Relocation to Mexico and Canada due to geopolitics

The relocation to Mexico and Canada is mainly due to geopolitical reasons, indicated a report released by the United States Federal Reserve.

Although the United States market experiences widespread labor challenges, which are affecting the national contingent workforce, the members of the Federal Advisory Council do not report any significant trends in economic activity «on-shoring» or «reshoring» to the United States.

On the one hand, nearshore Anglicism (close relocation) refers to the installation by a multinational company of the production of its goods and services in a country close to that of its parent company, where costs are lower.

As reshore (relocation or repatriation) refers to the transfer by a company of its operations from abroad, where they had been transferred, back to the original country of origin.

However, many members of the Federal Advisory Council have reported an increase in interest in «right-shoring» or «near-shoring», which is supported by a report from Thomas Reports consultancy from July 2021, which found that 83% of manufacturers indicated that re-shore is likely over the next 12 months, up from 54% a year ago.

Relocation to Mexico

The board added that most of the informed focus has been on diversifying operations outside of China to other Southeast Asian countries or moving operations to physically closer locations such as Mexico and Canada.

Although global supply chains are undergoing significant changes abroad, some of these changes appear to be due to geopolitical reasons rather than in response to supply chain issues related to Covid-19, according to the Council.

Industrial products companies are dealing with these changes and additional expenses by relying more on artificial intelligence and other technologies to improve production efficiency.

While these adjustments to the global supply chain are likely to add some cost pressure to the production chain, the increase in price pressures has been minimal.

The correct underpinning or best positioning is the location of a company’s components and processes in locations and countries that provide the best combination of cost and efficiency.