Logistics Advantages of Manufacturing in Mexico
By Isaías Rivera | Mkt & Business Development Director at American Industries Group®
Over the last two years, logistics has been one of the key challenges facing global industry. Disruptions have occurred in all methods of transport, ranging from a lack of air cargo availability at the start of the pandemic, to more recent global container shortages, leaving many companies unable to ship their products. Disruptions have even affected land transport, with a lack of drivers being intensified by the effects of the pandemic across the US, EU and China.
These logistics challenges, in addition to the overall uncertainty resulting from a variety of factors, have caused a major shift in the way companies make decisions. Historically, decisions like which suppliers to use or where to set up or expand operations were based solely on lowering costs, referred to as a “cost-driven” approach. Now, after the losses caused by the delays and shutdowns of the last two years, companies are focusing more on assessing, managing, and minimizing risk rather than prioritizing their short-term bottom lines, known as a “risk-driven” approach.
Mexico’s competitive advantages
With this new strategy for business continuity focused on balancing rewards and uncertainties, many companies are increasingly looking to start up operations in Mexico. Manufacturing in Mexico offers a variety of logistics advantages and contributes to increasing the transparency and agility of supply chains in a number of ways.
First, Mexico’s geographic location means 80% less shipping times and costs compared to China. The country’s well-developed, safe, and accessible network of air, land, and rail infrastructure means that companies have a variety of options for transporting goods depending on what best meets their needs. The flexibility of having multiple options, and the transparency of being able to communicate with transport carriers and track shipments in real time further reduces logistics risks.
Companies can also work with a provider of shelter services in Mexico with OEA or Authorized Economic Operator certification for easier crossing of goods at the Mexico-U.S. border. This certification is Mexico’s equivalent of the C-TPAT certification granted by the U.S. Customs and Border Protection to companies that commit to implementing measures aimed at increasing supply chain visibility and security. Under a mutual recognition agreement signed by both countries the OEA certification allows companies with OEA certification to interact with C-TPAT certified companies as equals.
Additional advantages include the ability to optimize supply chains by taking advantage of Mexico’s mature regional networks and industrial capacities. The country’s well-developed ecosystems in a variety of sectors, such as the automotive industry in Mexico and medical devices manufacturing in Mexico are backed by a skilled, available and affordable workforce, offering additional opportunities for enhancing companies’ business continuity plans.
Overall, starting up business in Mexico allows companies to reduce risks, streamline logistics, and insert themselves into existing regional networks, decreasing dependency on China and ensuring long-term business continuity.