strategicinsight
BY JAMES A. COOKE, EDITOR AT LARGE
know before you go
When they think
about relocating
offshore operations
to Mexico, most
companies focus on
the supply chain
benefits. What they
should be looking at
are the challenges.
NOT SO LONG AGO, ASIA WAS THE CLEAR DESTINATION OF CHOICE FOR
companies looking to set up offshore manufacturing operations. But now that’s
starting to change. In recent months, a number of U.S.-based companies in the consumer electronics, telecommunications, and pharmaceutical industries have quietly
closed up shop overseas and relocated their operations to a country much closer to
home: Mexico.
“In the past year to 18 months—partly as a result of the economic crisis—we have
seen more companies making the decision to outsource their logistics or manufacturing operations to Mexico,” says Larry Malanga, president of the third-party logistics service provider Mexflex Logistics, S.A. de C.V.
Although wages and currency fluctuations play a role, it’s clear that the desire to
cut freight costs and transit times weighs heavily in these decisions. “From the cost
of fuel and resources, you minimize a great deal with being in Mexico,” says Larry
Monaghan, who’s the department head for logistics at LG Electronics, which makes
products like cell phones and plasma TVs in Mexico for U.S. consumption.
Mexico may have the edge over Asia when it comes to freight costs and delivery
times, but it’s not without its logistics challenges. Take infrastructure, for example.
“Public roads with a few exceptions are in bad shape,” says Rolando García, who
works on the strategic planning team for contact center management company
Teleperformance in Monterrey, Mexico. Bad roads cause wear and tear on trucks,
García says, so anyone planning to operate trucks in Mexico should be prepared to
