Pros and Cons of outsourcing in Mexico
This isn’t the 1990s anymore. Long gone are the days when outsourcing to China was the way that manufacturing was done at the lowest cost possible. These days, nearshoring to Mexico is the option of choice.
Today, lean companies that stay abreast with current strategies are following a new trend – nearshoring to Mexico. Nearshoring is the strategy of partnering with a nearby country for the benefits of outsourcing along with the benefits of keeping business at home due to the proximity of the nearshore partner. But there’s more to it than this.
Nearshoring is rooted in the intertwined and constantly-changing supply chain challenges and opportunities faced by organizations as they strive to compete globally, nurture a wider customer base, and adequately satisfy the demands of a changing marketplace. This currently trending and unique approach has many of the same companies who shifted operations to China in the 90s now bringing those operations to Mexico to meet these very needs.
But does nearshoring to Mexico come with all positives and no negatives? Don’t just jump on the bandwagon before considering all aspects and requirements that are involved. While most feel that the pros far outweigh the cons, each business has to do the research for itself.
The cons of Mexico outsourcing
Procurement: Procurement must be addressed early on in a nearshoring strategy. Nearshoring is particularly vulnerable to shortages, unpredictable deliveries, and delayed shipments if proper attention is not paid to procurement concerns early on.
Regulations: It is often the case that nearshoring to Mexico will involve a partnership with a shelter company who handles compliance issues. However, some companies may be tempted by the nearness of an operation on the Mexican border to go it alone. Mexican regulations can be tricky, if an experienced shelter company is not consulted.
Outsourcing in Mexico – the pros
Transportation Costs: The benefits of transporting goods manufactured as close to the US consumer market as the Mexican border and, even, in its interior are all many companies need to make the decision to nearshore to Mexico. The savings in fuel and other transportation costs are significant.
Executive Convenience: It is not uncommon for executives to burn out or underperform due to the stress of operating on two dramatically different time zones or having to fly back and forth between continents. Nearshoring to Mexico means time zones are virtually the same, and trips between US and Mexican offices are frequently only a few hours.
Supply Chain: In today’s next-day market, supply chain is an important consideration – one area of clear benefit in nearshoring to Mexico. Inventories do not need to be as extensive, and time to market is drastically reduced.
Import/Export Duties: It’s no secret that NAFTA has eliminated most tariffs between the US and Mexico, but equally as important to the global manufacturing company is the 40+ free-trade agreements Mexico has with countries all over the globe, making Mexico the clear choice for dealing not only with the US, but also the international marketplace.