Procurement is a crucial process for any business, as it involves purchasing goods and services essential to its operations. With globalization, businesses have access to suppliers worldwide, and Mexico has emerged as a popular destination for procurement. Many companies are setting up buying offices in Mexico to take advantage of the country’s strategic location, low labor costs, and favorable trade agreements.
Here we will explore the benefits of procurement from Mexico for your business’s growth. We will look at some reasons why setting up a buying office in Mexico can be advantageous for your company, including cost savings, quality control, and market access.
Cost Efficiency: Lower Operating Expenses
Lowering operating expenses is a key advantage when procuring from Mexico. Living expenses in the country are low, leading to lower wages and affordable manufacturing costs. Also, tax incentives are available from the Mexican government for foreign businesses planning to set up operations in the country.
Moreover, Mexico being close to the United States, enables easy transportation and lower shipping costs. This makes it an optimal location for companies interested in expanding their North American customer base while decreasing logistics expenses.
Quality Control: Access to Skilled Labor
Quality control in every manufacturing process relies heavily on access to skilled labor. The country’s main advantage for businesses looking to procure from the region in Mexico is the availability of skilled labor. The presence of robust technical education programs, thanks to significant investments by the Mexican government, has produced a highly skilled workforce capable of offering top-quality services across multiple sectors.
Proximity: Faster and Cheaper Shipping
Businesses can achieve a local presence by establishing a buying office in Mexico, resulting in additional benefits. This can contribute to enhanced market insights, improved supplier communication, and fewer language obstacles. Also, due to technological improvements and investments in infrastructure, Mexican manufacturers have experienced increased competitiveness over the years. Compared to other countries, businesses can obtain high-quality products at lower costs.
Trade Agreements: NAFTA and USMCA
In 1994, the United States, Canada, and Mexico signed the North American Free Trade Agreement (NAFTA), creating a trilateral trade bloc. One significant outcome of this agreement was reducing or eliminating most tariffs on goods exchanged among the three countries, facilitating greater economic growth and job opportunities. Despite this, NAFTA faced criticism for its impact on job outsourcing to Mexico and the subsequent wage stagnation experienced by certain industries.
The trade relationship between the three countries was modernized and strengthened when NAFTA was replaced by the United States-Mexico-Canada Agreement (USMCA) in 2018. The USMCA encompasses fresh stipulations for online trade and the defense of intellectual property rights, all while upholding unrestricted access to goods among member nations.
Cultural Affinity: Shared Business Values
When considering procurement from Mexico, cultural affinity plays a significant role in building successful business relationships. Shared business values between your company and Mexican suppliers can create a foundation of trust and mutual understanding, which can lead to increased collaboration and improved communication. Companies that prioritize ethical practices, sustainability, social responsibility, and quality standards match the values commonly upheld by Mexican businesses.
Mexican suppliers are familiar with American business practices and expectations due to their proximity to the U.S., making it easier to navigate cross-cultural differences. Understanding each other’s perspectives is particularly crucial when dealing with complex procurement processes where decisions have long-term implications for both parties involved.
Expanding businesses can reap multiple benefits by procuring from Mexico. The combination of inexpensive labor and its nearness to the United States has propelled Mexico into a prominent position in the global market. Also, through its free trade agreements with various nations, the country gains entry to a sizable consumer market.