Supply Chain Resilience: How Mexico Provides a Solution
June 15, 2021
Before the pandemic, long supply chains (often coming from China) did not pose much of an issue. However, as the COVID-19 pandemic erupted and cities everywhere went into lockdown, companies across the world saw a significant supply chain disruption.
Although the world is slowly recovering from the worst of the pandemic, and businesses may no longer be dealing with continuous crisis management, many are rethinking how they construct and manage their supply chains, placing a new emphasis on being resilient and flexible as opposed to purely efficient and profitable.
Global supply chains are naturally more complex, leading to more room for error and less reliability. To minimize risk and create a supply network that can quickly recover from disruptions, it’s necessary to move your manufacturing and distribution facilities closer to each other and closer to your customers. The United States is one of the biggest consumer markets in the world, so many companies are choosing to move their manufacturing to Mexico.
To more easily manage risk and adapt to fluctuating demand for your product, it’s essential to consider the speed at which you can get your products to consumers. This is where companies may perhaps find the greatest advantage of nearshoring to Mexico. The proximity of the United States to Mexico helps cut down on the chances of your product getting delayed overseas and ensures that your product gets produced and delivered. This reliability contributes to a stronger supply chain and gives manufacturers a competitive advantage in a world where consumers expect their goods to arrive more quickly than ever before.
MORE CONTROL OVER SUPPLY CHAIN MANAGEMENT
Beyond increased transport speeds and lower transport costs, moving one’s manufacturing to Mexico gives companies greater control over how they manage their supply chain. Not only can managers more easily make in-person visits to their production facilities, they can also keep supply chain management stateside, with the ability to remotely manage their operations without having to work around large time zone differences.
The COVID-19 pandemic has affected economies worldwide, so while cost reduction has always been important, it’s even more critical now. Through the IMMEX program, Mexico offers numerous tax incentives that can help companies reduce the costs of importing and exporting goods. Under the provisions of IMMEX, companies can import raw materials or product components without having to pay Mexico’s general import tax—so long as the product made from those goods is exported within a set timeframe.
IMMEX also gives manufacturers greater flexibility in terms of the risk they assume by allowing them to outsource certain components of their operations. To take full advantage of the program’s benefits, foreign manufacturers often outsource to or operate under shelter companies. Through the IMMEX shelter program, companies can avoid liability risks as well as other challenges that come with operating in a foreign country.
INCREASED PRODUCTIVITY & AUTOMATION
As another way to safeguard against future disruptions to supply chain operations, manufacturers are looking towards increased productivity and automation. Mexico, now one of the biggest manufacturing countries, is no stranger to these things. The Mexican government has made significant investments in STEM education, and engineering programs are becoming more widespread. Mexico has even pushed ahead of countries like Germany in terms of engineering talent. As more and more students graduate with undergraduate and graduate engineering degrees, you can find engineers across many sectors, such as aerospace and biomedicine.
INNOVATION & INDUSTRY
Beyond its skilled labor force, Mexico has become a center of innovation and industry. Construction of a new city, which has been titled Ciudad Modelo or “model city,” is even underway in order to leverage an already prosperous auto manufacturing sector and create a metropolis of industry. This commitment to innovation, along with the country’s intelligent workforce, has drawn in companies producing products for the U.S. market and allowed them to minimize supply chain risk.
As the pandemic develops, countries are recovering and adapting to new ways of doing business. Mexico’s manufacturing industry, though impacted by the beginning of the pandemic, has been making a clear recovery, and within the maquila sector, there are even more jobs than there were prior to the initial eruption of COVID-19. The industry will continue to thrive and attract companies as one of the top solutions for building a strong supply chain.
Looking to build resilience and efficiency into your supply chain with a move to Mexico? NAPS can help. Contact NAPS today to learn more about our solutions.