Managing Logistics Challenges: Manufacturing in Mexico vs. China01.27.19
Many companies are weighing the decision of whether or not to move their manufacturing operations from China to Mexico. In the 1990s, China was a popular choice for offshoring because labor costs were low enough to offset higher shipping and freight costs. Now, labor costs in China have increased dramatically and the US has imposed tariffs on many goods from China. This is prompting companies to re-examine their options for offshoring or nearshoring, and many are finding that manufacturing in Mexico is the better choice. Here are some reasons why:
Shipping & Freight Costs
It’s estimated that getting one shipping container from China to Long Beach costs about $3,000. However, that number fluctuates throughout the year, depending on fuel costs and whether you’re shipping in a peak season. It’s challenging for companies to forecast their shipping costs when they manufacture in China, and those costs often end up being higher than anticipated.
Shipments from Mexico to the US can travel via ground transport, air, or sea, so businesses that are manufacturing in Mexico have more options and the ability to find more cost-effective solutions.
Shipping & Delivery Times
To be competitive in today’s market, companies need to promise fast, reliable deliveries of their products. Getting a shipment from a facility in China to the end user in the US can take at least a few weeks and possibly months. Delays often happen during peak seasons because shipping lines will overbook shipment dates.
In contrast, a shipment from one of Mexico’s northern states to the Midwest, for example, usually takes at most four days.
Damaged & Defective Goods
When parts in a shipment are found to be damaged or defective upon arrival in the US, the entire shipment is suspect. At best, final delivery is delayed while the shipment is inspected. At worst, the facility in China must increase production to replace the damaged parts while continuing to meet other schedules and deadlines.
Manufacturing facilities in Mexico have better quality control, in part due to labor laws that require strong safety measures and routine health and safety monitoring. The Mexican labor force is also highly skilled in manufacturing engineering. Finally, it’s easier for companies based in the US to track and monitor production in their Mexico manufacturing facilities, so they can quickly make adjustments should production or quality control issues arise.
Once they look at all the factors, for most businesses, nearshoring in Mexico is the clear choice. Mexico’s maquiladora/IMMEX program and shelter business model also benefit foreign companies who establish production facilities in Mexico. Learn more about why Mexico manufacturing solutions may be the right choice for you—contact IVEMSA for a free consultation.