Over a decade ago manufacturers wouldn't hesitate to say that China and other overseas locations were hands-down cheaper than anywhere in the world. That is no longer the case. The trend has shifted for both political as well as economic reasons, and Mexico has arrived to the top of the short list.
Expanding operations to Mexico, or nearshoring as it's called, has now evolved from being a trend to a best practice. With Mexico boasting over 50 years as a manufacturing experience, Co-Production International presents the following Top 10 Reasons to manufacture in Mexico versus China.
1. MEXICO IS 46 TIMES CLOSER TO LOS ANGELES THAN CHINA
Tijuana is a few minutes south of San Diego, California and only 140 miles from the major port of entry in Los Angeles/Long Beach. Its stones-throw proximity makes logistics less expensive and provides quick and easy access for US executives travelling to the region.
2. MEXICO HAS OVERTURNED CHINA'S HOURLY WAGES
Not only is the Mexican labor force highly-skilled, but in 2012 reports show that average hourly manufacturing wages in Mexico are now lower than those in China in constant dollar terms, they are 20 per cent less. Overseas manufacturing is no longer considered the "cheaper" alternative. Mexico has surpassed China in lowering overall costs for manufacturing.
3.LOGISTICS IN MEXICO CONNECT DIRECTLY TO MAJOR TRANSPORTATION CORRIDORS
With major manufacturing hubs like Tijuana only minutes south of the US/Mexico border, moving parts and products couldn't be easier. Major transportation highways and NAFTA corridors connect Mexico's industry with major North American markets. The deep water port in Ensenada, just 60 miles south of San Diego, is connected to major ports in Los Angeles and Shanghai. Annually there are 1.4 million commercial northbound crossings a year at the Otay Mesa commercial port of entry. Additionally, recent discussions have begun between governments to revitalize the cross-border railway between San Diego and Tijuana.
4. INDUSTRIAL REAL ESTATE
Mexico's industrial real estate estate lease rates hover around $0.40/sq. ft. /year, whereas China's lease rates average $1.25/psm/day. There are over 60 million square feet alone in Tijuana's industrial real estate market with 4.8 Million available, making the northern border metropolis an industrial real estate oasis. Many industrial complexes are structured around specific industries such as medical device, electronics, and aerospace and defence, offering not only space to lease but trade and logistics support. One example is the Thomas Alva Edison Industrial Park who just welcomed two medical device manufacturers; RAM Technologies and Phase 2.
5. MEXICO GRADUATES MORE ENGINEERS A YEAR THAN THE US, ADDING TO THE BILINGUAL-BICULTURAL WORKFORCE
Mexico graduates 115,000 engineers a year, more than any other country on the continent, capturing 30% of the country's total university population. Baja California alone boasts 35 universities and 14 technical schools offering over 100 professional degrees. Partnerships between academia and government have helped spur development of industry-specific R&D centers such as the newly inaugurated CADTE center offering training in precision machining for aerospace and defense manufacturing. With a university-educated and technical-trained workforce, the electronics, medical device, aerospace and other high tech manufacturing industries find a labor pool that are up to the task.
Mexico's proximity and long history with the United States, executives find the workforce is largely bilingual and bi-cultural. Additionally, the US Dollar is the most frequent currency used in trade. With over 59 million annual north bound crossings from Tijuana, the region is not only bi-cultural, but deeply engrained with American customs. Executives find communication and business negotiations much easier than overseas countries.
6. NAFTA AND MEXICO'S PRO-BUSINESS ENVIRONMENT
Mexico has the most trade agreements of any country in the world and has twice as many as China. In addition to 12 free trade agreements Mexico has with 44 countries, it's the North American Free Trade Agreement (NAFTA) that continues to drive the country's manufacturing industry. From no-tariff trade to duty free temporary imports for production through the IMMEX program, manufacturing in Mexico couldn't feel any more like manufacturing onshore.
7. TIJUANA'S $11 BILLION DOLLARS IN INDUSTRIAL SUPPLY DEMAND
Are you missing out on a major market? Tijuana's annual industrial supply topped $11 billion dollars in 2012. Not only is it cheaper to near shore operations for your own production, but mere proximity to major manufacturing clusters allows access to a whole new set of customers to supply to.
8. MADE IN MEXICO WITH US PARTS
Whereas products made in China are made up almost entirely of non-American parts (96%), products made in Mexico contain roughly 40% American-made parts. With major states like California, Texas, Michigan, Illinois and 16 other states, sell more than $1 billion dollars' worth of goods to Mexico every year (roughly 13% of all US exports.) Mexico and the US don't simply trade goods, but they work together to manufacturer them. US-Mexico trade is responsible for 6 million jobs in the United States.
9. THE POWER OF THE CALI-BAJA MEGA REGION
The Cali-Baja Mega Region encompasses San Diego County, Imperial County and the Mexican state of Baja California. With a GDP in 2011 for the region topping $202 billion dollars, the region supports electronics, aerospace, medical device, and automotive manufacturers. The Mega Region boasts a highly skilled workforce, world class academic and applied research centers, proximity to major North American transportation corridors, and established and sophisticated industry clusters to support manufacturing activities.
10. STRONG IP PROTECTIONS BASED ON US AND INTERNATIONAL STANDARDS
Mexico is regarded as having strong IP protections and enforcement compared to overseas competitors like China. With intellectual property laws that were modeled after international standards set by the World Intellectual Property Organization (WIPO), Mexico's IP laws carry similar legal provisions for IP protection and enforcement as seen in the United States. The Mexican Patent and Trademark Office will cooperate with its counterparts in other countries to reduce the local examination process for patents that have already been registered in other countries.
Article by Co-Production.net