Nearshoring and logistics

The Evolving Global Political-Economic Landscape with Nearshoring Opportunities.

In a rapidly evolving global landscape, manufacturing industries face a multitude of challenges and opportunities. “Geopolitical shifts, supply chain dynamics, and economic uncertainties have prompted companies to rethink how they approach production, competitiveness, and nearshoring. In this article, we delve into the insights provided by Boston Consulting Group (BCG) to navigate this complex terrain successfully.

This article explores a strategic framework comprising five pivotal steps that empower businesses to adapt to these transformative forces. We offer actionable strategies for thriving amid change, including clear strategy, visibility, cost assessment, informed nearshoring, and governance. Join us on this journey as we unveil the keys to staying agile and competitive in today’s dynamic manufacturing environment.

Trade Wars, the Pandemic, and Geopolitical Tensions.

The international political-economic system has been prominently featured over the past five years due to various tensions that have arisen within it, such as trade wars, the pandemic, and even geopolitical tensions, all of which impact nearshoring decisions. Collectively, these factors have exacerbated supply chain issues, creating logistical bottlenecks. This, in turn, has necessitated a global-level reconfiguration of where companies manufacture and source their products.

The Rise of New Manufacturing Powers and Nearshoring Opportunities.

A report published on September 21, 2023, by Boston Consulting Group (BCG) titled “Harnessing the Tectonic Shifts in Global Manufacturing” helps shed light on the magnitude of this issue and the resulting changes.

BCG released information estimating that over 90% of manufacturing companies in North America have successfully relocated or are in the process of relocating their production facilities to various countries. It’s worth noting that this 90% encompasses only the companies surveyed by BCG.

Potential for Development as Emerging Powers and Nearshoring Choices.

According to BCG, the primary factors driving these changes in the production processes of North American companies can be attributed to three key phenomena in the international system, one of which is the nearshoring option.

  1. The uncertainty in the international geopolitical system: This phenomenon is primarily driven by tariff costs imposed by the United States of America (USA). These tariffs have undermined confidence in China as the primary export platform for several American industries.
Emptry Congres
  1. The rise of Mexico, Southeast Asia, and India: This triad has garnered attention for its competitive production costs, abundant labor availability, and substantial development potential across various industries. Thanks to these attributes, they are widely regarded as the next manufacturing powerhouses.
  1. Morocco and Turkey: The aforementioned duo had a substantial expansion capacity in their manufacturing processes due to their proximity to the European Union (EU). However, their advantages don’t stop with the EU; their geographical positions also grant them excellent access to other markets. This advantage translates into competitive production costs when compared to the Chinese market. Crucially, these changes are being driven by the United States in response to a growing demand for local production.

Impact of Wage Inflation on Global Competitiveness and Nearshoring Considerations.

As previously noted, recent changes have influenced the global market and manufacturing companies into a trade-off to maintain competitiveness. It’s important to emphasize that these considerations are specifically tied to nearshoring. In this context, wage inflation has become a direct negative factor for manufacturing companies. While this may benefit the average worker, who has no concerns about this phenomenon as it increases their purchasing power, on a global scale, it translates into overall inflation. This is because the cost of living and purchasing power show significant disparities due to the increase in costs for the end consumer.

The BCG report indicates that wage inflation has outpaced production gains in most regions. This is evident in a 21% increase in labor costs in the USA between 2018 and 2021, and a 24% increase in China during the same period. Similarly, Mexico experienced a 22% increase, while India saw an 18% increase. However, these increases do not rule them out as highly competitive manufacturing markets at present. Therefore, these two markets are solid options when it comes to discussing Nearshoring.

Market-Back Approach and Integrated Marketing Communication (IMC).

In order to achieve better outcomes, BCG recommends in its report that North American companies adopt a “market-back” approach. In other words, companies should seek their own mechanisms to establish and design a coordinated marketing process to increase their chances of success, considering that Integrated Marketing Communication (IMC) programs play a crucial role in this endeavor.

BCG’s Recommendations for Addressing Changes with Nearshoring in Mind.

To be effective, this process should commence with structuring it based on the end market. Subsequently, design a comprehensive manufacturing process, manufacturing footprints, and supply networks. This may allow to include of nearshoring options. In fact, this report makes it clear that there is a complete 5-step process to reach such an approach.

Step 1: “Establish a Clear Strategy for Nearshoring Success.”

The first step involves creating a manufacturing footprint. This involves considering the company’s starting point and the challenges faced by project leaders, including those related to nearshoring. Recognizing that this challenge arises naturally due to no market having all necessary factors to fully meet production demands is crucial. Thus, making early-stage adjustments to the production footprint can mitigate and resolve issues, while also optimizing available supply networks.

Step 2: “Creating End-to-End Visibility.”

The first step is to establish “end-to-end visibility,” including visibility into nearshoring decisions. This capability involves tracking and monitoring products and components throughout the supply chain, from acquisition to customer delivery. Indeed, meticulous tracking of each process stage, capturing all relevant data, and centralizing it in a data management system are essential.

This enables continuous review, analysis, and extraction of valuable insights to enhance business processes, support long-term financial planning, and inform strategic decision-making, including nearshoring choices.

Additionally, this visibility leads to improvements in six key supply chain areas:

  1. Procurement and Inventory Management.
  2. Finance.
  3. Logistics.
  4. Operations.
  5. Quality Control.
  6. Sales and Customer Service.

Step 3: “Assessing Landed Costs.”

This calculation encompasses all costs related to shipping each item, including the initial product price, shipping or transportation expenses, taxes, tariffs, customs clearance, insurance, packaging fees, handling fees, and even currency exchange rates.

Step 4: “Consideration of Trade-offs and Compromises in Location Decisions.”

Equally important is considering “trade-offs” and the risks linked to location choices when setting up operations in a specific region or market. Considering production and delivery capacity, as well as evaluating the necessary capital investment and staff training to meet the demand, becomes essential when choosing a specific location.

Step 5: “The Importance of a Clear Governance Structure.”

Finally, it is crucial to have a clear governance structure. The governance structure refers to how an organization is designed and organized to make decisions and exercise control. Then include a well-structured operating model, taking into account nearshoring considerations.

Success heavily relies on the governance structure in use, allowing the leadership team to maintain a comprehensive perspective and framework for long-term success. When executed correctly, nearshoring initiatives can indeed thrive.

Final Thoughts on Navigating the Dynamic Manufacturing Landscape with Nearshoring Strategies.

In the ever-changing global manufacturing landscape, these strategic insights offer a valuable roadmap for businesses, including those considering nearshoring. This article covers strategy, nearshoring decisions, and governance structures, explaining key factors and providing actionable steps for successful navigation.

Furthermore, to stay at the forefront of industrial real estate market trends, make sure you don’t miss the quarterly research reports that NAI Mexico generates. These reports are a valuable resource for staying informed and maintaining a competitive edge in this evolving industry. Stay agile and continue to embrace transformation within the manufacturing sector.

*This article is based on a report published on September 21, 2023, by Boston Consulting Group (BCG). * All Information presented here, was redacted by NAI Mexico’s Corporate Communications Team, based on the report “Harnessing the Tectonic Shifts in Global Manufacturing.”


Original post by The Canadian Press.

WASHINGTON – In a bid to counter China’s growing geopolitical influence, a bipartisan team of U.S. senators is spearheading efforts to broaden the scope of the acclaimed U.S.-Mexico-Canada Agreement (USMCA) to include select Latin American nations.

Expanding the USMCA: A Bipartisan Effort.

U.S.A. Senators: Bill Cassidy & Michael Bennet

Earlier this year, Senator Bill Cassidy of Louisiana enlisted the support of his Democratic counterpart, Senator Michael Bennet of Colorado, to jointly introduce the Americas Trade and Investment Act.

This legislation aims to expand the USMCA, often referred to as CUSMA in Canada, to forge a more robust economic alliance.

Benefits of Investing in Neighbors.

“From a U.S. perspective, investing in our neighbors provides a higher return on foreign expenditure compared to overseas investments,” Senator Cassidy emphasized during a USMCA panel discussion. “As Mexico prospers, so does the United States, and vice versa. That’s the beauty of capitalism – it’s a win-win for everyone. That’s precisely what I’m striving for – a victory for all.”

The Council of the Americas Report.

The recent launch of a new report by the Council of the Americas, which delves into the concept of “accession” to the USMCA, underscores the importance of reinforcing economic strength throughout the Western Hemisphere.

White House’s Commitment to Hemispheric Trade.

This notion of hemispheric trade has not escaped the notice of the White House. During last year’s Summit of the Americas, President Joe Biden introduced the Americas Partnership for Economic Prosperity, one of several trade “frameworks” designed to enhance economic and geopolitical bonds among key U.S. allies.

Joe Biden

A Pragmatic Approach: “Docking” Partners into USMCA.

The report advocates for “docking” current or future U.S. trading partners into the USMCA as a more pragmatic and effective approach to bolstering regional integration.


The success of the USMCA.

Juan Carlos Baker

Juan Carlos Baker, one of the report’s co-authors and a lead negotiator for Mexico during the NAFTA talks that led to the USMCA’s creation in 2018, hailed the agreement as a resounding success for all three countries.

He stated, “Canada and Mexico are now the preferred partners of the United States, and vice versa. Given the high levels of uncertainty and volatility globally, aligning potential allies around shared values and objectives is a sensible approach for North American countries.”

Challenges of Reopening the Agreement.

However, former diplomat Louise Blais, an advisor for the Business Council of Canada, cautioned that reopening this hard-won agreement may face resistance due to political uncertainties and volatility.

Louise Blais

She noted, “There is no consensus in the U.S. government on this issue. I would not even qualify this discussion as having hit Main Street, despite Sen. Cassidy’s efforts.”

Mandated Review in 2026.

The USMCA mandates a review involving all three parties in 2026, with a requirement to maintain the agreement. Most Canadian advocates prioritize successfully navigating this process.

Canada’s Stance.

While the Council of the Americas champions trade and investment across the Americas, Blais emphasized that the immediate priority should be renewal, not amendment.

Canada’s International Trade Minister, Mary Ng, has been actively advocating for prompt trilateral endorsement, reiterating that the current agreement lacks mechanisms to allow new countries to join.

Potential Latin American Candidates.

The report does not delve into the specific Latin American countries that should be invited to join the USMCA, but there are evident candidates with robust trade connections to the U.S. These candidates include Barbados, the Dominican Republic, Chile, Colombia, Panama, Peru, Uruguay, Ecuador, and Costa Rica, which has outgrown its existing Central American trade agreement with the U.S.

Costa Rica’s Aspiration.

Manuel Tovar Rivera

Costa Rica’s Minister of Foreign Trade, Manuel Tovar Rivera, highlighted the nation’s burgeoning medical devices and semiconductor industries, as well as growth in aerospace and automotive sectors, areas of particular interest to North America.

He stressed that Costa Rica is a different country with different challenges and aspirations.

A Strong Message on Labor and Environmental Standards.

Furthermore, accession to the USMCA would signal the importance of strengthening labor and environmental standards, offering a potential reward to countries seeking reform.

However, these proposals come at a politically sensitive moment in the U.S., with former President Donald Trump leading the race for the Republican nomination in 2024. Additionally, Mexicans are preparing for upcoming elections, while Canada faces a federal election within the following year.

Considering Domestic Politics

The report acknowledged these political complexities, stating, “Expanding the USMCA will demand an articulated strategy that considers the domestic political situation in Mexico, the United States, and Canada, since the three countries will have general elections in 2024 and 2025.”


*This article by The Canadian Press was first published on September 14, 2023.* All Information presented here, was redacted by NAI Mexico’s Corporate Communications Team, based on the original article published by “The Canadian Press”.