Mexico may soon become more attractive as sourcing alternative

More evidence that shippers may be “near shoring” in the future surfaced at a maritime conference in Southern California earlier this month.

According to Anne Landstrom, principal adviser for the commercial group at engineering and construction consultant Moffatt & Nichol, escalating wages and total landed costs are causing logistics managers to look south.

“All of Latin America is becoming more attractive,” he said. “But we really feel that Mexico is going to be an area of increased manufacturing concentration.”

While the conference addressed Asia Pacific concerns, Landstrom’s presentation emphasized the advantages of doing business in Mexico.

‘”Quality fade’ has been experienced with other sourcing regions in the past,” she said, “but the scale of global dependence upon China’s exports has amplified the focus on these issues.”

Landstrom recited a series of “notable recalls” in recent years, including fish, toothpaste, toys, pharmaceuticals, and pet food to illustrate her point.

“Noise about near-sourcing has grown in conjunction with high-profile recalls,” she said.

She also pointed out that cost for manufacturers increasingly includes quality (i.e. impact of recalls on supply chain economics and brand value) intellectual property (theft), FX fluctuations and credit terms (length of supply chain).

“The near-sourcing trend is difficult to see in the data thus far, but there’s no smoke without fire,” she said.

A recent LM survey indicated that most logistics managers may not yet be considering alternative sourcing but Landstrom noted that Mexico’s Pacific Coast ports are posting steady growth in volume and container throughput.

“Manzanillo and Lazaro Cardenas are booming,” he said, noting that direct rail serive to the U.S. southeast and Midwest is only going to fuel this growth.

“Surface transportation links and highway systems in Mexico are also rapidly improving,” she said.