The supply chain is changing and new global economic structures are emerging. Companies are now finding new ways to get their raw materials. Amongst all the trends, nearshoring to Mexico is one of the most well-considered and attracts the attention of innovative companies.
This article covers the strong points of Mexican nearshoring. It emphasizes its low cost compared to Asian options and showcases connections to a vast pool of skilled professionals and industries. Here you can also learn about the free trade agreements for added benefits. Now, see how this localization concept can change your supply chain. It can help you achieve sustainable growth in a more competitive world.
Benefits of Nearshoring to Mexico
Proximity to the US
Benefit: Mexico’s nearness to the United States makes it an ideal place for sourcing goods. This closeness has many benefits. For instance, it cuts transportation costs and time and lets the firm meet market demands and changes.
Impact: This means that shipping will be faster and cheaper. The ability to ship more often will cut down on inventory and improve cash flow.
Time Zone Alignment
Benefit: Having the same time zone as the US makes it easier to have real-time communication and work. This alignment helps with team integration and makes decision-making faster and better. It also improves project management.
Impact: It leads to better efficiency. This is because it cuts through confusion and delays. So, it improves performance.
Cost Competitiveness of Mexican Manufacturing
Competitive Labor Costs
Benefit: Wages in Mexico stand at a lower level than in Asia. It has cheap, skilled workers. So, it is a good place for manufacturing and assembly.
Impact: The lower labor cost helps in keeping the overall price of the product lower, which improves the competitiveness of companies.
Lower Transportation Costs
Benefit: The US’s proximity minimizes transport costs, making them lower than Asian imports. The shorter distance between them reduces fuel costs. It also cuts transit time and has a negative impact.
Impact: Efficient transportation has cut these costs. It reduced logistics costs and reduced the carbon footprint. This aligns with the sustainability agenda.
Shun Tariffs and Duties
Benefit: Mexico is a popular sourcing market. It gives companies the chance to use free trade agreements like the USMCA. These deals remove most of the tariffs and duties on products traded between the three countries.
Impact: Excluding tariffs and duties from the cost of the goods makes their total cost low. This cuts the costs of doing business and raises profit margins.
Access to Skilled Labor and Established Industries
Skilled Workforce
Benefit: Mexico has a highly qualified and increasing pool of manpower especially in industries like automobile, electronics, and aircraft. Mexican workers are considered technical specialists exhibiting a hard-working attitude to their work.
Impact: The availability of a competent workforce assures quality production and innovation because companies are in a position to deliver good quality products and services to the market to sustain competition and quality.
Established Industrial Base
Benefit: Mexico has a mature industrial structure with well-developed supply chains and production hubs. Areas such as Baja California, Nuevo Leon, and Jalisco have many industrial parks and FDI indicators.
Impact: The supply line is crucial as it provides a proper industrial base, suppliers, and logistical support, thereby reducing operational risks.
Free Trade Agreements and Their Impact
United States-Mexico-Canada Agreement (USMCA)
Benefit: The USMCA helps in the elimination of tariffs and in enhancing customs procedures between the US, Mexico, and Canada, and it protects IPRs. This is a new trade deal that has replaced the North American Free Trade Agreement, or NAFTA, with provisions that meet today’s trade.
Impact: The USMCA liberalizes trade. It does this by improving market access and trade facilitation. This sets up a predictable legal environment for investment and commerce.
Other Free Trade Agreements
Benefit: Mexico has a web of free trade agreements with more than 50 countries, including the EU, Japan, and several other countries in Latin America. These agreements give us the first right of access to those important markets.
Impact: Businesses enter into these agreements to gain broader market access. This breaks the monopoly of a single market and lets them use the international market.
Suggested Articles:
- Understanding the Value of Nearshoring in a Supply Chain Emergency
- Near-Sourcing: Key to 4th Industrial Revolution
- Why Your Business Can Consider Mexico Sourcing Solutions
- The Environmental Benefits of Near-Sourcing
- The Benefits and Drawbacks of Near Sourcing
Conclusion: Strategic Advantages of Sourcing from Mexico
Several benefits in the procurement market are strategic. They include the low cost of manufacturing in Mexico and the favorable nearshoring policy from the FTA. It is an ideal location for US investment. So, when making your sourcing strategy decisions, do not forget about Mexico. It has an advantage due to its location, cost, and efficiency. With these strengths, you can improve supply chain security. You can also boost the company’s revenue and do better in global competition. Take advantage of its proximity to Mexico. Explore ways to develop and improve the procurement process.