What You Need to Know About Nearshoring

Q: When a company begins a nearshoring initiative in Mexico, what is the best way to expand its supply chain to meet the future need without disrupting the service their customers have come to expect?

A: When a company initiates a nearshoring program, it is critical to have a partnership with a transportation and logistics company that understands the dynamics of logistics in Mexico, and has the necessary infrastructure and network to support an effective supply chain operation in Mexico. Regardless of the services needed [e.g. full truckload, less-than-truckload (LTL), rail, expedite, warehousing, consolidation, customs broker, or freight management], being aligned with the right partner will ensure a seamless transition into this new market and minimize any negative impact on the service to the end customer.

Some of the important factors to consider when selecting the right partner are:

1. Do they have a bilingual staff on both sides of the border?

2. Do they have strong logistics and supply chain experience on both sides of the border?

3. Do you need a warehouse near the border to lower inventory at the plant and reduce risk of delayed transit times?

4. Does their TMS provide visibility along the supply chain in all NAFTA countries?

Q: How should a company leverage the relationship with their partners as demand in Mexico increases?

A: Having a logistics partner that can be flexible enough to tailor solutions to meet a company’s specific needs can be a differentiating factor that can allow them to gain market share. Many 3PL providers have a rigid process they require their customers to follow in order for them to take on the business. In essence, they make the customer fit the provider’s operational model.

Requiring changes to existing processes can create a significant increase in cost and a significant decrease in efficiency. Even if the result is a cost savings for the company, it can take months or even years to recoup the initial cost of implementation. Being aligned from the start with a partner that is willing to change their processes to meet the needs of their customers will decrease implementation costs as well as decrease the time required to operate at optimal levels. A company with this partnership can leverage this as a selling point to their internal and external customers and use it to obtain an advantage on the competition.