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Nearshoring opportunities are worth your consideration

When Plante & Moran LLC, a certified accounting, tax and business consulting firm, held a seminar in March regarding manufacturing in Mexico, they were hoping to get 40-50 people. Scott Sneckenberger, partner Global Services for Plante & Moran who led the seminar, told PlasticsToday that they were totally surprised when 87 people showed up for the Detroit-area event.

Clare Goldsberry

April 17, 2013

3 Min Read
Nearshoring opportunities are worth your consideration

   
Granted, there’s a lot of automotive business in Michigan and the automotive industry is the second-largest employer in Mexico behind the government, and the largest industry in Mexico, with aerospace coming in at number two and electronics at number three. Mexico itself hasn’t been immune to the offshoring trend over the past several years as many OEMs found China labor to be much cheaper. Mexico is now seeing resurgence in foreign direct investment and the pace of manufacturing there is picking up. But why this renewed interest in manufacturing in Mexico?
   
“I think that in spite of all the talk we hear about security there, the OEMs continue to invest heavily in Mexico,” Sneckenberger said. “We don’t hear a lot about new plants here, but they’re [global automotive OEMs] building new plants in Mexico, and the Japanese can’t buy land fast enough.”
   
The Tier One and Tier Two suppliers are being dragged in by their OEM customers. “Many of them are telling their suppliers, ‘if you want to supply us, you must come here,’” said Sneckenberger.
   
And many have followed OEMs such as Bombardier, which has attracted a huge following of suppliers since building an industrial park near Monterrey, Mexico.  However, in the molding and moldmaking supply chain, there’s always been a reluctance to put facilities in Mexico. They’ll put a plant close to Mexico, but crossing the Rio Grande is just too big a step for many of these midsized enterprises.

Sneckenberger noted that “I always caution my clients that being close to Mexico isn’t good enough for long. They’ll eventually be dragged further. If you take the initial step, soon you’ll have to be in Mexico.”

But at a time when there are fewer moldmakers after the fallout of the latest recession, and those who survived seek new opportunities, Mexico is a good bet.  “There is a ton of opportunity there,” said Sneckenberger. “If you’re a moldmaker in Mexico you have unbelievable opportunity. Finding a moldmaker in Mexico is even tougher today because there’s more manufacturing activity. More mold maintenance is being done internally and I’m not aware of anyone making molds in Mexico. It would take time to train people. They have the same issue there as we do here in the U.S.— trying to get good moldmakers.”

Mexico has some good trade/technical schools. For example, Monterrey Institute of Technology, with 31 campuses in 25 cities, is the “MIT of Latin America,” Sneckenberger noted.

Mexico is also a beneficiary of the reshoring movement. “I certainly have clients doing work in Mexico now that were doing it in China,” said Sneckenberger. “Just two weeks ago, I spoke with a client who is buying tooling in China but bringing it back to Mexico for the manufacturing. The price differential isn’t enough to keep the manufacturing in China.

“If you look at just the unit price Mexico would be more expensive, but looking at the total cost there’s an advantage now. Companies are getting smarter,” he commented further. “They’re looking at three-five days on a truck from Mexico versus weeks on a boat. We’re definitely  seeing a growing trend toward Mexico.”

Doing business in Mexico isn’t that difficult: “it’s just different,” Sneckenberger said, adding that it’s important to know the laws—and Mexico has some new laws that in many cases is making it easier to do business there. A new labor law that went into effect last year reduced the burdens to some extent on employers’ severance and other liabilities for employees, and allows a wider base of people to be employed as temporary workers and not be subject to the severance law.
   
There’s a lot to be said for nearshoring work to Mexico, and venturing there to serve global OEMs might just might result in some good opportunities to grow business locally with a global clientele.

About the Author(s)

Clare Goldsberry

Until she retired in September 2021, Clare Goldsberry reported on the plastics industry for more than 30 years. In addition to the 10,000+ articles she has written, by her own estimation, she is the author of several books, including The Business of Injection Molding: How to succeed as a custom molder and Purchasing Injection Molds: A buyers guide. Goldsberry is a member of the Plastics Pioneers Association. She reflected on her long career in "Time to Say Good-Bye."

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