Mexico is rapidly becoming a dynamic player in manufacturing at a global scale. As logistics providers and transportation carriers expand production throughout the world in response to trade tensions between the U.S. and China, as well as respond to increased investment in Mexico from Asia, they must learn to quickly strategize how to scale their businesses to compete with this changing supply-chain landscape.
Mexico is currently facing a shipment boom, with nearly all southern border ports experiencing a significant increase in traffic. Seventy-five percent of border crossings occur at four strategic locations (Laredo, Otay Mesa, El Paso, and McAllen). In recent years, the greatest volumes have occurred at Laredo, the largest port in North America.
Mexico is well-positioned to take advantage of the market volatility occurring in China. As party to the largest number of free-trade agreements in the world, totaling 43 countries and growing, Mexico stands as a leading alternative location for manufacturing. The region has the proven ability to quickly set up and streamline manufacturing processes to serve the consumer market in North America, while feeding markets in Europe and South America as well. There has also been heavy investment in Mexico from Asia, driven by suppliers’ desire to be close to production plants where their commodities are being used.
While Mexico exhibits sustainability and strength in most areas of manufacturing, it’s important to note that it doesn’t provide much in the way of raw materials. It maintains a preferential manufacturing program, called IMMEX, for foreign companies sourcing materials outside of Mexico, thereby limiting the amount of tax that’s paid upon importation.
By and large, the increasing globalization of Mexico creates dynamic supply chains that force manufacturers to achieve scalability, keeping in mind that Mexico is becoming less dependent on U.S. consumption. With this important changing dynamic, there are a number of actions that importers and exporters should take to remain proactive and competitive in the global marketplace:
Identify and work with a vetted and recognizable third-party logistics partner with both global presence and local resources, to mitigate the impact of changes in the marketplace, especially where there is unpredictability and volatility.
Have a firm strategy in place that generates the ability to quickly convert from one mode to another, to limit disruption within the supply chain. This is critical to fortifying supply chains and managing against risk.
Invest in streamlined technology that’s reliable and provides detailed information at all points of the supply chain. Modern supply-chain technology enables gains in analytics and visibility, and provides real-time data for making critical business decisions.
United States-Mexico-Canada Agreement (USMCA) provisions are likely to result in faster and safer trade facilitation of cross-border shipments within North America. Technology will further equalize the market, creating more fluidity and consistency. An increase in data integrity will improve cross-border velocity, as importers and exporters cope with greater demands on capacity, and seek to implement new supply-chain processes.
