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Mexico’s nearshoring gives shippers more reasons to go cross-border

Going global just means going next door these days

Image: Jim Allen (FreightWaves)

The global shake-up of the supply chain has dispelled the notion that the greatest opportunities are an ocean away.

Who said a global supply chain had to be global?

That’s the question manufacturers have been posing in recent years as they face continual setbacks in places like China. Fed up with production delays and shortages, companies are taking their business elsewhere.

Many U.S.-based companies have found just what they’re looking for in their neighbors to the south.

Amid China’s ongoing pandemic-related shutdowns, cross-border trade with Mexico has grown by leaps and bounds, making the country an attractive destination for nearshoring. The reasons are numerous. Topping the list is Mexico’s lower cost of labor, recent investments in transportation infrastructure and the hard-to-beat trade benefits of the United States-Mexico-Canada Agreement.

Mexico reigned supreme as the United States’ top trading partner for the second consecutive month in September, as total trade with the U.S. was at $67.4 billion, representing a 23% year-over-year increase. Canada was second, with a 22% year-over-year increase of $66.5 billion. China came in third with $61.1 billion.

Nearshoring’s impact has been almost instantaneous. Carlos Capistrán, Bank of America’s managing director of Canada and Mexico economics, notes that Mexico’s manufacturing sector has grown 5% this year, already surpassing its pre-pandemic footprint, according to Fortune.

Capistrán and bank researchers believe Mexico is on a trajectory for its “best growth opportunity for the next 10 years.”

Recent investments show the U.S. and Mexico are on a similar wavelength, as the Inter-American Development Bank, a leading developmental financial institution for Latin America and the Caribbean, announced plans to provide between $1.75 billion and $2.25 billion in financing to boost nearshoring and company relocation efforts in Mexico over the next three years. 

With trade between Texas and Mexico projected to reach $1.5 trillion by 2050, there’s no better time than now to take advantage of nearshoring and cross-border freight opportunities.

“There is significant momentum on bringing products and the manufacturer of those products closer to home,” said John Leach, chief executive officer of FLS Transportation. “From a macro level, that’s been the focus of these large shippers that have suffered through two and a half years of the pandemic and the myriad disruptions it’s caused.”

As Mexico’s freight future continues to flourish, FLS Transportation is expanding its cross-border operations to ensure shippers can enter the burgeoning market with confidence. The leading 3PL provider for cross-border freight is leaning into its 30-plus years of Canadian cross-border experience to improve the freight logistics across the southern border.

This opens the door to abundant opportunities for shippers that have been weary about cross-border shipping or haven’t even considered it. 

Those on the fence due to security concerns are justified in that thinking. Cargo theft and truck hijackings continue to hold back Mexico in many regards.

“Competition with China is driving nearshoring,” Vanda Felbab-Brown, senior fellow at the Brookings Institute, told Forbes. “Mexico should benefit dramatically, and yet the security situation critically undermines the economic benefits Mexico could reap. Many large businesses will make the calculation that putting new investment in Mexico might have to be put on hold until the security situation improves.”

With a focus on building long-term commitments with shippers and carriers and deploying its shipment visibility technology, FLS Transportation Services looks forward to introducing reliability to a freight sector that has historically lacked these attributes.

“Visibility has become table stakes with large shippers,” said Richard Wolfe, senior vice president of transportation operations at FLS Transportation Services. “They want to know where their freight is in a timely manner, and it’s incumbent on us to provide that to them. Customers using our services and portal receive updates in many cases every 15 minutes on the location and status of the shipment.”

With FLS Transportation’s TMS, shippers can receive quotes, book loads, keep track of shipments and manage invoices in real time via electronic data and application programming interface integrations to stay connected with 54,000-plus trusted carriers in the company’s network.

“It’s in Mexico’s best interests to continue to work with its U.S. partners, as they clearly have the motivation and the benefit to expand what they see as a great opportunity,” Leach said of Mexico’s freight fortunes and safety concerns. “It’s definitely something that we need to deal with and be very mindful of as we’re working with our shipper and carrier partners there to ensure that we’re doing it in the safest way possible.”

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Jack Glenn

Jack Glenn is a sponsored content writer for FreightWaves and lives in Chattanooga, TN with his golden retriever, Beau. He is a graduate of the University of Georgia's Terry College of Business.