New data suggests Mexican suppliers are gaining ground as manufacturers reset their supply chains amid growing global disruptions, reports The Wall Street Journal (April 1, 2022). Last year, large American manufacturers solicited chemicals, produce and construction materials and other goods from six times as many suppliers based in Mexico as they did in 2020. At the same time, the number of suppliers in China that received procurement bids declined by 9% in 2021.
The push for suppliers in Mexico comes as more companies say they are resetting their supply chains by adding suppliers and bringing some production closer to end users. The effort is aimed at bolstering resilience, redundancy, and reliability following a series of shocks to supply networks brought on by Covid-19 outbreaks, port bottlenecks, extreme weather and geopolitical conflicts.
“If you’re a manufacturer and you used to have strategic relationships with one or two suppliers that produce the same good or a similar good, we’re now seeing that same manufacturer have relationships with three or four different suppliers,” said one industry expert.
The added suppliers tend to be closer to the buyer and its customers. There was a 514% increase from 2020 to 2021 in Mexican suppliers receiving bids from U.S. buyers and a 155% increase in Latin American suppliers. At the same time, manufacturers sought goods from 26% fewer suppliers in the Asia-Pacific region.
A separate survey of 2,000 U.S. and U.K. CEOs by a London-based group found that 15% had moved production closer to their home countries or sourced from suppliers in nearby regions, and 26% were looking into doing so.
Classroom discussion questions:
- What is “nearshoring” and what are its advantages?
- What are the OM implications of these two studies?