Sourcing in Mexico: How Manufacturing Locations Affect Your Supply Chain

Whether you have purchased or manufactured in Mexico for years or are just starting to nearshore your product, there is a lot to navigate that will affect the cost, time, and risk around your supply chain. This series aims to shed light on these topics and give shippers insights that are helpful and actionable.  

Choosing a manufacturing location requires a lot of thought beyond simply logistics. There are potential tax breaks to consider, access to local resources (water, electricity, infrastructure), labor laws, labor costs, talent, safety, environmental and zoning regulations, and political landscapes to navigate. If Cross-Border Supply Chain is not your area of expertise, here are some helpful tips: 

Proximity to the border

The immediate advantage nearshoring has over shipping via ocean container is the shorter transit time. However, you will want to avoid long transits within Mexico as it leaves more opportunity for something to go wrong. If you can source from maquiladoras, Tijuana and Juarez are your best bet. It’s a quick and easy process to get loaded trailers onto US soil from these two cities. Monterrey, the country’s third largest city, is another great option due to its proximity to the Laredo border. Many of the Bajio states like San Luis Potosi, Guanajuato, and Queretaro are reasonable choices due to their manufacturing infrastructure and central Mexico location. This makes it an easy and predictable transit to the US border. 

Distance to suppliers

If you are sourcing parts from local vendors (or even raw materials coming inbound from the ports), central Mexico is ideal. Mexico City, Guadalajara, and the Bajio are great areas to ensure short transit and cheaper supply chain costs to consolidate the materials needed for a completed product. If you have multiple vendors, this gives you the ability to utilize multi-stop pickups on full truckload shipments, an additional cost-savings strategy. 

Border crossing locations

One of the most overlooked factors that affects the cost, speed, and quality of how your goods move is the border crossing location you will utilize. Borders like Tijuana, El Paso, and Laredo have large infrastructures that have more border crossing lanes, more customs brokers, more warehouses, and more capacity. This gives you a larger array of shipping options as Cross-Border Mexican carriers specialize in crossing borders where they have secure yards. This allows them to avoid having drivers sit while customs paperwork is processed. More competition equates to more options and greater quality, ultimately leading to better rates. 

Avoiding high theft areas

The longer your trailer moves within Mexico, the higher the chance of theft. Due to the geographical layout of Mexico and the current roadway infrastructure, the quickest routes are through central Mexico up to Laredo. These are also the most densely populated areas and thus the most targeted for theft. Based on 2023 reports from Reliance Partners’ Mexico Cargo Hijacking Data Portal*, the most targeted states are Estado de Mexico (outskirts of Mexico City), Puebla, and Michoacan. If manufacturing near border cities is not feasible, a safe practice would be to focus on industrial parks located near major toll highways that have quick and predictable routes.   

Your customer-base

In the end, be practical when making these decisions. If your customer base is located solely along the West coast, Tijuana is logistically the best location. If you will mainly be shipping east of the Mississippi, choose a location where Laredo is your ideal border crossing point. Pay close attention to the potential transit options as well. Depending on the product and quantity you ship, ocean container or rail are viable options. It may make sense to locate closer to an origin rail ramp or within a short haul of an east coast port. The UP, Ferromex, and CPKC have very cost affordable routes depending on where your end destination is. 

If this is your first time heading down this path, your best foot forward is to do your research and talk with professionals who have experience in these matters. There are a large number of consulting firms like Agon*, who specialize in assisting companies set up and execute their operations in the nearshoring Mexico market. If you are looking for recommendations or assistance you can reach out to info@shiphoplite.com for a guiding hand. 

* https://borderlesscoverage.com/mexico-cargo-hijacking-data-portal/ 

*https://agon.mx/en/