With the growing benefits of nearshoring, many corporations have rapidly increased operations in Mexico and are seeing a sharp rise in corporate travel. At the same time, Mexico has benefited from nearshoring with a much-needed economic boost and has positioned itself as an international logistics hub. As we close out 2023 with a significant increase in protective assignments south of the border , we’re spotlighting the topic of nearshoring, our observations during assignments, and ways to enhance security without affecting business operations.
What is Nearshoring?
Nearshoring is a manufacturing and supply strategy in which a company moves all or part of its production closer to the end user. Traditionally this method employs highly skilled local labor at a significantly lower hourly rate which optimizes costs, avoids traditional logistical setbacks, and enables faster scalability.
What Triggered Nearshoring’s Popularity in Recent Years?
“With China’s dominance in manufacturing over the last three decades, companies in many ways have lost control of their product,” says Harry Arruda, CEO of Cooke & Associates, Inc. “Between politics, government restrictions, and lack of quality raw materials, many companies became dependent on China. As a result, their product and ultimately their brand took a significant hit. With the United States imposing tariffs on China in 2018, many companies were forced to rethink their manufacturing and logistic strategy.”
In addition to the 2018 tariffs, several other factors contributed to the success of Mexico’s nearshoring.
Prior to COVID, almost every country experienced significant delays and disruptions in manufacturing and shipping. Inventory for many commonly used raw materials and the availability of shipping containers was at an all-time low. This resulted in consumers experiencing a 500% increase in shipping costs.
In 2020, while the world faced COVID-19 many countries closed their borders at a time when there was a high demand for essential products. At the same time, the United States-Mexico-Canada Agreement increased the regional value content requirements for products to be considered for manufacturing in North America. Then in 2022 with Russia’s invasion of Ukraine, raw material supplies became limited and forced companies around the globe to look for supplier alternatives.
These critical events, each impactful individually, gave manufacturers even more reason to consider other options and relocate their supply chain.
More on Mexico
With Mexico being among the 15 largest economies in the world and the second largest economy in Latin America, they saw an immediate opportunity to grow their viable ability in nearshoring. With many international companies and brands already having operations south of the border, Mexico began investing in industrial centers in strategic regions of the country that could also be supported by qualified personnel.
Nearshoring Regions and The Workforce
Certain regions in Mexico have a larger concentration of specific industries and are more attractive to companies, thus they have the added benefit of attracting significantly more bilingual and industry-specific talent. In Monterrey, Mexico there is an increase in companies opening EV manufacturing plants while in Mexico City and Guadalajara, there are more pharmaceutical companies opening their doors. In Mexicali, packaging production has steadily been on the rise while just down the road in Tijuana, technology companies continue to open.
As with all international business travel, security has always played a role. But with rising extortion and kidnapping rates in Mexico, along with rising cartel-related violence, specialized security with preplanning services and coordinated transportation has become vital to cross border travelers.
In part two of this series, we’ll look at the significant rise in violent crime in the major nearshoring cities of Mexico and share some observations as a result our protective services work south of the border.
// COOKE & ASSOCIATES INC.
At Cooke & Associates, Inc., our cross-border mission has always been clear: Ensure the safety and productivity of executives traveling between border cities. We recognize the importance of understanding local and regional culture and adapting on the move, which is why our agents are extremely successful in the intricacies of each region they operate in. Whether it’s conducting business in bustling urban centers or remote locales, our experts ensure a seamless and secure journey for our valued clients.
We understand that executives have a multitude of responsibilities and business goals to focus on. That’s where we step in. Our trained and experienced agents manage all logistics and coordination, taking the worry off our clients. From transportation arrangements to executive protection, CAI manages all aspects of the movement allowing our clients to concentrate on their business objectives without any interruptions or inconveniences.