For many years people have regarded the Pacific Rim, and, in particular, China as the best place to achieve manufacturing cost reduction. Over the years, however, the negatives associated with producing goods in a place that is geographically removed from the point of consumption have become increasingly clear. In addition to rising wages, “offshoring” work to far away places has become less attractive than “nearshoring” to Mexico for a number of clear reasons.
Over the last several years, Mexico has become a more attractive option for companies and top executives pursuing manufacturing cost reduction because of the:
- ease of doing business in time zones that are more conducive to efficient communication between headquarters, engineering and production
- facility of travel when face-to-face communication is absolutely essential to getting a job done
- cultural affinity and similar business code of ethics that exists between the US and its southern neighbor
- ease, speed and economy with which finished product can be shipped to customers
- eradication of costs related to the keeping of additional inventory and emergency stocks of supplies
In some instances, it continues to make logical sense for North American companies to set up shop in Pacific Rim countries and China. This is irrefutably the case when the products that are manufactured will be used by consumers in that part of the world. Otherwise, manufacturing cost reduction by nearshoring in Mexico is an unparalleled choice. In addition to globally competitive wages, Mexico offers access to reliable supplies of electricity, and the water, sewer and transportation infrastructure that is required by companies’ production and commercialization activities is up to global standards. With respect to electricity, and energy costs in general, those that choose to look toward Mexico as a means by which to operate in a low-cost manufacturing environment can expect, in the coming years, that the cost of Mexican power will gradually come down in the medium term due to reforms that have been adopted that will gradually be implemented in the broader energy sector.
In order to facilitate a transition from an offshore to a nearshore location in Mexico, things to keep in mind include:
- making an offer to customers to tour Mexican manufacturing facilities so that they can see circumstances that are prevalent “on the ground” for themselves. Although security conditions in Mexico have improved markedly in the last few years, many still haven’t gotten the memo.
- providing sufficient training for Mexican employees to ensure to create “buy in” with company rules and culture.
- Engaging with human resource professionals in Mexico to make sure that higher level employees are fully qualified for the positions that they will occupy, and making sure that they have a high level of bilingual communications ability. This will make communication and coordination between US and Mexican operations go smoother.
Today, when manufacturing cost reduction is a must, nearshore Mexico is the logical choice. There are companies in North America, the Tecma Group being one of them, that are experienced in helping manufacturers make the transition from “offshore” to “nearshore.”