Nowadays, a lot of a commodity’s production processes are done globally. An end product passes hundreds to thousands of kilometers from the extraction of the raw materials to its distribution to the final customer. In order for a finished product to reach the end consumer, there is often a transnational division of labor. Through a variety of transportation methods and routes, the intermediate and finished goods are delivered to the final user.

Due to technical progress, especially in communication, information and transport technology and the resulting globalization, foreign trade has been increasing for decades. The international division of labor is a global division of labor in production and work processes with the aim of improving performance through labor specialization on the one hand and achieving cost savings on the other hand. As a result, numerous businesses from industrialized nations outsource the production of some or all of their products to emerging countries. Additionally, one of the primary drivers of increased overseas commerce in order to improve the welfare of the participating economies is the removal of trade barriers, which leads to the liberalization of global trade.

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target market without taking risks

For every company a reliable supply chain is crucial for business success. The COVID-19 pandemic, however, exposed the flaws in international supply chains. As a result, businesses have been compelled to review their strategy for risk mitigation and continuity in the event of future crises. Companies that depended significantly on distant suppliers had difficulties obtaining essential components and raw materials. This resulted in delays in manufacturing and dissatisfied customers. Consequently, businesses think about nearshoring possibilities. Presently, Mexico is becoming the location of numerous manufacturing companies whose main markets are the US and Canada.

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Nearshoring Boom in Mexico

Businesses strive to improve their supply chains and guarantee the reliability and security of their operations. Mexico has been promoted to the top tier of production hubs for items created for the North American market by numerous corporations by concentrating on shorter, more dependable supply chains and avoiding geopolitical concerns at the same time.

We provide you some key considerations for companies looking to ensure a resilient supply chain through nearshoring:

• Proximity to Target Market: Nearshoring includes moving production or sourcing operations to nations that are logistically closer to the company’s target market. This proximity lessens the overall complexity of long-distance supply chains. Furthermore, it lowers the expenses and lead times involved with transportation. In times of change, it ensures better coordination, faster response times and easier market access.
• Enhance Control & Visibility: Companies can have more control and insight over their supply chains due to nearshoring. As a result, monitoring and managing the production process, quality assurance, and regulatory compliance become simpler. Moreover, companies can develop tighter ties with their suppliers. It enables an improved collaboration, frequent site visits, and a better grasp of how things work.
• Reduce Risks: Nearshoring aids in reducing some of the risks linked to offshore production, including trade restrictions, geopolitical unpredictability, and rate changes. Companies can lessen the effects of disruptive events like natural catastrophes, political instability, or worldwide pandemics, which can seriously disrupt the supply chain, by situating production near to the target market.
• Increase Customer Satisfaction: By lowering lead times, ensuring quicker deliveries, and enhancing product quality, nearshoring can significantly contribute to customer satisfaction. Additionally, closer proximity enables quicker responses to client inquiries, requests for modification, and returns, thereby facilitating improved customer service.
• Cost Optimization: Cost-effectiveness in terms of labor and manufacturing are offered by nearshoring. Shorter distances also result in lower expenses for logistics and transportation. Time zone disparities, communication costs, and intellectual property protection can all be reduced. Additionally, nearshoring enables businesses to save capital invested in long-distance supply chains and optimize inventory levels.

Companies should conduct a thorough review of the total cost, market circumstances, infrastructure, local laws, and the availability of trained labor in the target region in order to ensure successful nearshoring. Moreover, for the purpose of creating a robust supply chain, cooperation and trust-building with regional partners are essential. By deliberately embracing nearshoring, businesses can improve their ability to deal with uncertainty, strengthen the robustness of their supply chains, and position themselves for long-term success.

Nearshoring has experienced remarkable growth in Mexico. International companies are realizing impressive results and create competitive advantages. Mexico offers companies cost-efficient solutions to increase their growth and remain competitive.

Mexico’s main advantages are the following:

• Proximity to the U.S. market, reducing logistics costs and risks.
• Highly skilled workforce and a large resevoir of engineers and technical talent.
• Competitive labor and production costs compared to other nearshoring destinations.
• Free trade agreements such as the USMCA facilitate access to large markets and reduce trade barriers.
• Mexican intellectual property rights are more protected than those in China.

International companies could improve their businesses.

A smooth expansion process and the avoidance of complications depend on the understanding of the market. Therefore, businesses should ensure to execute a throughout market and competitor analysis. Furthermore, it is advised for expanding enterprises to engage with partners in Latin America.

Understand the Mexican Market by Engaging Ongresso to Conduct a Detailled Market Research

By partnering with us, businesses can lower risks and ensure a successful soft landing. Ongresso is your reliable partner in Latin America. With our expertise and resources we enable your company to enhance efficiency and attain sustained growth.

In conclusion, companies should do a thorough review of the total cost, market circumstances, infrastructure, local laws, and the availability of trained labor in the target region to ensure successful nearshoring. For the purpose of creating a robust supply chain, cooperation and trust-building with regional partners are essential. Businesses can improve their ability to deal with uncertainty, strengthen the robustness of their supply chains, and put themselves in a position for long-term success by deliberately embracing nearshoring.