I had a unique opportunity yesterday to participate in a live event – an international conversation of sorts. Source One presented a webinar at the University of LaSalle's School of Business in Mexico City about a topic near and dear to their hearts: nearshoring. While this isn’t a new topic, the presentation was so completely different that it was hard not to feel enthusiastic about the opportunities that exist. In the last 10 months, I have attended roughly 100 webinars. None of them had a live video feed from another country and none of the presentation formats were able to capture the enthusiasm that this audience expressed. I highly encourage more event planners and hosts to try to incorporate applause into their events – somehow it makes the message more exciting.
But I wasn’t so swept up that I missed the message - and the message was clear. Mexico is open for business. My notes from the event are below, and as soon as a recording of the event is made available we will link to it here. For now, you can read the presentation: SourceOnes US Companies and Global Opportunities: A Perspective on Strategic Sourcing from Mexico
Global economic conditions are ripe for a nearshoring to become a strong option:
- The Chinese government has subsidized materials costs in the past, but this is not sustainable in the long term, and as those subsidies are rolled back, costs are rising.
- Natural disasters have increased both the concern and visibility of supply chain disruptions
- Intellectual property risks, political unrest, and poor working conditions have caused consumers and stakeholders to pressure companies to relocate their spend to other parts of the world
- Nearshoring offers a number of benefits:
- Greater cultural affinity (foods, religion, holidays, and customs)
- Lower shipping rates
- Lower union presence results in lower costs
In addition, a recent change to NAFTA allows trucks to go directly from Mexico to the end destination rather than transferring goods to U.S. based transportation services 15-20 miles from the border.
As much as Mexico was the focus of this event, they have local competition for U.S. business, particularly from Brazil. The primary challenge Mexico will need to overcome is that their suppliers are too hard to find. This comes from a shortage of English websites and supplier directories. Response time expectations may differ from the U.S. to Mexico as well, resulting in some frustration.
While the speakers were up front about the challenges Mexican businesses and workers will have to overcome if they are to increase their share of the U.S. nearshoring market, some of the challenges were perceptions rather than true issues. For instance, U.S. perceptions of social trouble or safety concerns overshadow positive news about GDP growth. Businesses consider Mexico’s economy to be agricultural rather than technological. Mexico has also not benefitted from the traffic and capacity that follow high visibility sporting events, such as the Olympic Games that will be held in Rio de Janeiro in 2016.
Since we are constantly getting updates about unemployment in the U.S., when I had the opportunity to ask the speakers a question, I asked about the same topic in Mexico – specifically which skill segments of their workforce have the greatest capacity to offer to U.S. businesses. Manufacturing and Professional Services (customer service and IT programming) capacity exists and are just waiting to be discovered and leveraged.
While in the past, Mexico has taken a passive “build it and they will come” attitude towards attracting business from across the border, this event was a great start in announcing to the world that great opportunity exists. All that is left is for a few leaders to start the trend of making use of nearhsoring – and if plans from companies such as Nissan, Toyota and GM come through, that trend may start sooner than any of us realize.
About Source One
Source One has been a leading Procurement Service Provider supplementing client resources with cost reduction, strategic sourcing services and spend management solutions since 1992.
Our experienced sourcing professionals work closely with clients' in-house staff to reduce spend, optimize existing budgets and increase the efficiency of operations by using proven sourcing and purchasing strategies, best practices, innovative technologies, and an unsurpassed database of market intelligence to help our clients achieve the maximum level of savings possible. Our ongoing monitoring and monthly audit process further ensures that savings remain competitive and sustainable.
Our process develops a secure and responsive supply base that is capable of providing quality, delivery, costs, technologies, flexibility and services to meet the current and future business needs of our clients. We have strategic sourcing solutions for businesses of all sizes, from the small to the mid-market and including the Fortune 500. More on the web at www.SourceOneInc.com