Economic disruptions and shifts in consumer behavior resulting from our new normal have highlighted the importance of logistics, and specifically innovation in logistics and supply chains, to business continuity now and in the future. With worldwide shutdowns and the consequent explosion of the digital economy, companies in nearly all sectors have been working to plant the seeds of technical innovation in logistics. By building processes and logistics systems that are leaner, efficient and more robust, businesses will have the solid foundation necessary to become more competitive and achieve long-term success. Especially for companies serving the largest consumer market in the world in the USA, nearshore or offshore manufacturing in Mexico can help create more agile, responsive, and adaptable logistics systems and supply chains.
In 2004, Hau L. Less began studying the world’s most successful supply chains and found they were built according to what he called a Triple-A model, meaning that they are agile, adaptable, and aligned. Amazon, the world’s largest online retailer that is currently investing a billion dollars in expanding its presence in Mexico, uses this same model. Making investments in technology (even those with no short-term gain) and prioritizing innovation far before the world was turned on its head last year has allowed the company to go beyond just being a leading company to defining the future of the new economy.
In his research, Hau wrote that “First, great supply chains are agile. They react speedily to sudden changes in demand or supply. Second, they adapt over time as market structures and strategies evolve. Third, they align the interests of all the firms in the supply network so that companies optimize the chain’s performance when they maximize their interests. Only supply chains that are agile, adaptable, and aligned provide companies with a sustainable competitive advantage.”
There are several reasons operating in Mexico can help international companies in Mexico become more aligned with this Triple-A model and gain a competitive advantage to stay ahead of their rivals in an increasingly Volatile, Uncertain, Complex and Ambiguous (or VUCA) world. One is Mexico’s ease of logistics. Its geographic location, fast transportation network, and time zones similar to the US, allow companies to cut the time it takes to track and respond to changes in customer behavior and supply and demand, and help ensure visibility and traceability across their entire supply chain.
In addition, the Mexico manufacturing ecosystem is mature and well-developed, offering a wealth of supplier options to provide added value to companies’ supply chains, products, and technologies. Its numerous trade agreements with over 50 countries and the recent signing of the USMCA contribute to aligning the goals of each company in the supply chain and placing them on equal footing in terms of tariffs and regulations. An example of this alignment is the North American automotive industry. Multinational companies working across borders with the same goals have contributed to and benefitted from sustained economic growth and strengthening of the entire supply chain.
Staying competitive requires companies to constantly evolve, and starting up business in Mexico is an excellent option to achieve this. A provider of shelter services in Mexico can help analyze the advantages of nearshoring in Mexico. These include cost savings and logistics advantages, among others, which can free up assets to invest in technology and save time companies can use to focus on their core business, customer service and collaboration, and developing a robust triple-A supply chain model.
By Alma Rosa Ortega López | Institutional Relations | American Industries Group®
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