Manufacturing in Mexico or China?
News
April 10, 2023
The manufacturing industry is at a unique and unprecedented opportunity to redesign its value chains for the future. Historically, supply chain decisions in the industry were driven by the cost of labor and logistics.
However, the new criteria include broader factors such as: distance between suppliers and the target market, faster delivery and less reliance on long and interconnected supply chains, as well as protection of intellectual property and environmental impact.
The world is changing and production networks are no exception; they continue to evolve.
In recent decades, China has emerged as the world's leading manufacturer, producing a third of global manufacturing parts and products.
The main competitive advantages that China used to offer are becoming less relevant.
Trade war between China and the United States.
The trade war, which began in 2018, continues to economically hurt U.S. consumers and the Asian export sector due to tariffs.
The decline in imports from China has been replaced by an increase in imports from other countries. The trade detour effects have brought large benefits to Mexico, Taiwan and the European Union, effects that are increasing over time.
Sustainability.
Today's supply chains could reduce their CO2 emissions by 40% if the following points are achieved
Moving to zero emissions is a gradual process that requires a sustained transition.
Relocation has a more immediate impact by shortening the current long supply chains, immediately reducing pollution from the use of fossil fuels, as well as having a positive social effect and stimulating local economic activity.
Relocation is a key factor in driving sustainability.
Advantages of relocating
Mexico and Latin America enjoy a favorable situation in this global scenario.
For companies, relocating production of the products they sell could reduce operating costs by an average of 23% by transferring their manufacturing from China to Mexico.
While a 40-foot container from China to the United States costs more than US$4,000 and takes about five weeks to ship, in Mexico the cost is less than half and takes only a few days.
Proximity to consumer markets, automation, access to resources, workforce skills, infrastructure quality and the increasing importance of speed to market in some industries are driving relocation in goods production value chains.
As a result, it makes strategic sense for companies to place production closer to key consumer markets around the world.
Decentralizing manufacturing
Enabling market sharing results in the consolidation of regional organizations that gain the opportunity to create products that create brands, and brands that create industries.
The outlook is promising, however, until now Mexico and Latin America did not have the tools to help connect manufacturing and product development capabilities with local and global brands.
R3D.com.mx came to help digitize the capabilities of makers and creators, we simplify on-demand product development for brands.
R3Design with us a decentralized, sustainable, connected and efficient industry.
Sources:
"Trade and Trade Diversion Effects of U.S. Tariffs on China," a study by the United Nations Conference on Trade and Development (UNCTAD).
https://www.pwc.com/mx/es/servicios-consultoria/eficiencia-cadena-suministro.html
https://www3.weforum.org/docs/WEF_Net_Zero_Challenge_The_Supply_Chain_Opportunity_2021.pdf
