COVID-19 Response

Reshoring, Nearshoring. Right shoring, Wrong shoring?

nearshoring mexico aircraft seats

Ever since China announced it would start increasing its wages by 13% each year through 2015, there’s been a lot of chatter in the global trade publications about production and assembly returning to the U.S. or to manufacture in Mexico.

While U.S. companies manufacturing in China and abroad are obviously said to be in favor of the “offshoring” trend, those selling to the U.S. market who prefer using  bordering countries are engaging in “nearshoring.”

However, in 2012, the proverbial buzzword stew got considerably thicker as excited analysts sliced and diced off a slew of new terms to describe businesses’ return to the U.S. or their attempts to outsource manufacturing across various markets.

As a result , we now have reshoring, on-shoring and right-shoring. As we’ve discussed in previous MFI blog posts, the smartest, most cost-effective business model for you comes down to your company’s individual priorities:

  • Your product: Big or small? Labor-intensive or high-tech? For instance, large-scale merchandise like cars are easier to ship cross-border.  Electronic components are better-suited to manufacturing abroad. But top-quality demand products like high-end textile components and medical devices are well-supported by supply chains and skilled workers in Mexico.
  • Cost of shipping and fuel:  Once oil reached $100/barrel, offshoring’s benefits no longer look so rosy.  Can you afford the high cost of long-distance fuel prices?
  • Skilled and affordable workforce: Can Asian factory workers complete products up to your standards?
  • Speed to market: Approximately 1 week from Mexico to Western markets; as much as 6 weeks from Asia or abroad.
  • Tax and tariff incentives: More than 43 countries enjoy free trade agreements with Mexico.

Can you come up with a better marketing term for moving production closer to home? Share it in our comments section and win the admiration of your peers.

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