Mexico a good choice for nearshoring
By Adina Moloman
Source: www.alixpartners.com
Recently, AlixPartners, a global business advisory firm, released a study over the opportunities and costs for multinationals, benefits of bringing back from China to the US and Mexico some of their production destined for the American market.
The study is based on manufacturing costs analysis to move factories from Asia to America in order to service the US market and on a supplemental online survey, conducted in March of 137 C-level executives from transnational corporations with different manufacturing fields of activities.
AlixPartners group investigated the difference between the total cost of production in China and America, including the cost of shipping, customs duties and other fees.
According to the survey, based on the executives answers: around 40 % of the respondents would choose the U.S. as their preferred location for nearshoring and a similar number of contestants would choose manufacturing in Mexico for their Nearshore Outsourcing operations.
Some industries are still not ready to return their production back into America, such as: machined aluminum parts, plastic molded parts, non-denim slacks, and knit apparel because the cost is still lower than Mexico’s and is forecast to remain lower through at least 2015.
On the other hand the cost is about the same to manufacture goods in Mexico or US especially for higher value industries, including computers and electronics, machinery, appliances, electrical equipment, furniture, etc.
The cost gap with China, on average, has been closed by approximately 70% for the industries they analyzed and 84% of the respondents are considering shifting production in Mexico during 2013 as a good decision.
Production a long way from the final consumer involves a lot of costs and now, in order to shift production back there are a series of variables to analyzed: product type, raw materials costs, labor costs, inventory costs, exchange rates, duties, freight costs and overhead costs, among others. In order to manufacture in Mexico some other variables should be considered: labor, property and transport, supply-chain risk and labor agreements etc.
