This week we’re continuing our infographic series on The Benefits of Nearshoring. We’re focusing more on Mexico and how efforts in both infrastructure have affected how it has developed in recent times. We’ve also taken a look at how the auto industry is ripe for a nearshoring move for American companies.

Mexico and Nearshoring

Mexico has set itself up to being in a good position for the main nearshoring or reshoring target for companies in North and South America, but especially the United States. Companies in the US are in a perfect position, depending on the industry and logistics needs, as Mexico offers an attractive location and cost (due to China’s rising wages) but also more control over manufacturing & delivery schedules when compared to supply chain and logistics operations overseas.

Mexico and the Automotive Industry

Major automotive manufacturers, such as Ford, Chrysler, and General Motors (GM) have already been operating in Mexico since the 1930s. These companies have spearheaded the nearshoring move in the auto industry and other companies like Toyota, Nissan, Honda, BMW, Volkswagen, and Mercedes Benz have followed suit.

Check out our infographic below to see how Mexico is continuing its trend towards being a very real consideration for American manufacturers looking to optimize their supply chain while cutting costs.

Morai-Logistics-Infographic-Nearshoring-Pt-2

 

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Source: Wikimedia Commons
Source: Wikimedia Commons
In the recent years, China and Mexico have been battling to be the prime hub spot for logistics operations in North America. While there are still advantages of offshoring to China, for example their already established work force and prime manufacturing facilities, when it comes down to it cost and time are the prime factors for the change. We will be discussing the expected advantages for nearshoring as well as present some statistics that support the trend that suggest that nearshoring, especially for companies that are looking to build manufacturing plants, is the better option.

Top 5 Expected advantages of Nearshoring

Inbound Logistics Magazine released and analysis of the status of the logistics and supply chain industry in Latin America. Below is an excerpt of survey respondents based on research by AlixPartners of the top five expected advantages of nearshoring:

  • Lower Freight Costs
  • Improved Speed-to-Market
  • Lower Inventory Costs
  • Time-Zone Advantages
  • Improved Cultural Alignment with North American Managers

Nearshoring is becoming more and more attractive as geopolitical changes, and factors such as rising fuel costs, have been affecting the main attraction for China: lower total cost for logistics operations. By 2015, China’s wages are expected to rise to $6 USD, and by this point it will no longer be cheaper than Mexico’s flat wages.

3 Statistics on Mexico as an Advantageous Nearshoring Move

Statistics since our initial post on our case study exploring Mexico as a prime logistics hub has shown that the trend to nearshore is not just very real, but also becoming more and more attractive. Logistics Management’s report exploring how US manufacturing costs are now equal to Mexico and how costs will be equal to China by 2015 seem to be confirmed as we near 2015. The following are statistics that we found that further solidify this trend:

1 – The full landed cost of Chinese production rose from 2005-2010 to 87% of US costs, while Mexican costs fell to 75% of US costs.
Source: Lilly and Associates

2 – Ocean freight from Altamira, Mexico to the port of Miami takes 6 days while a similar shipment from China can take up to a month to arrive.
Source: Lilly and Associates

3 – China’s fuel costs grew at approximately 20 percent per year in the past few years.
Source: Supply Chain Brain

China has some challenges to compete with the attraction of nearshoring to Mexico, and indeed efforts are being taken in order to control the rising fuel costs and the new minimum wage standards in order to remain a strong competitor as an offshoring option for North America. But the concept of nearshoring is now not just a real avenue of exploration, it simply cannot be ignored for those in the North American logistics and supply chain industry.

If you’re interested in finding out more Mexico as a solution for your logistics and supply chain needs, check out our white paper on Mexico and Third Party Logistics!

That’s it for us this week! If you liked this blog post, why not subscribe to our blog? If you’re interested in what we do as a 3rd party logistics provider, don’t hesitate to check out our services (as expressed above, we are very pro finding you the lowest total cost!). We’re also in the twittersphere, so give us a follow to get the latest logistics and supply chain news!

3 Reasons to Partner with a 3PL Provider
3 Reasons to Partner with a 3PL Provider

Why do companies look to outsource their logistics processes? The primary reason is that companies expect third-party logistics providers (3PLs) or logistics service providers (LSPs) to run all transporting and warehousing operations more efficiently, and at a lower cost, than they can run it themselves. The services that 3PLs provide can include all of the steps along the supply chain from origin to destination depending on the type of partnership. Furthermore, multiple 3PLs can take care of different aspects of your logistics needs (one that specializes in small package deliveries for one product line and another for larger shipments, etc.).

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This White Paper focuses on:

  • Benefits of outsourcing third-party logistics services.
  • What makes a 3PL provider a good one.
  • Current state of the logistics industry for 3PL.
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That’s it for us this week! If you liked this blog post, why not subscribe to our blog? If you’re interested in what we do as a 3rd party logistics provider, don’t hesitate to check out our services (as expressed above, we are very pro finding you the lowest total cost!). We’re also in the twittersphere, so give us a follow to get the latest logistics and supply chain news!