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Years ago, manufacturing in China was so inexpensive, it made up for the many drawbacks of moving operations so far away. Now, Mexico’s labor rates are actually lower than China’s, but that’s far from the only reason that nearshore manufacturing is the better choice.
Even if all other manufacturing costs in Mexico and China—labor, overhead, administrative services, real estate—were the same, Mexico would come out ahead when it’s time to ship the finished goods. In many cases, companies can offer next-day or same-day delivery from a facility in Mexico to U.S. customers. Shipping from Mexico is also far cheaper and more flexible. To ship goods from China, you’re generally limited to filling 40-foot shipping containers or paying a premium to ship smaller quantities. Shipping from Mexico allows you to use pallet or box quantities when needed.
Easier Travel & Communication
It’s also easier to visit your Mexican facilities whenever needed. A trip to China would involve at least a full day of traveling there and back, incur higher costs, and require advance planning to make arrangements and secure visas. Communicating is much simpler too—a factory in Mexico would be at most three hours ahead or behind a business' headquarters in the U.S., so emails and calls will get answered faster and scheduling conference calls will be less of a hassle.
Favorable Trade Agreements
Thanks to USMCA, other trade agreements, and Mexico’s IMMEX / Maquiladora program, U.S. companies can also save on duty rates when importing and exporting goods to and from Mexico. If your target market is in North America, this can provide significant cost savings. The IMMEX Program allows for goods and raw materials to be imported into Mexico. Companies can also source supplies and raw materials in Mexico. As various manufacturing industries have grown in Mexico, the industries that support and supply them have grown too.
