Many manufacturers and distributors are looking for ways to stem the bleeding that often takes the form of returned goods. Some companies destroy the products or dismantle them and recycle the parts. But many, if not most, repair, refurbish, and resell these items to recoup some of their losses – a process known as reverse logistics. To perform reverse logistics in Mexico makes economic and strategic sense.
The costs involved in the reverse logistics operations of refurbishment,or repair, include labor, equipment and transportation, among others. High expenses in these areascan eat into company profit margins. It is paramount that organizations mitigate and efficiently streamline repair and refurbishment processes and master remarketing and recycling these goods in order to recoup as much of their investment as possible.
On every major point for cost consideration – from labor costs to infrastructure logistics to transportation times and costs – the establishment of a reverse logistics operation in Mexico provides US manufacturers and distributors a competitive option. The state of Mexico’s transportation logistics and infrastructure is rapidly improving. In addition to the transportation freedom afforded by NAFTA, Mexico presents an improving environment for manufacturers. Additionally, as a NAFTA member, Mexico is not subject to customs duties on goods that have been repaired or altered there, regardless of origin. The border is a location particularly well-suited for the performance of reverse logistics in Mexico operations due to its proximity to the consumers from whom products come to be repaired and refurbished, and to whom, after processing, they are returned.
Mexico also has a highly skilled and inexpensive labor force comprised of primarily young, educated workers who have been fully acclimated to industrial activities. Universities and vocational training centers abound in the region, and students pursuing higher education have the choice of 10 universities and 13 technical schools located in the the U.S. – Mexico border city of Ciudad Juarez, for instance.
As alluded to above the distance between a company’s manufacturing operations or customer base and its refurbishing or repair center can have a big impact on the overall cost. Companies must consider the higher transportation costs of shipping their returns overseas for the execution of reverse logistics operations. With a facility for reverse logistics in Mexico, just across the border, manufacturers and distributors can enjoy both the reduced transportation costs, as well as the reduced turnaround time required to re-purpose an item and get it back on the shelf, or into returned into the hands of the consumer.
Aligning with a partner, such as a Mexico shelter company that is operating within the maquiladora, or IMMEX, program, can reduce the risks and headaches of conducting business operations in another country. These partners already have capabilities in place to address all the legal, human and non-core functions needed to successfully start-up and run a reverse logistics operation in Mexico to the benefit of companies’ bottom-lines.