Trend: Nearshoring To Mexico
A recent article in Manufacturing Global explores why Mexico is attracting nearshoring by a range of industries.
Mexico is a big player in manufacturing, and is evolving into a valuable partner for many U.S. manufacturing companies. Author Sergio Tagliapietra, president and CEO of IVEMSA, reminds us:
For decades, powerhouse industries including automotive, aerospace, information technology, medical device manufacturing, and electronics have maintained good trade relationships with Mexico as part of a cost-effective supply chain solution. Among these companies are global brands including Ford Motor Co., Honeywell, Toyota and Samsung to name a few. These industries are able to stay competitive by taking advantage of the convenient logistics, highly-skilled workforce, and more cost-friendly operations and labor Mexico has over China.
In recent years, industries including office furniture, stamping and metal mechanics, plastics, textiles and wire/cable harnessing have been increasing their presence in Mexico.
Mexican Manufacturing Has Much to Offer
One factor that caught my eye: Mexican universities and vocational schools graduate over 110,000 students in engineering annually. Also, Mexico has over 5,000 foreign manufacturing companies and the infrastructure to support their needs.
The struggle to attract skilled labor is a common conversation in US manufacturing. The article points out that in Mexico, vocational schools collaborate with companies and the government to ensure a supply of highly qualified workers.
Labor costs in Mexico are 10-30% less than in the US. Other financial benefits of nearshoring in Mexico include lower shipping and travel costs thanks to our shared border, faster shipping and travel, compatible time zones, and certain tax advantages conferred by NAFTA (North American Free Trade Agreement).
Currently, NAFTA represents an attractively stable trade arrangement in the western hemisphere, in contrast to the ongoing trade disputes between China and the US. While China provides a cheap work force, its perspective on intellectual property laws create risk of theft and fraud for their US partners. Mexican laws regarding IP mesh with those in the US, and Mexican facilities have demonstrated their ability to maintain certifications, such as ISO.
Manufacturing Is a Global Industry
Generally speaking, nearshoring is a regular practice among a growing number of manufacturing industries. It’s not only the mainstays of the global automotive companies or aerospace firms that are nearshoring to Mexico anymore. Industries like metal mechanics and woodworking are experiencing a labor crunch in the U.S. due to employees retiring from these industries and a new wave of employees not interested in factory work. As a result, they are turning their attention south of the border to meet operational needs.
While many of us would like to return to the golden age of American manufacturing, the writing is on the wall in our 21st century global economy. Partnerships and supply chains inevitably cross national borders, and the reality is that an economically strong Mexico benefits the entire hemisphere.