DHL’s Nearshoring to Mexico – An Example for Midsized Manufacturers

Commentary by Doug Donahue

DHL has over 10,000 employees in Mexico, over 800,000 square meters of warehousing space, and the ability to handle more than 100,00 domestic and international shipments daily. A big reason the global logistics giant set up shop in the country is in order to support the growing number of companies, manufacturers among them, that are opting for Mexican nearshoring – the perfect location for serving the US market while lowering operating costs.

The growth of Mexican production is at least partly driven by soaring costs in China, where wages and transport costs have grown so quickly that overall operating costs in Mexico are now at parity.

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A recent Supply & Demand Chain Executive article delves further into Mexico’s growth, highlighting the importance of one of 21st-century manufacturing’s most significant trends: Regionalization. The article uses DHL as a case study to show why a growing number of companies are putting heavier emphasis on production occurring close to the customer base.

“Our goal is to simplify our customers’ supply chains,” says David Fox, VP for multinational customers, Americas, with DHL. “By nearshoring [to Latin America], our customers are able to shave weeks off their supply chain, which makes a huge difference. For planning purposes, it certainly puts much less pressure on a number of components in the supply chain.”

Challenges of Nearshoring

Nearshoring to Mexico can help manufacturers bring production closer to customers while lowering operating costs, but the transition isn’t risk free. DHL brought in a team of regulatory experts to help their customers comply with myriad rules and legislation in places like Mexico and Brazil, just to deal with logistics and the supply chain, to say nothing of in-country production. What if you’re considering Mexico but lack the resources or compliance expertise of a DHL?

Most small and midsize manufacturers contemplating Mexican nearshoring lack the required resources to transition to Mexico without incurring untenable levels of risk. That’s why they turn to specialists like Entrada Group, who can assist in the setup and ongoing support of a Mexican facility. Entrada’s unique model oversees General & Administrative support, with manufacturers retaining full control of all production and quality. Our clients lower their compliance risk, as we assume full oversight and responsibility. This advantageous model allows smaller companies to leverage the strengths of a bigger manufacturing community, and compete with bigger players on a global level.

Source: Supply & Demand Chain Executive

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