For many businesses that have spent years depending on cheap manufacture in countries like China, the Coronavirus pandemic has been their wakeup call. While the serious effects of COVID-19 on our way of life and economies were not felt until late March here in the west, Asia shut down much sooner. Many businesses have experienced what it’s like for their inventory to simply stop shipping, and no longer be able to serve their customers here in North America, since as early as February.
Still, as we move into June, many businesses don’t know when their shipments from China will be coming. While a global pandemic is, of course, an extremely unique set of circumstances, it has highlighted the precarious nature of relying on a different continent for production.
Most businesses chose Asia many years ago to save money and find flexibility in what they need to be manufactured, but what if now was the right time to move things closer to home? If you’ve been thinking about moving production to North America, here are 8 benefits of moving production to Mexico.
1. The Same Time Zone
There are many communicative barriers in doing business in Asia if no one on your team is familiar with the language and culture, and we’ll cover those shortly, but one of the biggest benefits is simply having your production in the same time zone as you. This means you’ll know that when you’re up and working, your outsourced production is likely doing so too, and if you need to contact someone, you can do so immediately.
2. No (or Less) Language Barriers
There are many Asian languages, most of which are very different from English and other languages that originated from Europe, with an entirely different alphabet. Moreover, few Asian countries learn a non-Asian language, which means there will always be a language barrier to overcome.
Many businesses either fumble their way through speaking to someone with a limited understanding of English, with the help of Google translator, or pay for a translator to be the go-between. While this may not be costly, depending on who you work with, it does mean you have to trust one person to communicate all your needs to your manufacturer, and be honest in everything they say.
In Mexico, this isn’t a problem. The majority of people speak at least some English, if not fluently, and there is a huge percentage of Spanish speakers in the US. In fact, approximately 53 million people in the US speak fluent Spanish, either as their first language or bilingually. Clearly, you aren’t going to encounter any serious communicative issues here!
3. Cultural Affinity
Of course, our close ties in language can also be seen in our cultures. Mexico, the US, and Canada all have a similar way of living and largely follow the same calendar. That means that while individual holidays may differ, the break at the end of the year will be the same, rather than suddenly slowing down for Chinese New Year a few months later. This also means we have a better understanding of how the other lives, since we’re so similar, which again makes it far easier to work with one another.
4. Shorter Lead Times
If you’re ordering cheaply from China, you can often expect your shipment to take up to two months to get to you. If you’re trying to find a new manufacturer, communicate your ideas, get a prototype, and then order your shipment, your lead times are going to be very long indeed.
When you move your production to Mexico, you could be looking at lead times as low as 10 days. Working this close to home means you can easily talk to your manufacturer when you need to, correct and difficulties quickly, and order fast.
5. Faster and Cheaper Shipping
Shipping from Mexico to the US and Canada is significantly faster, and often cheaper, especially if you’re in a nearby state. Getting your goods shipped via freight means paying less and waiting for longer, meaning you have to wait weeks or months to get the stock you need to serve your customers. If it’s a part for your product, rather than the whole, this can be incredibly frustrating.
Of course, shipping by sea also leaves you open to disruption from natural disasters, epidemics, and political disruption. When your production is in Mexico, you have the possibility that if you needed your part or product as soon as possible, that you could get expedited shipping and get it overnight or just a couple of days. Even airmail from major Asian production centers can’t boast that.
6. Better Payment Terms and Lower Taxes
Because we don’t have a communication barrier, and we’re nearby, we can offer you much better payment terms than a manufacturer in China or other parts of Asia. Due to the long lead times, you’ll likely have to pay for your goods weeks or months in advance of receiving them, which can lead to cash flow difficulties. Working with a manufacturer in Mexico can help minimize this, not to mention the better rate of taxes you’ll see from working with businesses in Mexico.
The USMCA comes into effect on 1 July 2020 and will last for 16 years, making it far easier and cheaper to work with one another, especially over other continents.
7. Ease of Travel
Do you want to go to see where your product or element is being produced? If you want to go and tour manufacturers (potential or current) in Asia, you’ll be looking at an expensive plane ticket and 12-14 hours on a plane. Of course, when you’re going south to Mexico, even a flight from major Canadian cities to Mexico City will only take 4-5 hours. This means less downtime – a lot less jetlag! – and a much easier time getting oriented and traveling once you’re here. Plus, there are often deals on tickets to Mexico, so you can likely fly cheaply, too.
8. You No Longer Have to Hold Large Amounts of Stock
When you order from Asia, you have to fill as much of a freight container as possible to make the shipping worth it. That means you go from having very little stock to a huge amount of it, and then you need to store it. This either takes up a lot of room you could otherwise use or means paying for the storage of your goods, further eating into your profits. When you work with a manufacturer in Mexico, you know you can get your goods quickly, and so you don’t have to order a huge batch at a time, as your manufacturer will likely be ready to pick up the slack as soon as you need them to. As you can see, while moving production to China was right for businesses 20 years ago, it’s much less likely that it is still the case today. There are numerous reasons to move your production much closer to home, and few reasons to continue to wait for production in Asia. If you think moving production to Mexico may be the right choice for you, you can reach out to us for more information. We’re PYA Automotive, we work with big brands like Nissan and Bosch, and we’re expanding