Survey: U.S. catches up to Mexico as preferred
North American nearshore location
The United States has caught up to Mexico as the preferred North
American location for U.S.-based companies that are considering moving
some or all of their overseas production closer to their end markets,
according to an annual survey of nearshoring trends released last month.
The third annual survey conducted by New York-based global advisory firm AlixPartners LLP has found that 37 percent of the 137 respondents would choose the United States as their preferred nearshoring location. An equal percentage would choose Mexico, the survey report said.
In the 2012 survey, 49 percent said they would choose Mexico, while 36
percent said they would choose the United States. In 2011, the survey’s
first year, 63 percent chose Mexico as the preferred nearshoring choice,
while only 19 percent said they would opt for the United States.
Of the 137 companies responding to the 2013 survey, about half had
annual revenues of $1 billion or more. All of the respondents sourced
production across multiple continents.
Approximately 49 percent of the respondents to the 2013 survey said
nearshoring presented an opportunity for their companies to meet U.S.
demand. In 2012, that figure stood at 46 percent. About 57 percent
responding to the 2013 survey said they would relocate some or all of
their offshore operations to North America within the next two to three
years. About one-third had either already done so or were in the process
of doing it, according to the survey.
About 58 percent of the respondents have either reduced or expect to
reduce their total “landed cost” by 5 to 20 percent for production that has
either been nearshored or is being considered for nearshoring, according
to the survey. Landed cost is the calculation of all aspects of a product’s
lifecycle, including the expense of inventory obsolescence for goods that
spend weeks on the water.
MORE TALK THAN ACTION?
Russell Dillion, director of enterprise improvement for AlixPartners, said
the growing appeal of the United States as a nearshoring destination is
due to several factors. These include closer proximity to end markets; better legal and regulatory transparency; and concerns, real or perceived,
about security and corruption in Mexico. About half of the respondents
expect security in Mexico will improve over the next five years, according
to the survey.
Dillion added that “patriotism” could play a role in the decision-mak-ing process, especially as U.S. executives witness other U.S. companies
either making the move or considering it.
Dillion added, though, that more companies are talking about
nearshoring than are actually doing it. Businesses have spent hundreds of
millions of dollars to scale up overseas production, and “source countries” like China still have strong labor-cost models that are difficult to
replicate in the United States, according to AlixPartners.
One interesting side note is that 7 percent of respondents to the 2013
survey chose Canada as their preferred North American location. In
2012, none of the respondents selected Canada. AlixPartners said the
increased interest in Canada is a byproduct of the U.S. market’s broader
appeal to respondents. ;
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