Benefits of Nearshoring: Supply Chain Diversification
From Risk Reduction to Competitive Advantage: The Power of Supply Chain Diversification
What started as a resilience method after the production disruptions and the supply crisis during the pandemic, has now become a strategic option for risk mitigation and cost reduction in the manufacturing industry. Some used to call China the “World´s Factory”, but it wasn´t until COVID-19 hit, that we realized that this dependency was very dangerous. Now, Supply Chain Diversification; the process of sourcing goods, materials, or services from suppliers based in a country nearby, makes sense more than ever, and it is only one of the plenty of benefits of nearshoring operations.
Mexico has become an increasingly popular destination for sourcing due to its proximity to the United States; sending a container from Mexico to the United States takes 5 times less time than shipping it from China. Mexico also offers competitive labor costs, free trade agreements, and reduced lead times, as well as access to a skilled workforce and a diverse range of industries, such as automotive, aerospace, electronics, and medical devices.
Even though, it is one of the benefits of nearshoring, sourcing in Mexico also comes with certain challenges. Language and cultural differences can sometimes lead to miscommunication during negotiations. Complex legal and regulatory requirements are often tricky to navigate through and certainly security concerns in some regions. This is why it is extremely important for companies to work with experienced partners to help them carefully evaluate their options and navigate these challenges and ensure successful sourcing operations in Mexico.
Fortunately, Prodensa has designed a precise approach to Sourcing, proven to help companies successfully source their commodities. With over 35 years of experience, we are dedicated to finding the right manufacturing partner in the right region for your operation. Locating vendors who are capable of supplying locally, the requirements of your company, in a cost and quality-effective manner.
First, we do our due diligence to collect all necessary information regarding the capabilities, location, and stability of the potential vendors. Then we filter those who comply with all the quality standards that the company needs, including certifications and quality systems. Next, a full capacity analysis is conducted, considering the type of strategy. High Volume Low Mix, or Low Volume High Mix.
And now we move on to the cost. In this step, our team of experts conducts a full breakdown of the Cost of Goods, Cycle Times, and Markups, to finally move on to The Total Cost of Ownership. In this final stage, we analyze Inventory Strategy, International Trade, Time to Market, and Landed Cost.
With our full implementation service, we help our clients not only reduce costs by locating potential vendors but also oversee vendor set-up and pilot runs, supporting our clients to attain sustainable growth, stay ahead of the competition, and achieve success in the long run.
At the end, companies should analyze working with and where the return of investment is higher in the function of the risk level, the market rules are clearer, and their investment is safer placed. And for this analysis, Prodensa is your ideal partner to accompany, inform and advise you in the Supply Chain Diversification journey.
Contact us for detailed information on our consulting services and support you in diversifying your supply chain strategy.