The Mexico Solution to Modern Supply Chain Challenges
November 19, 2021
Modern supply chain management challenges existed prior to the outbreak of COVID-19, but the pandemic has exacerbated these problems and has left many businesses scrambling for solutions.
Tired of the costs, risks, and complexity of supply chains coming from China, more and more manufacturers are beginning to manufacture in Mexico.
Here’s a look at five of the top supply chain challenges, and how Mexico is helping to alleviate them.
Challenge 1: Forecasting Demand
Predicting demand for consumer goods has almost turned to reliance on intuition rather than big data and analytics. With the constant changes in the COVID-19 pandemic, a major contributor to buying behavior, suppliers are often left with an unclear guide to how much inventory should be manufactured at a given time.
Why Mexico: Investing time and money into forecasting is critical to the overall success of manufacturers producing consumer products. By working with a shelter company under Mexico’s IMMEX program, manufacturers are able to lower both production and transport costs, which can then be reallocated to improving forecasting tools and methods.
Additionally, shelter companies’ handling of administrative processes affords manufacturers more time to dedicate towards improving their supply chain and logistics management.
Challenge 2: Changing Customer Attitudes
Now more than ever, customers tend to expect a seamless buying experience with almost instant results. Often referred to as the “Amazon Effect,” this phenomenon has sparked a supply chain race across all industries, with businesses searching to improve the efficiency of their supply chains and meet changing demands.
Why Mexico: Mexico’s proximity to the United States, one of the world’s largest consumer markets, makes it an advantageous location for businesses looking to improve supply chain performance. The relatively short distance between manufacturing facilities and end customers not only allows businesses to better meet the demands of consumers in moving manufactured goods, but also helps protect the supply chain from detrimental disruptions.
Challenge 3: Risk Exposure
In search of inexpensive labor and lower manufacturing costs, a large majority of companies choose to outsource to other countries. However, international supply chains bring increased risk, whether in the form of transport complications or changing government policies.
Why Mexico: For manufacturers with target markets in the United States, a Mexican supply chain poses fewer risks compared to those that stretch overseas. Such short transit times between Mexico and the U.S. means companies can generally maintain smaller inventories in addition to being able to minimize transport and storage costs. Company executives can also have more hands-on involvement in their partnerships with suppliers.
Challenge 4: Rising Costs
From silicon to grain, raw materials prices have been soaring over the past year, impacting production processes and many companies’ bottom lines. For instance, rhodium, which is used in catalytic converters for cars, has risen in price by more than 400%. These sharp increases come as a result of the simultaneous restart of economies across the globe which have driven up demands.
Why Mexico: There is no easy solution to any modern supply chain challenge, but in this case, one answer is to diversify supply chains and reduce dependence on single suppliers. For companies that are looking to expand out of Asia, Mexico is a favorable location that not only diversifies supply chains but strengthens them as well, thanks to the country’s effective and efficient logistics infrastructure.
Challenge 5: Improving Resiliency
The pressure of the pandemic has exposed the weaknesses in disconnected supply chains, appearing in the form of long procurement cycles, poor quality, and high costs. Rather than strict supply chains which are prone to breakage, companies should be looking towards creating flexible and responsive supply chains that can more easily recover from any setbacks.
Why Mexico: Compared to China, which affords little supply chain flexibility, Mexico offers U.S. manufacturers the opportunity to form the dynamic supply chains they need. In addition to its proximity to the U.S., Mexico boasts robust infrastructure and is part of over 12 free trade agreements, all of which facilitate the movement of materials and products.
Build a Better Supply Chain in Mexico
A strong, flexible, and resilient supply chain is one key to the long-term success of your business. We’re ready to help you get there with our complete administrative and compliance services, which let you stress less about standard business processes and focus on innovating your supply chain practices and growing your business. Contact NAPS today to learn more about what we can do to help you find success in Mexico.