Defining Nearshore Manufacturing in Mexico
05.01.19
Nearshore manufacturing in Mexico is a cost-effective way to operate in nearby countries. It has become a catalyst for manufacturing companies to improve their supply chain and deliver better customer service. When compared to China, for example, Mexico offers a huge location advantage and carries less expensive shipping costs.
Mexico is one of the most open countries worldwide for international trade. The country has 12 multilateral trade agreements that provide preferential trade access to 44 countries. Nearshore manufacturing is becoming a preferred option for U.S. companies who wish to gain a competitive edge and greater productivity by moving a portion of their supply chain to Mexico. It results in closer product distribution, lower labor costs, and financial growth and stability.
Location and Logistics
Nearshore manufacturing in Mexico allows foreign companies to open new markets in their industries at home, which aids in economic growth and opportunity. Unlike offshore manufacturing, where companies turn to countries outside the neighboring regions, this type of manufacturing helps cut costs and improve operational processes.
Mexico has advantages over China and other countries that don’t make as much logistical sense, such as similar time zones, which equate to shorter lead times and better response times. For example, it can take 24-48 hours to receive finished products to the U.S. from a manufacturing facility in Mexico, while the same goods could take up to three weeks to arrive from China.
Manufacturers with facilities in Mexico also incur fewer travel expenses and general operational costs than their overseas counterparts. Closer geographic proximity reduces transportation and travel time for more frequent site visits when products are being moved and assembled.
Labor Costs and Availability
High-skilled labor is an asset to any company growth. Mexico has focused on investing in education and hands-on training for trade industries such as manufacturing, engineering, and construction. This accessibility to qualified employee candidates is a huge benefit for companies who want to expand their operations.
It also provides significant cost savings since the Mexico minimum wage is $1.80-$2.00/hour and the country recognizes a 48-hour workweek. More productivity time and a lower labor rate are helpful for foreign companies, like the U.S., to grow operations in a cost-effective and efficient way.
Financial Growth and Stability
The scale of production available through nearshore manufacturing in Mexico boosts trade. This ultimately leads to growth and stability for a company’s finances. It allows manufacturers to stay competitive with industry trends and continue to strengthen their operational process while maintaining product quality.
In general, nearshore manufacturing saves time and cuts costs by helping to increase production and improve efficiencies, thanks to closer operational proximity, access to a skilled workforce, and cooperation between neighboring countries to benefit trade deals.
When considering the opportunities of nearshoring, Mexico shelter companies provide a beneficial solution that helps businesses expand more quickly. They are designed to handle administrative, legal, and trade management responsibilities. At the same time, foreign companies still have full control over their manufacturing process, equipment, and materials.