Consultant’s Insight: Looking for nearshoring signs

Is nearshoring actually occurring or is it mere talk? Different viewpoints are emerging with little data to support the actual trend. [caption id="attachment_76185" align="alignright" width="224"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo Next columnist[/caption] According to the consulting firm Kearney ’s 2022 Reshoring Index, 96% of CEOs surveyed are evaluating reshoring their operations or have either decided to reshore or already reshored, an increase from 78% in 2022. When asked about nearshoring trends and Mexico during its earnings call Tuesday, Hamid Moghadam , chief executive of property management firm Prologis , told analysts, “The biggest impact is on northern Mexico. Those markets along the border are literally on fire. There is no vacancy, and we’re seeing a lot of nearshoring happening there as sort of a diversification move.” Building trend Chris Caton , managing director of global strategy and analytics at Prologis, added, “I’d say there isn’t great data on this, but we see that it is a building trend in Northern Mexico. So, it takes time for those supply chains to relocate instead of the ecosystems they need to really function properly and resiliently. And that is happening and will continue to happen, so I would expect it to grow in the coming years as well.” The Federal Reserve Bank of Dallas seems to agree with Caton on the lack of data, recently writing: “Nearshoring to Mexico should be reflected in foreign direct investment (FDI) data. But FDI in Mexico was largely flat from 2015 to 2022. It could be because large sums are often involved; the impact on FDI is lagged and may well show up in future data releases. It could also be that other factors, such as a changing business climate or the pandemic, have held up progress on nearshoring to Mexico.” The Dallas Fed further noted that the U.S. share of FDI in Mexico has changed little over the years, while China’s share, though still very small, is rising quickly. The Fed attributes China’s growing share to higher tariffs since 2018 and supply chain difficulties during the pandemic. Additionally, the U.S.-Mexico-Canada trade accord (USMCA), which took effect in July 2020 and replaced NAFTA, may have limited some anticipated FDI benefits by the U.S. Logistics providers prepare Chicago-based Redwood Logistics announced Wednesday it would open new offices in Monterrey, Mexico. The company has been in Mexico for more than five years but noted that the latest expansion “reflects the investment businesses are making in nearshoring efforts as they look to reduce manufacturing and cash-to-cash cycles.” “Mexico has evolved from an exporter of basic goods to a manufacturing hub for the most complex and technologically advanced consumer goods, and we are seeing major investments from the world’s largest retailers and manufacturers from industries including automotive, appliances, aerospace, pharmaceutical, HVAC and food and beverage,” said Jordan Dewart , president of Redwood Mexico . “As shippers of all kinds make the move south of the border, it’s vital that we grow to match their efforts. With our expansion in Monterrey, we’re now able to service more cross-border freight beyond the over 25,000 shipments we oversee yearly,” he added.

Consultant’s Insight: Looking for nearshoring signs

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