Mexico: A Better Choice than China?

Many U.S. companies forget to consider alternatives, including El Pequeno Kahuna—Mexico, points out Hal Sirkin

There are many other low-cost manufacturing alternatives: Brazil, India, Thailand, and Vietnam, to name some. Closer to home lies America's third-largest trading partner, Mexico. If distant China is the Big Kahuna of low-cost manufacturing and sourcing, Mexico should be seen as El Pequeno Kahuna.

Mexico is growing more competitive

As noted in a 2008 Boston Consulting Group report, Mexico's Evolving Sweet Spot in the Globalization Landscape, the cost difference between low-wage Mexico and lower-wage China has been narrowing. In 1996, Chinese labor cost about one-third of Mexican labor. Today, Chinese labor costs are about half of Mexico's—$1.69 per hour, on average, in 2007, compared to $3.46 per hour, according to the International Labor Organization (ILO).

The fact that Mexico is our neighbor means a company often can place an order one or two weeks before delivery is needed, rather than four to six weeks in advance, as is typically necessary when sourcing from China.

shipping savings exceed labor edge

Mexico's proximity to the U.S. also means less dependence on America's crowded ports. It's also faster and cheaper to move heavy products relatively short distances by truck than to do it over thousands of miles by ship, and then further by rail, truck, or both.