Nearshoring to Mexico

Industry Discussions on Nearshoring to Mexico

Over the past few weeks, APD hosted 15 manufacturing executives and purchasing leaders in a series of small group Executive Roundtables to discuss best practices related to nearshoring to Mexico. Some of the more interesting discussion points are summarized below.

• Vice President of North American Purchasing for a sunroof manufacturer shared that they have found Mexico has a very competitive business case for “best cost country” when considering landed costs. They shared that they have had good success sourcing stampings, injection moldings, glass, and electrical components from Mexico, but cautioned that many suppliers are over-capacity and the skill set of engineers and technicians at Mexican suppliers can be a challenge.

• President of a sintered metal components supplier shared that they’ve had good experience sourcing castings, forgings, and machining to Mexican suppliers. They also shared that when moving manufacturing operations to Mexico, finding skilled labor can be a challenge, so it often makes sense to invest in modern technology that can be operated successfully with lower skilled labor.

• Strategic Sourcing Director at a health products supplier shared that they recently resourced some items from Asia to Mexico, primarily bulky items that don’t ship efficiently. They presented a business case to leadership that focused on total cost and risk mitigation rather than piece price. Advantages they’ve found for sourcing to Mexico vs. Asia include:
  • Mexico offers an enthusiastic, well-educated work force
  • Better respect for intellectual property and contracts in Mexico

• Vice President of Procurement at an agriculture equipment manufacturer shared that they’ve had good experience sourcing plastics and electronics, but not plastic tooling or aluminum extrusions, in Mexico. [Note: APD shared they recently completed an aluminum extrusion sourcing project in Mexico and identified multiple capable and cost competitive suppliers] . They added that additional advantages of sourcing to Mexico including:
  • Similar time zone to U.S. and Canada
  • Reduced travel costs for supplier visits
  • Similar holidays (can lose up to 2 months/yr of optimum productivity sourcing to Asia)

• Purchasing Director for an automotive supplier shared that their nearshoring initiative is being driven by supply continuity issues out of Asia. They’ve found that Total Cost of Ownership for metal components is better out of Asia, primarily due to highly advantageous raw material prices.

• CFO of an automotive aftermarket exhaust systems manufacturer shared that they recently moved sourcing of steel tubes from China to Mexico, as well as some aluminum products, mainly due to transportation cost advantages. Their strategy going forward will be to dual source in both Mexico and Asia to be able to optimize costs as economics change.

• Vice President of Procurement for an automotive and plastics packaging manufacturer shared that they had good experience sourcing electronics and labor-intensive items (e.g. seat covers and trim) from Mexico. Some challenges of sourcing from Mexico include instability of the workforce (Juarez was mentioned specifically) and logistics issues within Mexico.

• Vice President of Purchasing for a thermal imaging components manufacturer shared that they have extensive experience sourcing to Mexican suppliers and found:
  • Common challenges include raw material capacity, worker retention, and transportation infrastructure
  • They’ve had more success sourcing to Central Mexico
  • They also had success working with current U.S. supplier to establish Mexican operations, including forming joint ventures with suppliers