Labor shortages at all levels and components, longer lead times, demand "whip effects" and rising costs continue to create uncertainty and disruption at all levels of industrial supply chains in the US and the world. Other global and local factors are added, such as the compliance requirements/rules of origin of the USMCA to the escalation of geopolitical hegemonic power tensions between the US and China.

These elements have driven the search for a strategic supply to relocate supply sources in nearby or allied countries, promoting the nearshoring trend where the focus falls on four factors: labor, location and logistics, infrastructure and time, and complexity.

Check here: Unstoppable industrial demand in Mexico, reported historic levels during 2022

We begin with the labor force, which in the case of Mexico establishes a known comparative advantage where the demographic bonus is projected to continue for at least two decades. As Mexico is a recipient of foreign investment, it is exposed to continuous world-class manufacturing practices in all industries. However, in Mexico, qualified and competitive labor is becoming scarce, especially in border cities and states, which creates greater employment opportunities and encourages internal migration from other regions.

On the location side, being a neighbor of the US border, our country benefits from significant advantages in freight costs, time zone and delivery terms, which allows it to compete with any other location in the world, Canada's peer.

Another core issue is infrastructure where the Mexican border states have been the natural beneficiaries of foreign investment in manufacturing (location and logistics) and continue to be the preferred destination for the establishment of distributed manufacturing candidates.

The availability of industrial real estate facilities is virtually non-existent, and there are significant structural challenges in meeting the growing appetite of these manufacturing operations for electric power, natural gas, and water/sewer as their associated processes have evolved from “assembly.” light basic. to sophisticated “manufacturing” processes, raising the overall added value of “higher level assemblies” and finished products.

Of interest: Solili Industrial Report 4Q 2022, historical numbers of industrial demand, grew 12% in 2022

Infrastructure shortfalls are very real and must be factored into any distributed manufacturing initiative by planning so that they are progressively resolved over time, but effectively become the true "bottleneck" to the nearshoring drive.

Finally, time and complexity are key in relocation processes. The challenges inherent in establishing and actually successfully operating any international manufacturing operation in a different country, far or near, range from the inherent manufacturing processes and complexities of technology transfer to culture, environment, the regulatory framework and general conditions of the new country. legal compliance requirements.

Given these protracted time frames and challenges, it is suggested that close outsourcing as a global trend is only in its early stages and may take years to cycle to maturity.

In Solili you can consult industrial warehouses available in Monterrey, Chihuahua and Ciudad Juárez

Original note