Nearshoring Services

Finding the best location for your operations in North and Central America

As many recent articles have attested to, nearshoring from China or Europe to North America has been a fast developing trend. Already, Mexico has become the United State's #1 trading partner, eclipsing China with over $334 billion in two-way trade for the first eight months of 2024. This is almost a 6 percent annual increase over 2023.

The election of Mexico's President Claudia Sheinbaum Pardo and subsequent policy statements regarding significant changes to national policy to encourage more foreign domestic investment has ignited the country's real estate and utilities sectors.

Foreign companies have been seeking new locations in Mexico and Central America in order to bring manufacturing closer to U.S. markets and to hedge against an emerging trade war between the U.S. and China. Many Chinese auto manufacturers and parts suppliers have announced plans to establish manufacturing footprints in Mexico, but U.S. officials worry about the impact on the domestic automotive industry and are weighing policy and trade agreement changes to mitigate this risk. This may include higher tariffs, changes to the definition of what constitutes local versus foreign contents, and what constitutes manufacturing versus final assembly and packaging.

Many companies want to assess the feasibility of manufacturing in Mexico versus locations in the United States, Canada and Central America. Geopolitical risks, infrastructure challenges in Mexico, real estate challenges, logistics challenges, crime and corruption, labor regulations, training and attrition challenges and other issues concern site seeking executives who must balance a lower cost operating profile against the operating and risk avoidance advantages of a U.S. or Canadian location.

To better understand these trade offs, many site seeking corporations have engaged consulting companies specializing in global footprint analysis, management consulting and supply chain optimization such as The Nearshoring Group.

Selecting a Nearshoring Company

If you are considering selecting a Nearshoring Consultant, there are many questions that you should be asking prospective vendors, such as:

• How does the consultant get paid?

  
  

  Many Nearshoring Companies provide advice to their clients for a fee, but also have other sources of revenue which can color their recommendations. These include companies that have as their core business model a commission structure which provides compensation to them based on the purchase or leasing of real estate. Typically, these compensation scenarios are based on a percentage of the total sales price or multi-year lease income. Thus the higher the cost of real estate the more they get paid. This is in direct conflict with the company's goals of reducing the cost of real estate and could lead to inaccurate or conflicted advice.

Other Nearshoring Companies, particularly those in Mexico operate Shelter manufacturing operations, which have the benefit of getting a company into

manufacturing faster, but at a higher cost that if the company were to find, construct and operate a manufacturing facility in Mexico on its own. In addition, most of these Nearshoring Companies have fixed operations in the border zone, where labor costs tend to be much higher and employee turnover can be as much as 50 % per year. Finally, as a company scales its operations in Mexico, a shelter operation can become quite expensive and time consuming from a management perspective. This negates the cost advantages that the drove the original location decision.

The Nearshoring Group operates as a conflict free management consulting organization where reasonable fees are not supplemented by "back-door" commission structures and/or fees paid to one landlord or another. This ensures that our customers receive honest, pro-customer advice without the influence of large commissions which could be driven by consultant recommendations.

• What geographies do you cover?

Many Nearshoring consultants specialize in only one or two geographies, such as the Mexico-U.S. border zone. Lacking locally-based resources, intimate knowledge, and key contacts, these companies tend to overlook potential locations in the U.S., Canada or Central America which may be a better fit over the border zone, from an operating cost, conditions or risk perspective.

The Nearshoring Group has expertise and local resources including ten regional offices in the U.S., Canada, Mexico, Europe, China and SE Asia. This affords our clients to conduct an apples-to-apples comparison of potential manufacturing sites in India, Thailand, Mexico and the U.S., for example. Our services are not limited to a single country, continent or region. You get the same local knowledge, methodologies and processes no matter which geography you choose to explore.

• What services do you offer?

Implementing a successful manufacturing plant start-up and on-going operation in a new geography is challenging and is fraught with cost and timing risks. Many companies do not know where to go for help on planning, managing and implementing a foreign manufacturing strategy, where cultures and customs can conflict with the cultures and customer of the home country. This requires the use on in-country resources who are familiar with the resources and capabilities of local professionals, engineers, constructors, and administrative consultants.

The Nearshoring Group has networks of highly experienced, vetted and professional services resources to solve almost any problem with expansion in a foreign country. From law firms and consultants with deep political connections, to

on-site energy consultants, architects, planners and realtors, our service offerings are customized to your specific needs and managed by full-time professional project managers. All communications and project management needs can be addressed with a single point of contact, instead of multiple call and finger pointing between numerous vendors.

• The Nearshoring Group's advantage.

The Nearshoring Group was founded by highly experienced site selection consultants and international trade experts to provide unbiased advice and assistance to companies seeking help in establishing new manufacturing, distribution or service operations throughout the world. Our services are tailored to your companies unique needs and timelines and can be phased in order to ensure a logical, data-driven solution to your company's immediate needs.

Services include:

• Business case development and analysis

• Site selection and reviews

• Real estate acquisition services and negotiation

• Government Incentives and credits review and compliance

• Capital markets/financing access

• Program management services

• Contract manufacturing tendering, analysis and negotiations

• Supply chain consulting and footprint optimization

• Procurement management/Supplier identification and qualification

• Federal, state and local government compliance services

• Trade regulations and import/export compliance services

If you are considering manufacturing, distribution or services expansion in North America, Central America or anywhere, worldwide, we encourage you to reach out to one of our experts for a confidential, no-cost review of your plans. Our U.S. sales operations are located in Irvine, California and can be reached at 949-328-7592 or via e-mail at bspence@nearshoringgroup.com.