Risk mitigation in Mexico

By Patrick Burnson, Executive Editor
May 03, 2011 - LM Editorial

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

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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 .(JavaScript must be enabled to view this email address).


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About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review. Patrick covers 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. Contact Patrick Burnson

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