Offshoring and Supply Chain Management in Mexico

June 16, 2017

The majority of manufacturing executives seek ways to reduce their operational costs and boost profits. Offshoring can offer these advantages to U.S. businesses, as does investing in a supply chain that can support these efforts. However, many executives are unable to streamline their supply chains and receive the benefits of offshoring. Expanding to Mexico offers the best of both.

Working to implement customer satisfaction, build a supplier network, and reduce costs all while attempting to boost profits has become the main objective of offshoring, especially to Mexico. But because of it's close proximity to the U.S. and Canada, Mexico offers more nearshore advantages than any offshoring country around the world.

Offshoring and Supply Chain Management

In an article published on supply chain community website EBN, Wade McDaniel, a vice president for Avnet Inc., said investing in supply chains allows manufacturers to boost profits by reducing the time it takes for products to enter the market. According to McDaniel, a manufacturer's supply chain is part of customer satisfaction and is becoming a priority area for manufacturers. 

"Recently, the supply chain functions of companies have become increasingly linked to customer experience," McDaniel wrote. "I'm not sure if most people think of Amazon as a supply chain and distribution company, or simply a company that has just about everything anyone could want, from physical to digital. It's a good example of how supply chain directly affects customer experience. Add this experience to the revolution in digital delivery of content across the web and mobile networks, and we all expect instant inventory and next-day shipping."

Nearshoring is the new Offshoring

Proximity has become an important issue in market timeliness, along with supplier access, can become a strong advantage for manufacturers with high demand and essential customer service relations. Offshoring companies use a production process that reduces their labor expenses, but certain destinations raise transportation costs for U.S. businesses that must ship their products from overseas to the U.S. market. Transporting a large amount of goods over an ocean can become expensive for U.S. businesses, especially if the products sit on shelves and must be housed in a warehouse due to low sales. 


Mexico Offers Logistical Supply Chain Advantages

According to an article on Real Business by Tony Duggan, CEO of supply chain business Crossflow Payments, the financial aspects of the supply chain are essential for efficiency. And for those businesses that keep their fabrication and assembly close to the U.S. market, they are able to invest most resources in supply chain technology and product delivery because they save in shipping costs. 

With its close proximity to the U.S. and lower labor costs, Mexico is the best destination for manufacturers to offshore their fabrication and assembly processes. According to Duggan, the best supply chains are the ones that aren't complicated by using too many systems, which can often happen when manufacturers offshore without an understanding of the value chain. Making the supply chain as simple as possible while still ensuring smooth operations can be difficult when offshoring, yet expanding to Mexico offers these benefits. Shipping goods north is much simpler to do than transporting them across an ocean. In fact, manufacturers can chose between ground, air, sea and rail for the logistical supply chain when they offshore to Mexico rather than having only one or two options when they offshore overseas.

Real Business recently published an article stating how emerging markets continued to increase towards the end of 2016, finishing the year with a 56% increase of trade payments to Mexico despite the political climate. This increase mirrors the impact of Mexico's manufacturing reliability as the skilled workforce and logistics infrastructure enables companies to grow in their home away from home. Offshoring to Mexico has taken on the term nearshoring for many U.S. companies as the country's proximity to the U.S. and access to large global markets, provides a timely movement of goods worldwide. 

Click here for our infographic about  Nearshore Manufacturing in Mexico!

Companies need to be able to invest in their supply chains while still receiving the cost benefits from offshoring - without complicating the manufacturing process. Mexico provides the timeliness and supplier infrastructure any thriving company needs as a neighbor to the U.S..


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