Why Mexico is California’s China

March 13, 2014

March 13th,  2014 – For the past 20 years, China has been the key for global expansion plans at many businesses in California and the United States. But due to rising costs, labor problems and slow lead times, many American businesses are starting to take notice of Mexico and the fact that for many companies, it is Mexico, not China, that is the future of manufacturing.

Manufacturing in Mexico has been consistently increasing ever since NAFTA came into effect. Besides the tax benefits and lower costs, the benefits and advantages are numerous. Mexican manufacturing is already developed, has gradually focused on high tech products, and has a solid infrastructure for logistics. Finally, its labor market is both young and highly skilled. With young engineers readily available, it’s no wonder many U.S. companies are manufacturing in Mexico.

Mexico’s close proximity to the US is one of the main advantages for all companies manufacturing in Mexico. Since many of the major manufacturing hubs are located near the United States border, manufactured products can be quickly and easily shipped across the border. Whereas product lead times are measured in weeks when coming from China, they are measured in days when coming from Mexico. This reduced lead-time is perfect for companies relying on just-in-time and lean manufacturing.

As the Mexican manufacturing sector continues to develop and become increasingly more high tech, its economy will also develop and lead to a stronger Mexico. This will create a larger Mexican middle class, which is a boon for all U.S. companies. This will also lead to a stronger economy and many positive effects on the U.S. economy. A strong and healthy Canada has always been important to the U.S., but a strong and healthy Mexico is much more beneficial since its population is almost four times greater than Canada.

The choice to manufacture in Mexico is an easy one to make as the labor costs, political issues and manufacturing problems in China continue to increase by the day. By keeping manufacturing close to home, California and the United States actually become stronger due to the increasing Mexican middle class that has more buying power and can buy more American products.