Historically, U.S. businesses have outsourced their manufacturing operations to China. But on top of an increasingly tense political relationship, COVID-19 has exposed critical weaknesses in offshore supply chains. Ally-shoring has emerged as one of the best strategies for confronting these issues.

A collaborative version of the term nearshoring, ally-shoring involves rethinking (on a nationwide scale) critical supply chains and sourcing goods and raw materials from democratic allies. With the goal of strengthening the United States’ and Mexico’s democracies, a robust ally-shoring program has many potential benefits:

• Greater job growth
• Faster recovery from the COVID-19 pandemic
• Stronger industrial policies
• More economic support

Key Benefits of Ally-Shoring for Manufacturers

In addition to the opportunities it offers Mexico and the U.S., ally-shoring gives individual manufacturers a competitive advantage thanks to these key benefits:

Less reliance on outside regions for critical supplies

One of the biggest boons of ally-shoring, manufacturing in Mexico allows businesses to reduce or completely eliminate their reliance on overseas suppliers. The reduced travel distances and increased modes of transportation that come with manufacturing operations in Mexico mean manufacturers are less vulnerable to supply chain disruptions, such as the ones many companies saw, and are still seeing, as a result of COVID-19.

Close proximity to U.S. markets

Mexico’s proximity to the U.S. doesn’t just help minimize supply disruptions. It also gives manufacturers the chance to improve other important factors:

Faster shipping times

Extremely fast delivery times continue to become more of an expectation, so manufacturers need to reduce their shipping times in order to stay competitive, and they can do just that with ally-shoring. Because most of the manufacturing facilities in Mexico are located near the border, manufacturers can deliver their products to consumers at a fraction of the time it would take to ship from China.

Better quality assurance

In addition to quickly delivering goods to consumers, every business wants to make sure those goods are of the highest quality. Luckily, when a company chooses ally-shoring, they have the chance for better quality management. Not only can business executives more easily conduct in-person visits, but because Mexico and the United States share three time zones, U.S. manufacturers also have better oversight of the daily production process.

Scalability to meet demand fluctuations

While we still see COVID-19 waves come and go, consumer demand continues to fluctuate frequently. With the many vertical supply chains that have been created in Mexico, manufacturers can easily scale their production up and down, helping them meet changing demand in an efficient, cost-effective manner.

Increased security

In addition to the trade war and political tensions between the U.S. and China, there is also some concern regarding intellectual property protections and cybersecurity. Manufacturers do not face these same issues with ally-shoring, which promotes partnership and increased transparency when it comes to trade. Mexico also has robust intellectual property regulations as a result of the United States Mexico Canada Agreement (USMCA).

Read more about all of the benefits of manufacturing in Mexico.

Challenges Manufacturers May Face

While ally-shoring can do a lot for your business, and the United States as a whole, it still involves relocating your manufacturing operations to a foreign country, which naturally comes with various challenges.

Workforce availability

Mexico is home to a highly-skilled workforce, but when trying to access the country’s labor pool, businesses located in Mexico’s manufacturing hotspots may see increased competition.

Local expertise

Setting up a business in any foreign country comes with its own unique challenges. To best leverage what Mexico has to offer, manufacturers need access to local knowledge.

Regulatory Compliance

From the country’s many free trade agreements to its complex property and labor laws, there are many compliance measures with which U.S. manufacturers in Mexico may struggle.

What’s the Solution?

Another primary advantage Mexico has over China is the opportunity for manufacturers to work with a shelter service provider. When companies utilize NAPS shelter services, they get immediate access to experts in everything from Mexican business culture to the intricacies of Mexican law. Plus, we handle all administrative responsibilities, so you can focus on what you do best—producing high-quality products.

Contact NAPS today to start creating a stronger, more resilient supply chain of your own.