Offshoring to Mexico? Look Before You Leap

(DC Velocity – James A. Cooke)

Not so long ago, Asia was the clear destination of choice for companies looking to set up offshore manufacturing operations. 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… Read more here.