over interfaces, data and customer access remains concentrated, new suppliers—regardless of location—remain peripheral actors.
Nearshoring changes where production happens.
It does not change how industrial power is organized.
Sources and references
This feature is based on field-based analytical work conducted in 2019 and on publicly available industry data and studies, including:
- Statistisches Bundesamt (Germany) – Manufacturing industry structure and turnover
- Institut der Deutschen Wirtschaft (IW)
- Bitkom (2016): Industry 4.0 – Status and Perspectives
- VDMA (2015): Industry 4.0 Readiness
- Plattform Industrie 4.0 – implementation and testing environments in Germany
- European Commission (2012) – SME employment data (industrial sector)
- ING Bank N.V. (2014): The German Technology Industry – Opportunities in a More Open Supply Chain
- Deloitte & Touche GmbH (2014): Automobilzuliefererindustrie – Standortoptimierung und Sourcing
- AMA Verband für Sensorik und Messtechnik e.V. (2018)
- Selected market studies by Grand View Research, MarketsandMarkets, Verified Market Intelligence, Yole Développement, Market Research Future and Global Market Insights (2016–2019)
All sources are used to illustrate structural industry patterns rather than short-term market dynamics.
© 2025 Stefan Schandera. All rights reserved.
This feature reflects analytical interpretations based on field observations and publicly available information.
It does not constitute policy or investment advice.
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