News, Insights and Best Practices for Manufacturing in Mexico

The global manufacturing climate is changing ... are you ready?

19 Sep 2013

Category: Manufacturing in Mexico

As the U.S. economy recovers and more businesses opt to stay in North America, the global manufacturing industry is in the midst of significant changes. During the past few decades, U.S. companies have offshored the production process to other continents to reduce manufacturing costs and stay competitive in the tough global marketplace. This approach brought monetary benefits to the business and even lowered the cost of goods for consumers. 

Yet, emerging markets are becoming more expensive as countries like China boost worker wages and costs to ship manufactured items across oceans increase. Combined with declining product quality, less flexible supply chains and the growing need for innovation, North America is overtaking many offshoring destinations as the growing power in manufacturing.

Changing needs cause businesses to rethink strategy
According to McKinsey Global Institute's "Manufacturing the future: The next era of global growth and innovation" report, North America is leading the world as a regional industrial cluster. Major factors of the expansion include the increasing need for innovations in manufacturing and rising demands for medical devices and auto parts, both of which are top industries in North America.

EBN, an online community for supply chain professionals, reported U.S. economic improvements have helped the entire region regain its foothold in the global manufacturing climate. According to the source, between December 2012 and January 2013 the U.S. industry saw the strongest gains since 2011. 

The continuing trend in global manufacturing is to move away from China and back toward the U.S., according to Forbes. Hal Sirkin, a senior partner at the Boston Consulting Group, told Forbes competition between countries in North America and Asia is high as localized manufacturing becomes more popular. Localizing the production process is an ongoing trend across the globe; by manufacturing close to the consumer market, companies are able to keep supply chains short and costs low. For businesses where Americans are the target market, manufacturing in North America significantly influences their bottom line.

While there are numerous reasons why North America is reasserting its dominance within the global market, the main factors may be due to rising demands for manufactured goods. Shipping heavy products like auto parts from overseas plants is time-consuming, costly and a burden on the business' supply chain. To stay competitive, manufacturers need to reduce the time-to-market of these goods, while still keeping the costs to produce those items low. Offshoring provides the later benefits, but keeping the production process in the U.S. provides faster time-to-market. The manufacturing destination that offers both advantages is Mexico.

The solution of Mexico 
The U.S.' southern neighbor provides the best of both worlds. Mexico offers all of the advantages that comes with offshoring the production process, while maintaining the quality standards of U.S. manufacturing and a short supply chain.

However, expanding to Mexico without the help of an experienced shelter company can be risky. U.S. businesses are often unable to navigate Mexican labor policies and environmental laws, successfully employ and retain highly skilled workers or build a factory that optimizes the Mexican manufacturing climate. Shelter companies have the resources and knowledge needed to help manufacturers offshore to Mexico quickly and efficiently because shelter companies understand the Mexico-to-U.S. supply chain and are able to mitigate any challenges. 

Shelter companies are able to work with businesses to develop the right strategies to coordinate the production process and execute a smooth logistical system. Optimizing all of these processes is essential to compete in today's global manufacturing environment, and offshoring to Mexico with the help of a shelter company can meet these challenges.

 

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