Nearshoring Expected to Penetrate Further, Drive Growth

Nearshoring is a macro trend related to the shift of supply chains to locations that are “near” or closer to the final consumer markets. The tendency seeks the same goals as offshoring — cost reduction, efficient and skilled labor, and high-quality final products — but with the difference of closer proximity. Increased taxes applied to goods manufactured in China and exported to the US, coupled with severe disruptions in global supply chains and record-high shipping costs, mainly driven by the pandemic, together with other factors, have fueled this trend in the past few years.

It is expected that this phenomenon will continue to penetrate and drive growth and expansion of several industries in Latin America, and especially in Mexico, since it has become the most relevant trade partner of the US, partly prompted by the USMCA. Today, supply chains that start in Mexico are faster and more efficient for many sectors and for many reasons. Because of nearshoring, Mexico has the potential to become the leading supplier to the rest of North America. 

Mexico retains several advantages. First and foremost, the country is the southern neighbor of the US, one of the highest consumer economies in the world. It also has an extensive manufacturing installed capacity in many industries that is very difficult to replicate elsewhere in the region. The auto industry, aerospace, maquila, industrial machinery, medical devices, mining and oil are among the most important manufacturing sectors in Mexico, while others are recently blooming, such as toys, textile, apparel, furniture, and semiconductors. Furthermore, the fact that the Mexican geography holds access to two oceans, a unique feature in Latin America, and virtually the same time zones as the US, ensures better communication. Moreover, Mexico holds one of the highest ratios of engineering graduates within the OECD. In addition, the country maintains 13 other free-trade agreements – USMCA aside –  with 50 different countries. All of the above translates into a very convenient logistics position. 

It is well known that several companies from both the US and China have been arriving in Mexico in the past few years to set up mainly large manufacturing operations targeted for the North American region, gaining market share, and seizing demand. According to some real estate sources, there are more than 530 industrial parks registered in Mexico, most of them class-A, while some 90 more are under construction. 

In a nutshell, Mexico is the natural destination for those companies seeking such advantages. Thus, nearshoring has become the new “name of the game” for companies like TRAXIÓN, the leading mobility, logistics and transportation enterprise in the country. 

TRAXIÓN owns an extensive operating infrastructure, coupled with a tremendous commercial muscle, a strong balance sheet and a modern technological platform, which will enable the company to continue to seize opportunities that arise from nearshoring in an efficient and profitable manner. 

In terms of logistics services, TRAXIÓN operates a state-of-the-art, technology-driven 4PL platform that provides efficient supply chain solutions for a growing number of industries whose clients are becoming increasingly more sophisticated. Such services are somewhat underpenetrated in Mexico, and are aimed at reducing process complexity, improving operating times, and ultimately rendering a one-stop, end-to-end tailor-made solution. 

The company is also one of the largest 3PL warehouse managers in the country, with more than 6.5 million square feet in operation and AAA clients. Its modern, state-of-the-art, warehouse management systems (WMS) provide efficient inventory handling and deliver improved control of distribution networks that reduce human error while providing a permanent, 100 percent visibility for clients.

TRAXIÓN also offers the broadest solutions for cargo in Mexico. Services range from truckload, intermodal, refrigerated, less-than-truckload, cross-border, petrochemicals, fuel, food-grade, moving and relocation and special formats. This service portfolio is leveraged with modern technologies that results in superior execution capabilities, which is precisely TRAXIÓN’s most significant competitive advantage.

All of that represents a unique position in logistics that, together with TRAXION’s extensive cross-border infrastructure and capabilities, provides unparalleled efficiency for door-to-door services to the US. 

Additionally, TRAXIÓN is the No. 1 player of people mobility in Mexico. It owns the largest and most modern fleet in the country and is several times larger than the next competitor. The company provides efficient personnel transportation solutions for large companies, especially to and from industrial parks and manufacturing hubs, thus rendering an effective alternative to public transportation, which in some regions of Mexico represents a great challenge as manufacturing centers have developed progressively farther away from urban areas.

The sheer size and scale of this division represents the toughest barrier to entry for new and small competitors. Besides that, the operating infrastructure in place is extremely difficult to replicate. Technology provides unique value-added services for clients and makes the mobility of their staff more efficient. 

Such leadership will allow TRAXIÓN to continue to capture opportunities as more and more industrial parks start operating, and more companies find in Mexico the best investment destination to manufacture products for North America.

In summary, nearshoring has been and will continue to thrive in Mexico. It is expected that investments will keep pouring into the industrial arena. The good news is that TRAXIÓN is poised to grow as this trend spreads further into Mexico.