India has often been held as an example of a country that offers optimal offshoring resources for major companies. For years, the area was synonymous with global third-party services and the benefits of working with foreign territories. As other countries expand their offshore markets, they often look to India as an example of how to succeed - but this may not be the best practice.
Mexico has unique advantages for manufacturing facilities and labor that is particular to the territory. By looking at the differences between Mexico manufacturing and one of the world's leading offshoring markets, it should become apparent why more U.S. companies prefer to nearshore their facilities.
The first major difference between the two countries detailed by Nearshore Americas is India's success as an offshore partner came from a place of instability, while third-party manufacturing in Mexico is currently flourishing due to improvements of regional infrastructure.
In the early 1990's, India was flooded with trade and business regulation changes. This caused local companies to turn to other solutions. India's service sector prospered due to a lack of government oversight. This is similar to its manufacturing facilities, with some companies cutting corners due to a lack of safety supervision. While the country now hosts a large population of engineers, its success is still dependent on the economy of China, according to the New York Times.
Meanwhile, Mexico has been flourishing in recent years. Bloomberg detailed how the country has taken great strides in education and infrastructure. The region has exceptionally low unemployment rates and a multitude of skilled workers.. While some still hold to outdated perceptions of the area's poverty and crime rates, many regions outscore major U.S. cities for safety and general financial prosperity.
Instead of utilizing tactics that take advantage of government oversight for cost-efficient labor - which grows more expensive by the day - companies can investigate Mexican manufacturing facilities to benefit from a young and eager workforce participating in local revitalization.
Companies choosing to nearshore as opposed to offshoring won't have to deal with the obstacles of moving facilities as far as India. It is true that communication solutions such as cloud data hosting can improve some of the visibility problems associated with geographic distance, but they still can't completely close the gap between distant facilities.
"Mexican manufacturing facilities to benefit from a young and eager workforce."
When a business plans to move manufacturing facilities to foreign shores, decision makers must account for the daily costs of running global enterprises. This includes the finances associated with travel between locations, global supply chain logistics management, import and export fees, and documentation. Med Device Online said these expenses can add up, especially for products that use material restricted by trade regulations -.not the mention that the further sensitive materials have to travel, the more likely supply chain problems will damage or stop inventory shipments.
Nearshoring manufacturing operations to Mexico allows U.S. companies to benefit from offshoring advantages, without moving their business to the other side of the globe. Beside the obvious gains made by shortening the distance supplies, personnel and products have to travel, the Mexican culture is much closer to an American audience increasingly made of Latino populations.
Some industry analyst suggest different areas will be known for particular offshoring businesses. For example, as the auto manufacturing industry picks up in Mexico, it might be assumed India will remain a primary spot for software and consumer electronics manufacturing, but Built in Austin, a Texas tech startup news resource, suggested this isn't true.
Not only is it becoming more expensive to manufacture electronic parts in Asia, but the distance may causes innovative companies to fall behind competitors. Mexico not only has the cost-efficient skill needed to build electronic games, computing devices and software apps, but the facilities in the area can get merchandise to market in time to meet critical deadlines and gather intelligence from initial consumer reactions.
In the future, companies may want to think beyond existing best practices and explore new territories for business success. India and Mexico are both popular locations for manufacturing facilities, but clinging to old ideas may prevent businesses from cashing in on new trends and opportunities.