3 Things You Need to Know Before Nearshoring Manufacturing in Mexico

Nearshoring is the hottest thing this side of the Pacific (well, at least in the world of manufacturing). The opposite of offshoring, nearshoring means shortening the supply chain to bring suppliers closer to the end customer. For U.S. manufacturers, Mexico is the nearshoring country of choice.

Thanks to a long border with America, the US-Canada-Mexico North America free trade agreement that means imports arrive tariff-free, and an affordable labor force eager for manufacturing jobs, the move to Mexico is happening fast. Axios reports that the number of companies making moves to nearshore production in Mexico nearly tripled in 2023 — to 42 percent of the companies polled, versus 17 percent in 2022 and just 11 percent in 2021.

Chances are good your company is considering moving some manufacturing to Mexico. Before you make the leap, you’ll need to understand the unique aspects of operating in Mexico.?

I asked two executives with experience working in Mexico for their advice. Klaus-Juergen Wolf, who has spent 15 years as a C-suite interim executive, and Jay Winkler, who works with manufacturing firms, offered a wealth of good advice. You can read all about it on our blog: Nearshoring in Mexico: Pitfalls, Potential, and Possible Problems.

Here are 3 highlights:

1. There is plenty of skilled labor (if you choose the right place to build in Mexico).

Where is the right place? Central Mexico. It’s teeming with young, skilled workers. If you choose to build elsewhere, you might find it difficult to hire the workers you need.?

2. There are downsides to nearshoring in Mexico.

Certainly, there are big upsides, including lower transportation and logistics costs and easier communications.

But the downsides can be significant, including an unreliable electric grid, inadequate water supply, and widespread political corruption.

3. You’ll need local knowledge.

There are many ways to set up operations in a foreign country – buying an existing business, forming a joint venture, or plowing ahead on your own, and the uniquely Mexican option of a shelter corporation.

Whatever your route, I think you’ll make your journey easier with the help of an expert RED Team interim executive who has worked in Mexico, already set up nearshoring operations. We’re happy to talk about the expertise needed, which can be onsite in as little as 48 hours.