- Manufacturing in Mexico
- About Tetakawi
June 08, 2020
Textile manufacturing has a long history in Mexico, but it’s also an industry that continues to innovate. Take Levi Strauss & Co., for example. In 2018, the country piloted automation technology to speed the finishing of its denim products. Through this introduction, being rolled out worldwide this year, the company found distressing denim by laser could shorten the process from 20 minutes to 90 seconds. “With the automation of manufacturing, nearshoring of denim sourcing to Mexico becomes cost-competitive,” noted the McKinsey report that outlined this technology introduction.
Of course, this type of innovation only grows the company’s presence in the country. As of 2018, Levi Strauss & Co. had more than 20 facilities under various brand names manufacturing apparel, accessories, and footwear from Baja California to Queretaro, feeding demand for its product across the Americas.
Levi is hardly alone in finding cost benefits to manufacturing in Mexico. In 2018, Mexico exported approximately USD $6.95 billion worth of textiles, mainly to the United States (77%). It was a 7.5% increase from 2017 export levels of $6.46 billion.
Since the first Mexican textile factory was established in Puebla in 1830, the industry has evolved considerably. One thing that hasn’t changed: Mexico supports textile and apparel manufacturers in creating quality products at cost-effective rates.
Manufacturers servicing the retail industry know that lead time is everything. Fashion changes in the blink of an eye and today’s trend is tomorrow’s overstock. That’s a leading reason nearshoring becomes particularly attractive for apparel manufacturers. However, nearshoring also provides tremendous cost savings. It’s the comparatively lower shipping cost of freight that’s pushing many apparel companies to move manufacturing from China and other southeast Asian countries to Mexico.
As global consultant McKinsey puts it in its State of Fashion 2019 report, “Nearshoring works where full onshoring doesn’t… From a landed-cost perspective, it is becoming more attractive for production to move closer, but not to come all the way home. But the real prize is shorter lead times.”
By increasing speed-to-market, manufacturers can produce apparel that is more closely in line with demand. This reduces costly overstocking and increases full-price sell-through, the McKinsey report notes. While manufacturers across many industries are beginning to shift their global footprint to more regionalized approaches, nearshoring becomes particularly important for textile and apparel manufacturers seeking low-cost production strategies.
Another strategy supporting manufacturers in Mexico is locating within an existing industrial hub. By selecting a site in an area where textile and apparel manufacturing is already strong, companies are able to leverage the benefits of an existing supply chain and experienced workers.
The Mexican National Institute of Statistics and Geography (INEGI) reports that 63% of Mexico’s textile industry is concentrated in the central and northeastern parts of the country, with concentrations in Puebla, Mexico City, and the states of Mexico, Hidalgo, Tlaxcala, Jalisco, Queretaro, Coahuila, Sonora Guanajuato, Nuevo Leon, and San Luis Potosi. In these areas, companies can gain greater efficiency by operating within a manufacturing community. These communities go well beyond traditional industrial parks by offering Class A industrial space alongside shelter services, employee training, and amenities that help with recruitment efforts.
As more apparel and textile companies discover the advantages of manufacturing in Mexico, they’ll find greater support from the existing supply chain. As another example of this support, Yucatán recently became home to the country’s first design, innovation and prototyping lab for the fashion industry. Indumental provides tools and services to support the growth of fashion brands. Among its offerings is a digital textile printing machine and research on industry trends.
The lab was created out of an investment from the state government, the National Council of Science and Technology, and private sector support. The goal of the lab is to strengthen the competitive power of small and medium-sized businesses, support major brands looking to work with technology partners, and further grow the sector as a job provider.
However, technology isn’t the only driver moving this industry forward. Mexico has long been attractive for foreign direct investment as a result of the ease of doing business with other countries. In fact, Mexico holds more free trade agreements than any other country. Its latest trade agreement — the recently ratified United States-Mexico-Canada Agreement (USMCA) — only serves to support the textile industry.
New provisions under USMCA limit rules that had under NAFTA allowed for the use of some non-NAFTA inputs in textile and apparel trade. This becomes good news for Mexico-based textile industry suppliers by making the industry a more cost-effective alternative to suppliers in China. USMCA also lays out provisions requiring sewing thread, pocketing fabric, narrow elastic bands, and coated fabric, when incorporated in most apparel and other finished products, to be made in the region of their finished products to qualify for trade benefits. This change presents an opportunity for further expansion of the local supply chain to support apparel manufacturing.
Textiles and apparel may not be Mexico’s largest exported sector, but they’re part of an industry with tremendous opportunity for further growth. As nearshoring becomes a more central part of companies’ growth strategies, we predict this sector will benefit tremendously from the support Mexico offers its foreign investors across a range of industries.
To learn more about the specific advantages you can gain from manufacturing in Mexico, contact Tetakawi today.
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