Why Nearshore Manufacturing Might Be Right for Your Company
In today’s global market, offshore and nearshore manufacturing have become viable options for companies looking to expand while reducing operational costs. Here at El Grande, we offer low risk, low investment manufacturing solutions in Mexico for automotive and aerospace companies.
If you are looking to grow your manufacturing business but aren’t sure where to start, then consider the following information.
What is nearshore manufacturing?
Nearshore manufacturing occurs when a company moves operations across national borders to another country that is in close proximity. Frequently, this can include countries that share a border; specifically for the United States, Mexico is the more attractive relocation site as it offers economic favorability.
Offshore manufacturing, on the other hand, generally refers to the outsourcing of manufacturing jobs and products to countries that are overseas. Oftentimes, these countries include China and India because they provide lower production costs.
However, with the rise of maquiladoras, an increasingly growing number of highly-skilled workers, 13 Free Trade Agreements with over 40 different countries, and the economic incentives provided by NAFTA, Mexico has quickly become the go-to country for nearshore (and offshore) manufacturing.
Additionally, with China’s growing economy, wages have increased significantly, while Mexico’s hourly wages have fallen. This includes a GTO ranking of the 2nd fastest growth rate for a young population and a steadier economy that allows for improved forecasting.
Why nearshoring in Mexico?
Mexico has numerous advantages when it comes to developing nearshore manufacturing facilities. Our El Grande team also helps you to maximize those opportunities by providing more than just shelter services. Our varied services include procurement and logistics, consultation support, legal advisory services, financial management, shelter programs, as well as offering a strategic location in the growing Bahia Industrial Hub.
Alongside our custom manufacturing solutions that we offer, relocating nearshoring manufacturing operations into Mexico has proven to be integral to their success due to:
- Streamlined Management: One of the biggest concerns for American companies is their ability to manage overseas operations. Distance has continually proven itself to be a top obstacle, and when coupled with cultural differences and timezones, offshore manufacturing has proven itself to be quite the challenge for smaller-to-midsize companies.Mexico’s geographical proximity and shared time zones allow for U.S. management teams to effectively communicate and travel within a few hours notice. The logistical implications are undeniable including little to no duties, lower shipping costs compared to overseas operations, and quicker product delivery. Plus, with an ever-growing English-speaking population, communication between the two nations has become much more efficient.
- High-Quality Infrastructure: Mexico’s transportation infrastructure has improved in leaps and bounds within the last decade. El Grande’s facilities are in an ideal industrial hub that allows for efficient access to an International Distribution Network that includes highways, railways, international airports, and seaports to the east and west.With transportation infrastructure on par with other well-developed nations, manufacturers are able to deliver their product to major U.S. markets within a few days. Mexico’s proximity also means sensitive materials are less likely to be damaged due to long-distance travel.
- Comparable Energy Costs: With an abundance of natural gas resources, Mexico offers energy costs comparable to those in the United States. This ultimately means lowered production cost compared to China, proving that nearshore manufacturing in Mexico, especially with El Grande, is one of the leading cost-saving benefits.
- Skilled Workforce: The Mexican government has helped to create over 70 institutions of higher education and developed grants to help improve more than 30 existing institutions. This has led to a higher quality worker and increased numbers of engineering/technical graduates. Engineering programs in Mexico are delivering 5,000 engineers and technicians per year.With Mexico’s median age of population in the mid-twenties, a labor force of approximately 47 million individuals, and increasingly qualified workers, American manufacturers considering nearshoring their operations to Mexico can find comfort in knowing there will be no decline in the quality of their product because of the skilled workforce available to them.
- Manufacturing-Friendly Nation: Mexico auto production and exports hit a record high in 2017, with exports growing 12.1% and production increasing by 8.9%. This translates to 3.77 million units produced with a total of 3.10 million units exported. This particular division with the manufacturing industry highlights the ever-growing manufacturing economy within Mexico. This has led to a growing number of Tier I and Tier II manufacturers moving into the country, helping to diversify the market while encouraging the growth of Tier III manufacturers.With the Mexican economy growing at an unprecedented rate of 4-5% within recent years and more than 90% of Mexico trade falling under free trade agreements, now is the perfect time for the nearshore relocation of manufacturers into the nation.
El Grande is the premier provider of manufacturing solutions and top strategic international business partnership in Mexico.
El Grande understands the ever-changing landscape of manufacturing in Mexico, and our years of experience keep us and our clients attuned to the industry’s pulse. If you are looking to move your manufacturing business, call us today so we can help you lay the foundation for a successful future in Mexico.