5 Good Reasons To Nearshore Manufacturing To Mexico
We’re seeing big changes happen around the world. COVID-19, for one. Some of these changes are making a huge impact on manufacturing. As a manufacturing company, you may be exploring your options right now.
Onshoring and nearshoring are becoming very attractive options.
- Onshoring means moving manufacturing back to your own country
- Nearshoring means moving manufacturing closer to you
If you’re in the US or Canada, nearshoring to Mexico is a great option. Here are 5 reasons why:
1. Customers Are Becoming More Frugal
Supporting USA-made products is becoming a thing of the past. Some consumers used to be willing to pay premium prices for USA-made products. That number of consumers, however, is dwindling. COVID-19 is making people hang onto their money. They’re more inclined to buy less expensive, foreign-made auto parts now.
If you nearshore to Mexico, you’ll get to save money on manufacturing. You’ll also get to pass these savings along to your customers. Some Mexican companies like Intran make parts that are as high quality as USA-made parts. When your customers realize that they can get high quality parts for much less, they’ll likely stick with your brand.
2. Manufacturing In The USA May Get Even More Expensive
The pandemic is causing countless raw material suppliers to shut down in the USA. That means USA-based manufacturers would need to ship raw materials from other countries. This may:
- Raise manufacturing costs within the USA
- Cause manufacturing and shipping delays (especially if the materials get held up by customs)
Unless you’re in a long-term contract with a USA manufacturer that won’t expire soon, expect your manufacturing costs to rise shortly. That means you may need to put a bigger price tag on your products. With nearly everyone being frugal these days, that may be problematic.
If you want to keep costs down, your best bet is to nearshore to Mexico. Manufacturers in Mexico offer:
- Skilled, low-cost labor
- Faster, less expensive, and more flexible shipping
- Experience and reliability (Intran comes with the support of three generations of experience working in the field, for example)
China and other overseas countries offer less expensive manufacturing too. Yet, manufacturing in these countries can be quite problematic. Read on to find out a few reasons why.
3. The Supply Chain In Mexico Is Much Shorter
If you’re manufacturing in an overseas country, you may face supply chain issues. In this situation, you may not even be protected by your contract. Since COVID-19 came into the picture, suppliers in China made at least 3,000 force majeure declarations. In other words, they’re legally excused from their contractual obligations until the pandemic is over.
What does that mean for you? Most likely significant delays in production and more supply chain issues. It can impact your company’s reputation and bottom line.
It’s not to say that Mexican manufacturers won’t make any force majeure declarations as well. But you’ll face much fewer issues with a Mexican company that does this. The supply chain in Mexico is much shorter. That means you’ll encounter fewer potential issues.
While we’re on the topic of short supply chains, we want to discuss the importance of proximity. Here are more reasons why you want a contract manufacturer that’s close by:
- Lower shipping costs
- Shorter shipping times
- Fewer disruptions in the supply chain
- Less travel time for executives
- Real time communication (because both parties are in the same time zone or adjacent time zones)
Being in the same continent as the USA and Canada allows Mexican manufacturers to offer many supply chain benefits, as well as low production costs. Win-win.
4. Overseas Shipping Has Become So Much More Complicated And Expensive
Do you have a contract manufacturer overseas? You may be scrambling to avoid a logistical nightmare. COVID-19 has disrupted the overseas shipping industry. For instance:
- Many shipping lines have reduced capacities and routes – this makes commercial cargo availability scarce these days
- Some countries like Singapore have been holding their ships until the crew is virus-free – this significantly delays shipping times
- Many countries, including South Korea, have implemented stringent screening measures – this significantly delays shipping times
- Air freight commercial capacity is down over 90%
Overseas manufacturing means you’d be dealing with:
- Significant shipment delays
- Increased shipping costs (air freight rates rose by 27%, for example)
- Higher likelihood of disruptions in the supply chain
If you nearshore to Mexico, you won’t have to worry about getting yourself into a shipping nightmare. Overseas shipping has always been complicated. COVID-19, however, has made it a hundred times worse. Many Mexican manufacturers, including us, offer a variety of shipping options, including:
This infographic illustrates how much easier it is to ship via air, truck, and rail than cargo vessel. Also, here are more reasons why shipping costs are poised to rise.
5. The New Trade Deal Makes It Easier And More Cost Effective To Keep Manufacturing Within North America
Did you know that the USA, Canada, and Mexico created a new agreement in place of NAFTA? It went into effect on July 1, 2020. The new trade deal is called USMCA (United States-Mexico-Canada Agreement). It offers several incentives to keep auto parts manufacturing in North America. For instance:
- USMCA requires automakers to use 75% of North American-made parts in their cars. Right now, it’s at 62.5%. That figure will rise to 75% by 2023.
- The USA promised that it would exempt Mexican and Canadian manufacturers from any future tariffs on some auto parts.
USMCA is an agreement that’s favorable to Mexican manufacturers. So if you contract with a Mexican manufacturer, you’ll enjoy the perks USMCA offers.
Finding A Reliable Mexican Contract Manufacturer
Have you decided to reshore manufacturing to Mexico? We have a lot of resources that will help you find the best contract manufacturer to meet your needs:
- How To Find Contract Manufacturers In Mexico
- Contract Manufacturing Companies In Mexico – What US And Canadian Companies Need To Know
- Is Your Contract Manufacturer Also Your Competitor?
- The Most Important Thing You Need To Know About Contract Manufacturing: It’s The People
- Why You Should Know How a Contract Manufacturer Sources Raw Materials Before Signing With Them
As an established Mexican manufacturer with a good reputation, Intran is one of the best options. Learn more about our company and services today!