Is China’s Popularity with Manufacturers Waning?
For Some, Mexico Remains the Cheaper Alternative
Southfield, Michigan — September 7, 2006 — Lou Longo II, CPA, Vice President of midwest-based Plante & Moran Global Services, is seeing a trend among his U.S. based clients who do business overseas: more are setting up shop in Mexico, or expressing a desire to do so, even if they already have operations in China.
"In the past six months, there’s been marked interest by clients who want to do business in Mexico, sometimes even planning for multiple plants," admits Longo. "We’re hosting or sponsoring three seminars on the topic in the next two months because there’s a definite demand among manufacturers here who want to revisit the benefits initially touted by Mexico."
Longo cites several reasons why ‘nearshoring’ to Mexico remains a good option for overseas expansion.
"There are practical considerations in comparing Mexico to China or India that can’t be denied," offers Longo. "Mexico’s proximity to the United States, for example, can mean much shorter product travel time, which aids in efficient Just in Time inventory and shipping processes. Similarly, it’s easier for management to oversee Mexican operations because of their ease of travel. Further, the NAFTA connections still have pull and, surprising to some, the labor costs in Mexico can be competitive with Asian countries."
Longo cautions manufacturers about establishing any foreign operations without extensive and often tedious due diligence.
"The biggest risks in global expansion are intellectual property control, supply chain management, language/culture/financial risks, management talent and underutilization of U.S. assets," advises Longo. "Business owners need complete confidence that these key areas have been fully addressed before making any significant investment in an international operation."
