The supply chain has always experienced challenges and situational disruptions. However, the onset of the COVID-19 pandemic has worsened the supply chain management challenges. The problems encountered have left many manufacturers no choice but to look for alternatives. 

Apart from COVID-19, the supply chain also experienced disruptions due to the Russian-Ukraine war and trade war with China. Many companies worldwide now move production to Mexico because of the trade war between the United States and China. Manufacturing in Mexico is the latest trend manufacturers use to improve their supply chain; it's no longer a consideration. Other challenges faced by the supply chain worldwide include:

  • change in customers' attitude

  • increase in the cost of production

  • difficulty in forecasting

  • exposure to risks

  • delayed shipping

  • border restrictions

  • labor shortage

Manufacturing activities have contributed significantly to Mexico's total Gross Domestic Product (GDP) and economy. Mexico's manufacturing sector has grown compared to other major Latin American countries in recent years. Now the big question is, why are businesses and companies moving manufacturing operations to Mexico? We have put together some top reasons to answer your question. Read below to find out why. 

Low cost of production

Mexico has special decrees and programs to attract foreign investors. The most commonly used program is IMMEX. The IMMEX program allows the importation of raw materials and goods into Mexico VAT-free and duty-free for some time (mostly 18 months). The intention is to export those materials alongside the finished goods. Under the IMMEX program, manufacturers can import machinery and equipment with essential permits. Companies also enjoy special fiscal treatment and income tax. All these help to reduce operational costs. No overwhelming taxes. 

High level of an educated workforce

Mexico has a highly educated workforce compared to other developed countries. The annual number of engineering graduates in Mexico is more than that of the United States. With the high level of young and talented professionals, workers, and managers who can help drive expansion with the knowledge of the best inventory software to handle momentous tasks of your business.

Proximity

Manufacturing companies worldwide seek cost reduction: To achieve this, no location in the world is closer than Mexico for manufacturing activities. Mexico is an option for low cost for the North American market due to its proximity to the U.S. and Canada. Many global manufacturers are turning to Mexico because shipping and transit of products are quick, unlike locations such as China, where shipping can take up to 30 days. In addition, Mexico has deep-water ports and border crossings connected to the world; flights are cheaper and faster; time differences are insignificant. 

Free trade agreements

Mexico is known to have the freest trade agreements with multiple nations in the world. Apart from the United States-Mexico-Canada Agreement (USMCA), which is widely known, Mexico has over 44 other trade agreements. These trade agreements serve as a shelter for foreign investors and companies to import necessary materials without disruption.  

Top-notch infrastructure

The Mexican government has dramatically invested in high-quality infrastructure to allow manufacturers to operate without disturbance. Mexico has a reliable electrical grid for an uninterrupted power source during production. Another infrastructural investment in Mexico is the highways and railways. Railways and trucks are readily available for convenient transportation of both personnel and products to border cities. Hence, money is saved on transportation.

Presence of notable industries

Although manufacturing in Mexico is growing across all industries (medical devices, electronics, and aerospace), the automobile industries contribute the most. Manufacturers of Toyota, Honda, Kia, BMW, Mazda, Ford, and Volkswagen are building plants in Mexico. The expansion of these automobile companies in Mexico attracts many other business owners worldwide.

Strict rules and regulations

One of the many reasons manufacturers are turning to Mexico is the presence of stringent rules to ensure job safety and the safety and condition of raw materials used to manufacture goods. Production is done in a consistent and regulatory environment. Withdrawal of goods from the market due to contamination is ruled out. Also, Mexico is socially responsible as regards its workers. Weekly, 48 hours is the maximum timeframe an employee can be obliged to work in Mexico.

Conclusion

Analyzing Mexico's GDP, the industry and manufacturing section contributes about 27%. Thousands of engineers and technicians graduate from Mexican technical schools and universities. As a result, manufacturing in Mexico contributes an advantage not seen anywhere in the world. A strong and reliable supply chain is vital to the success of your business. Due to obvious economic and political reasons, Mexico is now on top of the game.