Exploring the Top Benefits of Nearshoring to Mexico

The manufacturing industry is focused on keeping up with demand in the most cost-effective way possible. A feat easier said than done due to inflation and the increase of global competition. Though nearshoring to Mexico is not a new strategy, it is one more companies are considering for the future.

It’s received greater attention in recent years because of increasing conflicts regarding trade with Asia, as well as the slowdown of supply chains during the pandemic in 2020. Moreover, during this timeframe, the North American Free Trade Agreement (NAFTA) was updated and the United States-Mexico-Canada Agreement (USMCA) was made official. The USMCA favors trade among the three countries with special incentives in many areas of the manufacturing industry, namely the automotive sector.

Though the benefits of nearshoring to Mexico have been well-known for decades, the recent turn of events has caused an influx of operators to take notice. When it comes to supporting growth while saving on costs, here are a few of the top reasons why this approach is favored.

Reduced Labor Costs and a Competitive Talent Pool

In previous decades, China was the go-to source for cheap labor with the ability to churn out high-volume products at a low cost. However, Mexico has surpassed China and the U.S. in terms of reduced costs and worker availability. On average, fully burdened Mexico labor rates for a semi-skilled worker is $5.30 USD with a competitive pool of talent ranging in skill level.

The lack of availability of industrial labor is a current sore spot for U.S. manufacturers as the generational shift is showing fewer people interested and/or qualified in industrial work. Therefore, millions of roles are going unfulfilled or met with exceedingly high wages to complete production state-side. Whereas, the cost of labor in Mexico remains steady.

Geographic Proximity and Aligned Time Zones

For U.S. manufacturers, being in close proximity to Mexico allows for better quality assurance. It allows for quick, frequent visits to production sites which can be scheduled and completed in a day versus the time it takes to travel across seas to manufacturing plants in China.

Additionally, working with a team based in Mexico is easier since the country shares similar time zones with the U.S. Working hours are typically the same to employ real-time communication and connections through email, phone calls, and instant messages. This keeps production moving forward by answering time-sensitive questions and addressing challenges right away.

Reliable Supply Chain

A shipping container arriving from China to the U.S. takes weeks and costs thousands of dollars versus shipping from Mexico which can often occur the same day. Furthermore, post-pandemic supply chains in China were slow to recover, putting manufacturers behind on getting products to market. Whereas, Mexico’s infrastructure and supply chain have remained intact and reliable, leading to further foreign direct investment and growth.

Shelter Partnership

Lastly, a unique benefit of nearshoring is shelter services in Mexico. These include all the administrative responsibilities necessary to get an operation up and running, such as accounting, legal, tax, and HR. A shelter can help a company launch production in as little as three to four months while saving on costs. Many foreign manufacturers save up to 50% on labor alone, in addition to permit and certification fees.

Nearshoring to Mexico has become an important strategy for many U.S. and other foreign operators. Contact IVEMSA today to learn how our shelter services can help you make the most of the opportunity.