Nearshoring Mexico : A Gateway to Economic Revolution

South Korean Ambassador said “Mexico today is a country with infinite potential for economic growth and is on an important path that will allow it to make a significant leap and become one of the leading countries in the world economy”.

Nearshoring in Mexico has been steadily rising over the last decade for a variety of reasons.

Firstly, ongoing trade disputes between the United States and China have created uncertainty about production costs and quality. Moreover, there are concerns about intellectual property protection. 

Secondly, when the globe was shut down because of the Covid-19 outbreak, it demonstrated how dangerous it was to rely so heavily on a deteriorating supply chain.

Thirdly, because of the stipulations specified in the USMCA (United States-Mexico-Canada Agreement), which went into force on July 1st, 2020, more North American manufacturers are embracing a regionalized approach to their strategy. 

Nearshoring, as opposed to offshore, which relocates factories from expensive countries to lower-cost regions to create goods or services, permits operations to be closer to where the goods or services will ultimately be sold. 

In recent years, there has been an escalating trend in which long-term workers are retiring. However, millennials do not appear to be interested in working in factories, which cause labor costs to rise. Companies in the United States continue to rely heavily on labor to deliver the goods to their clients. Nearshoring to Mexico, is one of the most cost-effective strategies presently. 

This has become a popular topic for many companies because of the benefits they can obtain. One of the most important advantages of manufacturing in Mexico, particularly for businesses with headquarters in the United States or Canada, is the shorter travel distance to Mexican plants, as well as reducing the number of corporate travels, and so on. 

Proximity: Via boat, a shipper can transport freight from Mexico to the United States in 48 hours. Futhermore, via truck, it can take 24 hours or less. This compared to two to six weeks via pan-Pacific ocean cargo carrier routes from Asia. 

Time zone alignment: One of the most significant benefits of nearshoring to Mexico is that it helps organizations to be in sync with the time zones of their teams since communications can be faster and more agile. Moreover, you don’t have to stay after hours to plan meetings with teams. 

Costs savings: Shipping costs are also lower because goods are delivered closer to their final destination. 

IBM is a well-known international technology corporation that offers a variety of hardware, software, and consulting services. IBM implemented a nearshoring strategy in Mexico to capitalize on the country’s strong labor and proximity to the United States. As a result, they have a substantial presence in Mexico and have been working there since the 1930s. Due to considerations such as cost-effectiveness, cultural affinity, and access to a talented pool of engineers and IT experts, IBM’s nearshoring operations in Mexico have been successful. 

Honeywell is a worldwide company with operations in a variety of areas. This includes aircraft, building technology, and performance materials. The corporation has a large presence in Mexico and has executed nearshoring strategies successfully. Honeywell’s nearshoring approach in Mexico has enabled the company to take advantage of the country’s skilled labor force. Moreover, it increased operational efficiency, and cut costs. They have created manufacturing facilities, R&D centers, and customer support activities in Mexico. This have contributed to their overall success in the region  

In conclusion, nearshoring in Mexico has emerged as an attractive choice for businesses looking to streamline their operations while capitalizing on the country’s tremendous potential. Nearshoring provides significant benefits due to its proximity to the United States. Moreover, due to shorter travel lengths, and lower shipping costs. Furthermore, time zone alignment promotes smooth communication and collaboration. This improves operational efficiency. 

Success stories from multinational firms such as IBM and Honeywell demonstrate the benefits of nearshoring in Mexico. These businesses have boosted their operations and achieved significant growth by using the country’s talented labor force, cost-effectiveness, and cultural affinity.