Risk mitigation in Mexico

As noted in a recent LM news story, the expected advantages to be gained from near-shoring from Mexico are lower freight costs, improved speed-to-market times, lower inventory costs...and risk mitigation.

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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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About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

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From the January 2018 Logistics Management Magazine Issue
Industry experts agree that costs across all sectors worldwide will continue to rise in 2018, and the most successful shippers will be those that are able to mitigate their impact on profitability. And, the right technology will play an increasingly vital role in driving efficiencies across the global logistics network.
The Future of Retail Distribution
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