In the world of logistics several factors can be involved when it comes to producing and moving your goods. Where is the best place to manufacture your products? Should we stay within the county’s borders or go offshore? If so, which country would produce the most cost-effective solution, or produce with a certain level of quality? This month, we’re going to focus on an interesting logistics hub that is sometimes overlooked, but is always at the back of most Supply Chain Officers minds: Mexico.
The Offshore Duel: Mexico vs. China
While there has always been an attraction towards creating logistics and supply chain hubs in Mexico as a means to reduce production costs, among other things, the competition has always been Mexico vs. China with regards offshoring options. For the past decade this has always been the case, but as the US economy creeps to pre-recession levels, American companies have been looking to restructure their supply chain. Companies are bringing their products closer to home and Mexico has become an attractive nearshoring alternative to making products within country in order to keep costs low while maintaining production quality.
According to the Offshore Group’s recent blog post:
Michael Shifter, president of Washington policy group Inter-American Dialogue, told Reuters U.S. manufacturers are shifting their sights to Mexico to be part of the country’s $800 billion goods and services market.
“There’s something happening in the region and the U.S. wants to be part of it,” Shifter said. “Whether there’s a well-thought-out vision or policy remains a question. But there is more of an affirmation of the region and a willingness to engage.”
Mexico’s Logistics Infrastructure
Mexico is aware of these trends and has already taken initiatives in order to attract companies to invest in their logistics hubs. Here are some of the highlights that we find to be the most appealing with regards to being a strong contender as a logistics hub for companies.
Improvements to Mexico’s Railways
According to Railway Track and Structures (RT&S), Mexico is investing in 4 billion pesos (~$318 million USD) to copmlete 12 rail-specific projects underway that will improve routes between Mexico City and Queretaro (a known manufacturing centre) and between Meridia and the Riviera Maya. This plan is said to increase transportation and communications speed; offering attractive intermodal options for many US companies.
Improvements to Corporate Social Responsibility and Sustainability
As US businesses begin to relocate south of the border, considerations to improve Mexico’s corporate social responsibility (CSR) policies and sustainability practices have gone underway. Over half of the 166 publicly traded companies in the Mexican stock market have created a system for managing sustainability related activities, with considerations for improvement in the supply chain included. This is a great start due to the fact that sustainability along all levels of the supply chain is still in its developing stages at the global level. Such an initiative offers a competitive edge towards Mexico’s main offshoring competitor, China, as trends for companies to tackle on green practices have now prioritized considerations on sustainability as a determinant for deciding offshore locations.
For more information about how Mexico is seen as an attractive supply chain location for both manufacturing and distribution, check out this great white paper from Jones Lang LaSalle.
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