Risk mitigation in Mexico

As noted in today’s news section, the expected advantages to be gained from near-shoring from Mexico are lower freight costs, improved speed-to-market times and lower inventory costs. Risk mitigation was also mentioned.

According to Russ Dillion, a vice president in the Latin American Manufacturing Practice at AlixPartners, these were the top three reasons cited on average.  Other reasons included “time-zone advantages” for easier management coordination, and improved “cultural alignment” with North American managers.

“In-transit inventory, in particular, was a high priority among those interviewed,” said Dillion, “Obviously, shipping products in from long distances eats up a lot of inventory expense, and that’s something companies would like to improve if possible.”

Here are a few of the survey highlights:
·      46 percent of companies have already engaged in near-shoring or have plans to within 5-plus years

·      For companies considering near-shoring, 63 percent of respondents cited Mexico as the No. 1 destination of choice for near-shoring manufacturing operations (beating out the U.S. by a wide margin at 19 percent)

·      Executives cited “lower freight costs” and “improved speed-to-market” as the top two most attractive advantages of engaging in near-shoring

·      73 percent of companies have already engaged in off-shoring of U.S. operations or have plans to within 5+ years

·      For companies considering off-shoring U.S. manufacturing operations, most (43 percent) cited Mexico as the No. 1 destination of choice for off-shoring (narrowly topping China (No. 2 at 30 percent) and other BRIC nations (India at 14 percent, Brazil at 3 percent and Eastern Europe at 5 percent)

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