The majority of manufacturing executives always seek ways to reduce their operational costs and boost profits. Offshoring offers many of these advantages to U.S. businesses, as does investing in the supply chain. However, many are unable to streamline their supply chains while still receiving the benefits of offshoring. Manufacturers often feel like they need to chose between creating a more flexible supply chain and taking advantage of offshoring's low cost manufacturing opportunities. Yet expanding to Mexico offers the best of both.
The choice between investing in supply chain management and offshoring
In an article published on supply chain community website EBN, Wade McDaniel, a vice president for Avnet Inc., said investing in the supply chains allows manufacturers to boost their profits through reducing the time it takes for products to enter the market. According to McDaniel, a manufacturer's supply chain is part of customer satisfaction and is becoming a priority area for manufacturers.
"Recently, the supply chain functions of companies have become increasingly linked to customer experience," McDaniel wrote. "I'm not sure if most people think of Amazon as a supply chain and distribution company, or simply a company that has just about everything anyone could want, from physical to digital. It's a good example of how supply chain directly affects customer experience. Add this experience to the revolution in digital delivery of content across the web and mobile networks, and we all expect instant inventory and next-day shipping."
According to an article on Real Business by Tony Duggan, CEO of supply chain business Crossflow Payments, the financial aspects of the supply chain are essential for efficiency. And for those businesses that keep their fabrication and assembly close to the U.S. market, they are able to invest most resources in supply chain technology and product delivery because they save in shipping costs.
Offshoring the production process allows manufacturers to reduce their labor expenses, but certain offshoring destinations raise transportation costs for U.S. businesses that must ship their products from overseas to the U.S. market. Transporting a large amount of goods over an ocean can become expensive for U.S. businesses, especially if the products sit on shelves and must be housed in a warehouse due to low sales. Companies need to be able to invest in their supply chains while still receiving the cost benefits from offshoring - without complicating the manufacturing process.
Mexico offers logistical advantages
With its close proximity to the U.S. and lower labor costs, Mexico is the best destination for manufacturers to offshore their fabrication and assembly processes. According to Duggan, the best supply chains are the ones that aren't complicated by using too many systems, which can often happen when manufacturers offshore without an understanding of the value chain. Making the supply chain as simple as possible while still ensuring smooth operations can be difficult when offshoring, yet expanding to Mexico offers these benefits. Shipping goods north is much simpler to do than transporting them across an ocean. In fact, manufacturers can chose between ground, air, sea and rail for the logistical supply chain when they offshore to Mexico rather than having only one or two options when they offshore overseas.
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