Manufacturing in Mexico: What You Need to Know
August 13, 2014
When it comes to manufacturing, China has long been the dominant force for almost every type of product in the world. And while China still enjoys a large portion of the manufacturing industry, a major shift is now underway. Mexico manufacturing steps up as a worthy successor and competitor, and if your company has manufacturing needs, it is time to see what Mexico has to offer. Even a cursory look will demonstrate the benefits of manufacturing in Mexico.
Reduced Transport Costs:
Whether you are looking at electronics or consumer products, medical devices or aerospace components, the one thing that cannot be overlooked is the price of transportation. Thanks to the rise in price of fossil fuels, transportation that was once cheap and easy is now significantly more expensive. Shipping anything overseas, even in bulk, is eroding margin for virtually all companies manufacturing in Asia. Mexico’s proximity to the United States can help reduce shipping costs by 70-80% compared to Asia, which plays a critical role in the total cost of goods for most manufacturers.
The next consideration when analyzing manufacturing is “time to market.” With shipping lead times upward of 3 weeks from Asia to the United States, precious time is lost, making just-in-time manufacturing virtually impossible. When manufacturing in Mexico, especially along the border, it is almost no different than being in the United States. Just-in-time manufacturing is feasible, as is same day deliver, if necessary. When speed is of the essence, it is difficult to beat Mexico manufacturing.
China has seen an economic boom that makes it one of the great economic powers of the world. China’s growing middle class has completely transformed its society but not without its problems. Now that Chinese citizens have experienced modern day comforts and conveniences, such as air conditioning, refrigeration and nicer housing, they do not want to lose it. The costs for these conveniences, however, is putting unsustainable, inflationary pressure on the labor market, which has resulted in over 200% hourly wage increases in less than 5 years. Wages in Mexico are now about the same as in China, causing a shift to other Asian countries, such as Vietnam, and also back to North America. This shift is causing unemployment to rise in China, resulting in pockets of social unrest. With over 1.2 billion people in China, many people are concerned about the country’s long-term stability.
With reduced shipping costs, similar wage rates as China and a stable social environment, Mexico is poised to become a leading manufacturing country once again.