A combination of geopolitical factors in recent years, including trade wars, tariffs and supply chain disruptions, have caused companies to analyze their supply chains and sourcing strategies and reassess traditional models of thinking and best practices. As a result, many are abandoning lowest cost models in pursuit of best cost models with a focus on resiliency and sustainability, which has caused a growing reshoring trend. For a variety of reasons, including competitive labor rates in Mexico, labor availability, quality of goods produced, delivery lead time, and logistics costs, the US’s southern neighbor is the logical choice for companies serving the world’s largest consumer market.
In addition, Mexico’s openness to trade, including updated provisions in the USMCA regarding rules of origin, protection of intellectual property and harmonizing of regulations, as well as practical factors that make it easier to do business, such as similar cultures and shared time zones make it attractive for US manufacturers to start up business in Mexico. Though US companies are leading the nearshoring boom, Chinese and Asian suppliers seeking regionalization are also making significant investments in Mexican manufacturing to better serve their US customers.
Having benefitted from several decades of growth—especially since 2016 with an influx of US companies moving manufacturing operations to the country specifically to serve the US market—Mexico industry has become robust and mature, making the country poised to continue this strong upward trend. The continued and sustained growth of Mexico manufacturing is helping it to reach a tipping point, with a supplier ecosystem that is competitive with China.
Its proximity to the US, as well as favorable exchange rates, and an ample, highly skilled and cost competitive labor force, have allowed companies in a variety of sectors, including the automotive industry Mexico and the aerospace industry in Mexico, to form strong relationships with contract manufacturers and third party logistics providers. In several industries harmonizing plant technology is in place, and the country’s infrastructure and trade ecosystems are constantly expanding to support more complex supply chains.
In addition to significantly lower shipping costs compared to China, Mexico’s geographic location and cultural context also allows companies to mitigate risk in a number of other ways. By having easy access to suppliers, they can foster strong relationships with these to become familiar with their processes and react quickly to changes. In addition, international companies in Mexico can more easily categorize suppliers not only by spend, but also revenue impact in the event of unforeseen disruptions, have more control over inventory, and quickly and efficiently ship products to end consumers in the United States.
As businesses continue to quantify risks and weigh best cost versus low cost strategies for manufacturing, now is the perfect time to look into how using shelter services in Mexico can help your company set up your manufacturing operations in Mexico.
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