Near-shoring for Cost, Logistics Considerations
Surging labor prices in China and soaring transportation costs have resulted in manufacturers repositioning facilities in countries closer to their primary markets. Among the biggest winners of near-shoring is Mexico, thanks to the country’s proximity to the U.S., competitive land prices and lower costs all around.
This is all good news for industrial investment, and with I.CON ‘16: Trends and Forecasts coming up in June, NAIOP chatted with David Eaton, vice president of sales and marketing with Kansas City Southern Mexico (KCSM), about the implications re-shoring, near-shoring and cross-border movements have on industrial real estate.
NAIOP: Why has near-shoring turned into a compelling financial advantage for manufacturers?
Eaton: Companies are persuaded by re-shoring scenarios that will allow them to reduce logistics cost and maintain greater control of their intellectual property. Also, the reduction of distances in supply chains allows companies to have quicker response times, allowing them to adapt to a changing market.
Near-shoring in Mexico has the unique advantage of utilizing comparatively lower-priced labor that is also world-class from a productivity standpoint – all while reducing supply chain complexity and saving on logistics costs.
NAIOP: What is the ripple-effect benefit of re-shored manufacturing? How will the logistics industry respond?
Eaton: Returning manufacturing activities to North America from Asia provides further opportunities for local suppliers to source products regionally. The logistics industry will respond by adding more capacity and transportation routes in the U.S., Canada and Mexico.
Hear more from Eaton and a great panel of industrial experts discussing what’s driving industrial real estate at I.CON ’16: Trends and Forecasts, June 9-10, in Jersey City, New Jersey. See the conference website for details on who attends, hot sessions, and project tours.
Kathryn Hamilton, CAE, is Vice President for Marketing and Communications at NAIOP Corporate.
