Many analysts feel that Mexico is the “New China” in regards to sourcing and Manufacturing. Here is our take.
The vast majority of Mexican sourcing inquires that we receive from prospective clients are from individuals and firms that are currently importing to the United States from China and want to take a logical look at the possibilities of sourcing from Mexico. As stated on our site, there are a myriad of advantages for North American firms who choose to source product from Mexico. These advantages include lower shipping times and costs, shorter travel times for managers who need to visit factories, a devalued Mexican peso against the dollar and NAFTA just to name a few. Additionally, the cost of Chinese labor has continued to rise over the last several years, making Mexico an even more viable option for American and Canadian importers.
What are the opportunities and challenges in sourcing product from Mexico?
But is Mexico ALWAYS going to work for a company that desires to get out of China and bring things back to the Western Hemisphere? NO! Is Mexico the new China? For many products and industries, the answer is Yes! For others, we often have to advise prospects that they will be facing high sourcing fees for a project that will probably yield a higher landed cost to their US warehouse than what they are currently paying to source from China.
Does this mean that a North American firm should forget about sourcing from Mexico? Absolutely not. Mexico has some of the fastest growing, most sophisticated high tech manufacturing in the Western Hemisphere as well as a wealth of hand made artisan products and crafts, not to mention a booming agricultural industry that trucks fresh fruits and vegetables as well as premium Mexican beer, wine and tequila across the US-Mexican border for daily American consumption. Also satisfying to almost any pallet is Mexico’s outstanding seafood export industry that ships some of the world’s best shrimp, oysters, mahi-mahi, grouper, swordfish and more to exclusive supermarkets and restaurants around the globe.
How is Mexico different from China in regards to the manufacturing and sourcing process?
For those looking to find solid Mexican factories for sourcing product from Mexico, the purpose of this blog post isn’t to scare you off. We just would like to give you a brief overview on how things work with Mexican sourcing. Like me mention on our site, if you think things are going to work in Mexico as they do in China, you will be in for a rude awakening. Sourcing from Mexico almost always takes a great deal of time and effort in comparison to Asian alternatives. Why can things run slow in Mexico? A lot of it has to do with culture. Check out our book or some of our other blog posts on the Mexican Business Culture in which we talk about the concepts of time and the high context vs. low context cultures. This type of literature can serve as tools for Western business people to develop a more in-depth understanding as to how things work in Mexico as compared to their home country.
Aside from the Mexican and Latin American concept of time, it is simply more difficult to locate sound, exporting suppliers in Mexico that would be willing to take a new sourcing project as opposed to other countries. We have mentioned that there is no Canton style trade fair in Mexico where we can simply go and find all of your suppliers in a few days. Nor is there anything in Mexico close to Alibaba in which suppliers begin courting themselves to you minutes after placing a sourcing inquiry. Furthermore, Mexico has roughly a tenth of the population of China coupled with the reality that a much lower percentage of it’s population and economy is dedicated to export manufacturing as compared to the Asian giant. Again we don’t want to tell you that Mexico isn’t going to work for you, but it’s going to take some time, strategy, background research and up-front investment on the part of the foreign firm that wishes to source from Mexico. For some more background on the benefits and challenges of sourcing from Mexico, it is worth taking a look at this New York Times article from a few years back that goes over the positive and negative experiences from some American firms looking to manufacture south of the border.
Common Products good for Sourcing from Mexico
If you contact a firm or sourcing agent who tells you that they can source any product from Mexico for you and get it landed in your warehouse at a competitive global market price, you had better run! Certain manufactured products tend to be much stronger when sourced from Mexico as opposed to others. Hers is a short, non-comprehensive list of products and raw materials that are viable sourcing options for Mexico and others that are not.
- Textiles and apparel
- Home appliances
- Household products (cleaning products such as brooms, mops, brushes, etc)
- Some electronics
- Auto parts (Perhaps Mexico’s strongest export sector to the United States)
- Certain hardware
Aside from the above list, which is based on our personal experiences, see the two links below for more official data.
At least take a look at Mexico for Sourcing!
In conclusion, Mexico in many instances is the new China as reduced manufacturing and shipping costs can lead to higher profits back home. However as stated, in many cases individuals and firms may be better off simply staying where they are. This is something that a firm like ours can help you decide on a case-by-case basis. In many cases we can simply take a look at product specs or samples and decide if Mexico will work for a given product. In other cases there is simply no way around a retainer, some background research and hunting around Mexico for the right supplier. No matter what your product or situation, it never hurts to take a look at sourcing from Mexico or other markets for that matter!