The Supply Chain Matters blog highlights a published report indicating that Mexico is increasingly benefiting from a rethink of prior globally extended supply networks.
Within our research arm’s January 2023 published advisory, 2023 Predictions for Industry and Global Supply Chains, we included a prediction that manufacturers would seek more direct control and added resiliency of their component or outsourced production supply networks in 2023. That would include alternatives to China under the umbrella of China Plus sourcing, along with other alterative sourcing strategies to include domestic on-shoring or near-shoring of supply network needs. Most of such product business and strategies are predicated on a focus toward major geographic market needing support.
We observed that the now embedded lessons of the continuous supply chain related disruptions of these past three plus years, coupled with increased concerns from business leaders for establishing more direct strategic and tactical control of supply networks, will continue to be a prominent element of business strategy and needs for added alignment in 2023 and beyond.
Further, some industries are defining more direct control under the notions of supply chain vertical integration, or complete transformations of strategic supply networks in the case of global automotive industry manufacturers.
In this vein of shifting supply sourcing actions, we continue to highlight for our readers surveys, editorials and developments related to this important strategy area.
In a published Supply Chain Matters posting in March, we highlighted for readers a published report by the Economist that surveyed actions on the part of various companies toward securing alternative forms of supply networks across other parts of Asia, in addition to China.
In a prior Supply Chain Matters posting earlier this month, we highlighted a published report by The Wall Street Journal that profiled five different manufacturers (Apple, Crocs, Lovesac, Pou Chen, Universal Electronics) representing various industries, each pursuing forms of China Plus sourcing alternatives. The basis of this report, based on company experiences and executive interviews was that “the strategy looks more like China plus many.”
Increased Attraction of Mexico
Bloomberg’s Supply Lines daily newsletter reported this week (Paid subscription) that: “Evidence is mounting that Mexico is a key beneficiary of a rejig in global supply chains that’s seeing companies find ways to be closer to the U.S. economy.”
The report cites data indicating that total Mexican exports in May rose by 5.8 percent on a year-over-year basis to $52.9 billion, the second highest reading on record. Other data cited was that this country’s foreign domestic investment levels rose by 48 percent in the first quarter of this year. Industrial real estate prices in areas within reasonable driving distances to U.S. destinations are on the rise.
Reportedly, much of this supply output activity is associated with automotive supply and production activity. The theme of the report was that shifting production capacity away from China equates to nearshoring within Northern Mexico, with transport lanes into the U.S. and Canada. A huge contributing factor has been Tesla’s recent announcement regarding a significant vehicle assembly plant in Monterrey, Mexico. The EV automaker has indicated that this soon to be constructed facility will reportedly produce Tesla’s next generation EV vehicle family.
Thus are the ongoing evidence points that reinforce that restoring more direct control of product supply networks is clearly underway. While there are specific industry, line-of-business or market strategy variations, we remain of the view that restoring more direct control and providing for added agility, augmented control and resilience aspects to supply networks remains a top of mind strategy for businesses.
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