Is Mexico the New China? How to Find Suppliers in Mexico that will Boost Profits
July 3, 2017
Given the economic benefits of near-shoring to Mexico versus offshoring to China, as well as our geographic proximity to Mexico, American companies large and small are gaining advantage when they find suppliers in Mexico versus trying to navigate the complexities and other major issues that come with dealing with a Chinese equivalent.
Although China seems an obvious source of low-cost production and supplies, consider that Chinese wages have soared and the shipping costs from China are considerably higher than Mexico.
Find a supplier in Mexico – save time and money
Despite all the hype and talk about building a wall between America and Mexico, working with a supplier in Mexico offers tremendous benefits to small businesses who are looking to boost profitability while maintaining high-quality standards for their products.
The practice of working with suppliers in Mexico is backed by a history of successful trade among large-scale businesses, including the world’s largest automaker, General Motors. But the same benefits are available to small and medium-size businesses (SMBs) exporting to Mexico (lower cost and more diversified supply chains) particularly with advances in technologies that support globalization efforts for SMBs.
Here are a few of the chief reasons SMBs find suppliers in Mexico so advantageous:
The NAFTA advantage
The North American Free Trade Agreement (NAFTA) makes it easy for North American companies to find suppliers in Mexico thanks to Mexico’s lower wages and superior worker productivity (compared to China). Although there was some talk that NAFTA might be abolished or reviewed, the current U.S. administration ended up reinforcing the country’s commitment to the agreement. As a result, Mexican manufacturing activity has reaped the rewards of many fixed costs, including lower energy, wages, and shipping costs.
Think manufacturing profitability, think Mexico
With manufacturing accounting for more than 30 percent of Mexico’s GDP, the Mexican manufacturing base is one of the most highly sought-after among businesses. Today, Mexico is rated far ahead of China in after-market services and prototype manufacturing.
Electronic component manufacturing, especially, has boomed in Mexico in the last decade. Today, Mexico has the world’s sixth-largest electronics industry and hosts more than 730 electronic component manufacturing plants alone, mostly concentrated in the northern region of Mexico, especially in the states of Baja California, Chihuahua, and Tamaulipas.
Because of lower energy costs and wages, whether your business sells automotive components or small computer chips, manufacturing your product in Mexico allows for lower costs and, as a result, higher margins.
But arranging the transportation of goods from your Mexican manufacturer or supplier to your doorstep can be confusing and frustrating as well—especially given the potential language barrier and local customs.
Resources to help find suppliers in Mexico
Companies like TACNA have built their reputation on introducing domestic companies to Mexico’s best manufacturers and suppliers. Other websites, such as Mexico Business Portal, can also offer a safe starting point to steer you in the right direction.
The above article, by Veem CMRO Frederick Crosby, appeared earlier this week in Inbound Logistics.