Eyes and investments are additionally pointed toward India; an economy focused on accelerated, sustainable growth. According to a report by the Ministry of Statistics and Programme Implementation, the cost of labor is comparatively advantageous, and industrial production in India is nearly 40% lower than in the United States, and around 25% lower than in China. These cost advantages are further amplified by the Indian government’s “Make in India” initiative, which aims to make India a global manufacturing hub and provides various incentives for companies to invest in the country. The government has also suggested an investment of $750 billion to strengthen railway infrastructure and envisioned the Maritime India Vision 2030 which estimates massive investments in world-class infrastructure development at Indian ports.
During the fiscal year 2021-2022, merchandise exports from India surged 43%, reaching a new high at $417.81 billion. Imports increased 55% year-over-year, reaching $610.22 billion.
The balance of trade is favorable, and both India and Vietnam’s focus on our industry is quickly paying dividends for the supply chain ecosystem.
Returning to the Americas
Looking beyond Asia and closer to home, U.S. companies are simultaneously keen on shifting operations back to the Americas.
Can you really take the risk of not having your product reach America? If there is another widespread supply chain problem and all your facilities are across the globe, that could happen. People are rethinking it.
Greater proximity cuts down on shipping delays, port holdups and damaged shipments, making it easier for companies to meet growing consumer demand for short delivery timelines. This ultimately means increased profits, at least somewhat easing the burden of higher labor and manufacturing costs.
People left America because of labor costs. Now, with increased labor costs in China, the advantage is not what it used to be.” Additionally, robotics has cut down on the need for labor.
A report by the Boston Consulting Group (BCG) estimated that the increased use of robots could lead to a 16% reduction in overall production costs for US-based manufacturers. Additionally, the use of robots can help address the labor shortage issues faced by many US manufacturers, as robots can perform repetitive and dangerous tasks that are difficult to automate with human labor.
For companies that depend on robotics for a large portion of their manufacturing processes, moving facilities to the U.S. allows companies to be closer to their customers without being bogged down by higher labor costs. The Lego Group, for example, announced its first U.S.-based factory last year.
Additionally, nearshoring to Mexico provides a multitude of proximity benefits as well as lower labor and infrastructure costs. According to data from the World Bank, the average monthly wage in Mexico’s manufacturing sector was around $589 in 2020. Additionally, Mexico has a large and growing skilled workforce, with a total labor force of around 54 million people.
If a company has to have a cheaper labor component, Mexico is the option. There are a lot of companies moving to Mexico because the Mexico-U.S. supply chain is very efficient.
Mexico’s interest is demonstrated by initiatives such as the Infrastructure Investment Program for Northern Mexico (PNI), launched by the Mexican government in 2019. The PNI promotes infrastructure development in various sectors, including transportation, energy, water, and telecommunications, across the states of Baja California, Baja California Sur, Chihuahua, Coahuila, Durango, Nuevo Leon, Sinaloa, Sonora, and Tamaulipas.
While the benefits are clear, the complexities and costs of reshoring are burdensome. It enables a customer-first approach to navigate new approaches with expertise and transparency at every step of the supply chain.