What is Reshoring?
Reshoring, or onshoring, is the practice of bringing manufacturing operations and other services from overseas back to the US.
Why Reshore?
Reshoring not only creates jobs and helps strengthen the economy, it also is an extremely cost effective move for companies. It results in better lead time, higher production quality, improved responsiveness to customer demands, and reduces inventory level that lead to better turns.
Other benefits to reshoring include:
- Creating a skilled workforce
- Helps balance trade and budget deficit
- Reduces unemployment
- Reduces income inequality
- Improved innovation
- The image of being “Made in the US“
- and more!
What is Near-shoring?
Nearshoring also brings back jobs that were previously overseas. However, it does not bring back jobs to the US. Instead, with nearshoring companies will take the jobs to geographically closer places such as Mexico.
Why Near-shore?
There are several benefits to nearshoring. One being the cost of overhead and labor, while not as low as overseas, is still much lower than it would be in the US. Other benefits include:
- Greatly reduced shipping times and costs
- Reduced travel costs, giving business owners more oversight into complex processes
- Risk of having intellectual property stolen is greatly reduced
- Fewer time zone differences
- Cultural and language barriers are fewer when sharing the work load with a neighboring country
- and more!
For Mexico in particular, there are several benefits to nearshoring if you are based in the United States.
Location: With modern highway infrastructure connecting Mexico to various cities across the U.S., as well as various seaports and of course airports, near-shoring in Mexico allows for an 80% reduction in shipping times and a 75% cost savings in the transportation of goods.
Labor Cost: Mexico has a lower hourly rate for entry-level workers compared to China, offering significant savings.
In addition, Mexico has a large workforce of qualified workers and engineers and is quickly becoming a hub for tech companies and manufacturing industries.
A Hub of Renewable Energy and Natural Gas: 26% of the electricity generated in Mexico is from renewable sources, including hydropower, geothermal, solar power, and wind, and it is expected that this will reach 35% by 2035.
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