Mexico continues to be top choice for manufacturing nearshoring

June 13, 2012

Reflecting continued rising labor and other manufacturing costs for imports from faraway places like China, nearshoring continues to be seen as an opportunity to serve U.S. demand by about half of senior executives of manufacturing-oriented companies. While 35 percent of that number view manufacturing inside the U.S. as the most attractive choice for such reshoring, up from 21 percent in a similar survey a year ago, 50 percent view last year's top choice, Mexico, as the No. 1 choice again this year.

Results from the Manufacturing Re-shoring and Near-shoring Outlook Survey, released by global business advisory firm AlixPartners, also suggest that rising domestic demand in developing countries such as China may encourage even more nearshoring and reshoring in the West in the future as companies in those developing markets redirect their capacity toward local consumption rather than export. More than a third of the executives surveyed — 34 percent — predict that will be the case.

According to Foster Finley, managing director at AlixPartners and co-lead of the firm's Transportation Practice, "As manufacturing costs have increased in China and elsewhere in Asia, the cost and time factors involved in shipping goods across vast distances are magnified. Whether it's in Mexico or the U.S., any company that's not at least considering alternative manufacturing sources closer to their home market is certainly missing an opportunity."

As in last year's survey, lower freight costs and improved speed-to-market were the two most-cited advantages expected from the decision to nearshore. Twenty-six percent of respondents also cited lower inventory costs as the biggest expected advantage, up from 20 percent last year.

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