Manufacturing returns to Mexico

There has been much talk recently about "nearshoring"—locating manufacturing closer to the end consumer—but few companies have actually taken that step. One that has is LG Electronics, a manufacturer of consumer electronics and appliances.

LG has increased the number of products it makes in Mexico and plans to boost production of flat-panel televisions there by 50 percent this year, said Larry Monaghan, LG's director of transportation and logistics, speaking on a panel at the Council of Supply Chain Management Professionals Annual Global Conference.

Several factors played into LG's decision to relocate some manufacturing from China to Mexico. Mexico's decision to promote development of foreign trade zones made the tax and duty picture more attractive, Monaghan said. The difference in order-to-delivery times between Mexico and China also was a major factor. Thanks to improvements in carrier management, customs procedures, and communication with plant managers, orders cross the border into the United States in just 12 to 18 hours.

While security is a concern south of the border for many, that's not the case for LG. "Theft rates are extremely low [for us] coming out of Mexico," Monaghan said.

But these low rates have not come without effort. Working with U.S. and Mexican motor carriers and railroads, the shipper has changed the way it loads and seals trailers, and it selects equipment, carriers, and drivers carefully. It also posts observers at border crossings; if a truck takes longer than expected to arrive at customs, it is turned back and searched for contraband.