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Mexico a new hotspot for lowering manufacturing costs

Mexico a new hotspot for lowering manufacturing costs

Even though China has been known as a cheap production hub for years, businesses are beginning to bring their manufacturing operations back to North America.
While some companies have chosen to have their products made in the United States, others are taking advantage of significant cost savings south of the border in Mexico.

The rise of Mexico

Mexico is becoming a haven for corporations seeking a new place to do business. According to The Wall Street Journal, Mexican labor wages are less than those seen in China when worker productivity is taken into account. Workers in Mexico tend to produce more goods per hour that their Chinese counterparts. Chinese laborer wages are also on the rise, making it more expensive for companies to manufacture their goods in the Asian country.
Aside from lower operating costs and increased productivity, American companies are also choosing to operate in Mexico because of its ideal proximity to the U.S. While goods can be easily trucked between the two countries in a relatively short amount of time, companies waiting on products from China may have to wait weeks to receive a shipment. Decreased shipping distances also mean decreased logistics costs, and some businesses now only have to pay for short trucking jaunts rather than long ocean journeys.

Mexico has been a rising trade partner with the U.S. since the two countries signed a free-trade deal that was implemented in 1994. Working with Mexico benefits American companies in two ways, the Journal reported. Not only does it allow them to produce goods quickly and cheaply, but Mexico manufacturing often relies on U.S.-made parts, bringing even more money into the American economy.

Changes have yet to fully take effect

Even though things are looking good for Mexico, it has yet to become the next big thing in the manufacturing world. Time will tell if the country will become a major production hub.

"We believe that Mexico will benefit from these changes, but we don't think it will be a wholesale rush into Mexico," consultant Harold Sirkin told The Wall Street Journal.

The Journal reported that one of the factors that may be holding Mexico back is uncertainty about violence in parts of the country. The source revealed that more than 50,000 have been killed as a result of drug-related violence in the past five years - a rate much higher than both America and China.

As more companies begin taking their operations out of Asia and into North America, both the U.S. and Mexico have the potential to benefit from the changes. As corporations try to implement business cost reduction strategies and save on manufacturing, Mexico may see a wave of new manufacturing facilities and jobs.

Source: Strategic Sourceror

Mexico Manufacturing Industry News

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