Navigating Nearshoring Challenges, Opportunities

The exponential rise of nearshoring has unleashed a revolution in Mexico and Latin America’s logistics landscape, and as pioneers in the sector, at UPS we are at the forefront of this transformation. The concept of nearshoring, which involves moving production and service operations closer to the end market, is gaining unprecedented importance in the region by shortening supply chains and optimizing efficiency in product delivery.

This phenomenon is causing a significant impact on international trade: Toward the end of November 2023, US Census Bureau data showed exports from Mexico to the United States achieved a historic milestone, reaching a value of US$39.81 billion, an increase of 8.1% compared to the same month in the previous year. The above consolidates Mexico as the main supplier of goods to its northern neighbor.

Likewise, according to data provided by the Association of Logistics Operators of Mexico (AOLM), the logistics sector currently represents a considerable part of national gross domestic product (GDP). And now, with the strong adoption of nearshoring in Mexico, its economic contribution is expected to increase significantly, driven by the growing demand for logistics services derived from the relocation of manufacturing and service operations.

That pace will continue, as demonstrated by recent data from Fitch Ratings, which in its outlook for Mexico's economic growth for 2024, raised its estimate from 1.8% to 2.4%. One of the factors was nearshoring. JP Morgan also raised its forecast for Mexico's GDP growth, from 1% to 2.7% by 2024, due to an increase in domestic consumption and the growth of FDI due to nearshoring .

However, this trend presents a series of challenges for companies, both those seeking to expand and those already established in the market. One of the most prominent challenges is the efficient management of the supply chain in an increasingly globalized and competitive environment. Companies are faced with the task of coordinating production, transportation, and distribution activities across multiple geographic locations, which can result in increased complexity and operational costs.

Additionally, the need to comply with trade and customs regulations in both the country of origin and destination adds another layer of complexity. Companies must ensure they comply with the legal and regulatory requirements of each country in which they operate, which can be especially challenging for new companies that have no prior experience in international trade.

In this context, logistics companies like UPS play a critical role as strategic partners to help companies overcome these challenges and make the most of the opportunities that nearshoring offers. As leaders in the sector, we have the experience and resources necessary to offer comprehensive solutions that address the specific needs of each customer and help them expand efficiently in the global market.

One of the main advantages of working with a logistics company like UPS is the ability to access an extensive transportation, distribution and warehousing network that spans multiple countries and regions. Our global footprint allows us to offer land, sea and air transportation services that can be tailored to each customer's specific needs and provide fast, reliable delivery anywhere in the world.

Additionally, our experience in customs management and trade compliance allows us to help companies navigate the complex regulatory environment of international trade and avoid potential obstacles that could delay their operations. Our inventory management services can also help companies optimize their stock levels and improve efficiency across their supply chain.

Today's logistics companies must focus on being more than just a logistics service provider; you need to be a true strategic partner that helps the companies that seek you out achieve their growth and expansion objectives in the global market. It will be important to work closely with clients to understand their needs and develop tailored solutions that add value to their operations and improve their competitiveness, to make the most of the opportunities that the relocation of production chains is opening up. 

Nearshoring is transforming the business landscape in Mexico and Latin America, offering new opportunities for expansion and growth; however, it also presents a series of challenges that companies must face. The best way will be to approach strategic allies that help them navigate this environment successfully, offering support and comprehensive solutions so that they can make the most of the opportunities that this mega-trend presents.