Competitive Advantages of Nearshoring in Mexico

By Isaías Rivera | Mkt & Business Development Director at American Industries Group®
Published 09/08/2022

With large-scale disruptions in global business since the COVID pandemic and the changes resulting from these hard-won lessons, companies are focusing on increasing agility in production models. Nearshoring, or the process by which companies or organizations relocate work or provide specific services from a geographic location relatively close to the parent company’s area, is an excellent option to achieve this. And for businesses operating in or targeting the North American market, Mexico is the logical choice.

The regionalization of supply chains in Mexico in recent decades and strengthening its networks and logistics infrastructure reduces costs and lowers the international risks of interruptions in supply chain, production, and distribution processes.

First offshoring, now nearshoring

In the 1980s, looking to reduce costs, manufacturers began relocating their production centers to low-cost countries away from their markets. Now, companies are reversing this trend, wanting to be as close as possible to their potential customers and market. Changes in customer behavior mean companies need to be more responsive to changes in consumer behavior, market shifts, and meet the demand for short-term deliveries.

With its proximity to one of the largest consumer markets in the world and resilient and mature supply base and logistics infrastructure, Mexico is in a privileged position to become North America’s leading supplier. Mexico also offers the trained and available workforce needed to run manufacturing operations and is investing in technology to keep up with advances and new best practices.

Cost savings of nearshoring in Mexico

Cost savings of nearshoring

To increase profits, companies have two options: increase sales or decrease expenses, and companies are finding that the cost benefits of nearshoring in Mexico provide a clear competitive advantage. Companies will save on various line items ranging from labor, logistics, raw materials, and tariffs.

Working with a provider of shelter services in Mexico for your nearshoring project ensures you optimize savings even further. They will connect you with the right suppliers, industrial, academic and government entities, and incentive programs for your specific operations and make sure you are up and running in the shortest time possible and seeing a rapid return on your investment.

With Mexico’s labor rates, even for trained, skilled technicians and managerial workers, companies will pay a fraction of the cost of those in the US and Canada.

Mexico’s labor rates

Another advantage of nearshoring manufacturing in Mexico is that it helps companies meet corporate social responsibility and sustainability goals. Consumers are increasingly concerned about the environmental and social impact of the companies they do business with, and nearshoring helps in several ways. For example, reduced shipping times means decreased carbon footprints and mitigating risks of supply chain delays. In addition, having production closer to the parent company and in a similar time zone improves communication and responsiveness and allows for increased transparency and the ability to verify suppliers and ensure fair working conditions.

Overall, nearshoring in Mexico is an option not to be overlooked by companies in the US and Canada that are looking for ways to cut costs and improve processes.

Isaías Rivera

Mkt & Business Development Director

American Industries Group®

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