Link to post: https://blog.victorypackaging.com/what-nearshoring-means-for-your-packaging-strategy
In recent years, nearshoring has emerged as a prominent global trend. This surge can be explained by many global events that make companies take the strategic step of relocating their business operations to neighboring countries. In the US, nearshoring is gaining traction as a larger number of businesses are shifting operations from APAC countries to Mexico — a move designed to reduce risk amid significant global volatility.
According to a recent Morgan Stanley study, new nearshoring investments could reach about $46 billion over the next five years, helping to boost Mexico's annual GDP growth to about 3% between 2025 and 2027. This has the potential to accelerate the growth of Mexico’s manufacturing exports to the U.S. from $455 billion to an estimated $609 billion over the next five years, boosting Mexico's economy while delivering benefits to US companies.
Nearshoring is often credited with helping to reduce geopolitical risks by establishing closer ties with neighboring countries. It also offers compelling advantages for businesses equipped with the right strategy, such as enabling significant shipping and transportation cost savings due to the geographic proximity between manufacturing hubs and consumer markets. Nearshoring can also help companies minimizing carbon emissions associated with long-haul transportation routes.
But in spite of these promising opportunities, nearshoring also brings challenges — particularly in the packaging supply chain. Maintaining consistency, quality and continuity across operations in Mexico and the US is critical. Addressing these challenges requires partnering with a packaging company that brings expertise and resources on both sides of the border.
Nearshoring is a business strategy of outsourcing processes to companies in nearby countries. Over time, nearshoring to Mexico has gained prominence among US companies due to its many benefits. Reshoring, on the other hand, involves bringing manufacturing, suppliers and other processes back to the domestic market.
Recent reports indicate the growing traction of nearshoring. According to Bloomberg, 80% of companies in North America were actively considering nearshoring in 2022. Similarly, a 2023 survey [conducted by QIMA](https://gfmag.com/economics-policy-regulation/latin-america-nearshoring-boost/#:~:text=Across industries%2C “57%25 of,research published by consultancy QIMA.) indicated that 57% of companies worldwide view nearshoring as essential to their supply chain strategy.
Many geopolitical dynamics have contributed to the rise of nearshoring. The US-China trade war, rising manufacturing costs in Asia and disruptions caused by the COVID-19 pandemic are a few examples of major events affecting global trade. Taken together, these factors underline the risk of poor sourcing diversification, the importance of streamlining supply chains and the need to mitigate risks associated with distant sourcing. The rise of automation has also enabled companies to produce goods closer to home without sacrificing efficiency.
Reshoring offers several advantages as well, including speed and flexibility due to reduced lead times, increased control and compliance with local regulations. It can also potentially offer domestic incentive benefits and lower carbon emissions from shorter transportation requirements. However, domestic wage rates and other related expenses often mean that reshoring comes with higher operational costs. In this scenario, nearshoring can strike a more optimal balance between cost-effectiveness and proximity, making it an attractive option for businesses seeking to optimize their supply chains.
The most common sectors for nearshoring today are automotive, industrial — including medical devices — and electronics. The proximity of manufacturing facilities to consumer markets greatly benefits these industries by enabling faster delivery times, reducing network complexities and avoiding major disruptions. However, nearshoring also raises critical packaging considerations that require an expert partner to navigate.
As businesses delve into nearshoring strategies to optimize their operations, it's crucial to recognize the implications this shift has on packaging. Nearshoring not only transforms manufacturing and distribution dynamics but also requires companies to reevaluate packaging strategies to ensure alignment with new operational frameworks.
Nearshoring operations present several packaging challenges, each requiring careful consideration to mitigate potential risks and ensure seamless supply chain management.
Take treated pallets as an example: These pallets are a critical component of many packaging and transportation processes. Ensuring they are treated to meet international standards is crucial for compliance and product safety. However, finding suppliers who consistently provide treated pallets with the required quality can be a complex task in Mexico's fragmented market.