Why Manufacturing in Mexico is Key To a Global Diversification Strategy
The pandemic has brought substantial changes in the way we do businesses. New ways to sell, market, distribute and to contact the final customers.
This is happening not only in the so-called “B2C” but also for the “B2B” in the value chain.
However, things will return to normal eventually. This period will call for new approaches in manufacturing, greater agility and flexibility, and a shift in mindset, for manufacturers of all sizes.
Diversification will be an essential part of this new normal, following the path established by global OEMs and leading Tier One manufacturers. The difference will be that diversification will be essential to the survival of large and small manufacturers.
Here are the 5 reasons why manufacturing in Mexico optimally supports a global diversification strategy after pandemic:
1. If You Currently Produce in China, Mexico Offers the Ideal Complement
American, Canadian, and European manufacturers that already have operations in China were well aware of the numerous challenges there, well before the COVID-19 appeared on the scene. The ongoing US-China tariff war is just one such obstacle, that is likely to remain even after things get back to normal after the pandemic. Operations in Mexico give a hedge against any issues in China, whether health-related, policy-oriented, due to natural disasters or from rising wages.
2. If You Don’t Have Operations in China, Mexico Offers Reliable, Cost-Competitive Production
With labor costs on par with or lower than in China, productive output and North America, Mexico is hard to beat.
3. Proximity to the American Customer
Your customers need you in their own neighborhood. That’s why manufacturers of all sizes have adopted cost-competitive regional production hubs around the world, as Elastomer Solutions did when they opened their operation in Zacatecas. They label their regional manufacturing approach “Triple A,” enabling them to service customers in the Americas, Asia and Africa from nearby cost-competitive production hubs.
4. Mexico Production Offers Supply Base Diversity
Another reason as to why Manufacturing in Mexico supports a global diversification strategy after the pandemic, is that Mexico’s rich diversity of manufacturers of all sizes, from OEMs down to Tier Two and Tier Three suppliers, is extremely diverse. The fact that suppliers in the country hail from all corners of the globe offers a built-in hedge, enabling companies to seek sourcing alternatives when a regional issue arises for a provider in its supply base.
5. Manufacturing in Mexico Has a Track Record of Quick Recovery
The global pandemic and the subsequent economic downturn that is still unfolding will create hardships for manufacturers all over the world. Manufacturing in Mexico has demonstrated the ability to bounce back from challenging economic times relatively quickly. That’s because Mexico’s competitive labor costs, compared to the US and Canada, make it a natural choice to restart operations in more challenging economic environments.
For certain, the challenges presented by the COVID-19 pandemic and the global downturn that is almost certain to follow are unprecedented. Diversification, as a long-term strategy, mitigates the risk experienced during more common challenges that could hamper regional operations: political unrest, natural disasters, contained health scares or virus outbreaks, labor strife, tariffs and so forth. A diversification strategy that includes Mexico will help companies sustain production, and position them well for nearly any crisis that may arise.
