Why It’s Time To Reshore Auto Parts Manufacturing To Mexico
Are you looking for a new contract manufacturer? Maybe your company is starting to outsource manufacturing. Or maybe a contract with a manufacturer is about to expire, and you don’t want to renew it. Either way, you may want to consider reshoring to Mexico.
Manufacturing in Mexico is a much better option than:
- In-house manufacturing at a US or Canadian facility
- Manufacturing in an overseas country
Here are 7 reasons why:
1. Shorter, Less Complicated Supply Chain
When you reshore manufacturing, the supply chain is a big factor to consider. If choosing between Mexico and an overseas country far, far away, Mexico is the clear winner. It’s because the supply chain is much shorter.
You want the supply chain to be as short as possible. Minimal transportation helps your company remain competitive. Whether you’re an US or Canadian company, nearshoring to Mexico guarantees a short supply chain.
The Benefits Of A Short Supply Chain
A short supply chain comes with many different benefits, including:
- Fast shipments
- Lower shipping costs
- Fewer supply chain issues
A Long Supply Chain Makes Everything Complicated
When you outsource manufacturing to an overseas country, you’ll deal with a long supply chain. It’s common to deal with the following issues with a long supply chain:
- High shipping costs
- Significant production delays
- Significant shipment delays
- It’s common for overseas shipments to be held in customs for a few weeks
- Higher likelihood of supply chain issues
Such issues can hurt your company’s reputation. For example, shipment delays can keep you from meeting deadlines with your clients. That can make your company look bad.
COVID-19 is in the picture now, and that makes overseas shipping even worse. This is because:
- Many shipping lines reduced their capacities and routes
- Some countries are holding ships until their crews are virus free
- Some countries are taking screen measures
All these changes are causing significant delays in overseas shipping. And who pays the price? Your company does. You don’t have to worry about this problem if you nearshore to Mexico.
The More Shipping Options, The Better
If you contract with a manufacturer in an overseas country, you have only two shipping methods to choose from:
- Ocean freight
- Air freight
Each shipping method has its own bag of issues. If you nearshore to Mexico, you’ll get to choose from more shipping methods, including:
- Air freight
- Truck
- Rail
- Ocean freight (over a much shorter distance)
These shipping methods are much safer and simpler than long distance overseas shipping. This infographic provides a visual representation of this.
2. The United States-Canada-Mexico Agreement
In July 2020, the US, Canada, and Mexico entered a new trade agreement. The agreement makes nearshoring to Mexico easier than ever for US and Canadian companies. It’s designed to encourage more cooperation between the three countries, especially when it comes to auto parts manufacturing. For example:
- The US agreed to make Mexican and Canadian manufacturers exempt from any future tariffs on certain auto parts.
- The agreement requires that after 2023, 75% of parts in American vehicles must be made in North America.
That means if you stick to or reshore to an overseas country, you’ll face some problems. For instance:
- You may need to pay tariffs to have the parts shipped to the US or Canada.
- Many North American automakers will hesitate to put your parts into their vehicles because your parts aren’t made in North America.
3. Time Zone Proximity
Mexico shares several of the same time zones as the US and Canada. That means if you sign with a Mexican manufacturer, they might be in the time zone as you. At most, they’ll be about 2 time zones away from you. That’s a great advantage because:
- You can have real time communication between you and the manufacturer
- You and the manufacturer will be working during the same business hours
- There will be less travel time for executives who need to visit the manufacturer’s facilities
If you work with an overseas country a few thousand miles away, you’ll face some issues like:
- Jet lag
- Delayed communication
- Very late night or early morning phone calls
- Long travel times
4. Affordable And More Skilled Labor
Did you know that Mexico’s workforce is outpacing China in terms of productivity? Not only that, but also Mexico’s labor has grown to be more affordable than China’s. The labor in Mexico is very skilled. In fact, Mexico turns out more manufacturing, engineering, and construction degrees per capita than the US and many other countries.
5. Fair Labor Laws In Mexico
Socially responsible manufacturing is very important. The Mexican government takes it very seriously. The Mexican government enforces labor laws that are quite similar to those in the US and Canada. Labor abuse is a problem in many overseas countries. So if you contract with an overseas manufacturer, you may be contributing to labor abuse and exploitation. You don’t have to worry about this problem if you reshore to Mexico and contract with a reputable company.
Intran Is A Leading Auto Parts Manufacturer In Mexico
At Intran, we offer many different services. If you’re interested in any of our services, get in touch with us to get the ball rolling!