Leadership Insights: The rise of nearshoring – and what it means for shipping

Of the many business-related issues exposed by the pandemic, weakened global supply chains were particularly significant, as staff shortages and lockdowns threatened worldwide manufacturing and shipping efforts.

In fact, in one study of 400 executives, 40 per cent said their companies’ image had been negatively impacted by missing deadlines, costs and other disruptions to operations. It’s no wonder many are now seeking to be more resilient, sustainable and collaborative with customers, suppliers and other stakeholders.

In addition to supply chain vulnerabilities, tariffs imposed on China by the previous U.S. administration, and maintained by the current administration, along with geopolitical concerns, have prompted companies to seek nearshore investments further from China. In other words, relocating manufacturing closer to home, closer to the end consumer and in a more convenient time zone, which is also an important consideration for transparency and improved communication between vendors and customers. This is the reverse of what we saw in the 1990s, when production was widely outsourced to China to reduce manufacturing costs.

Mexico is an attractive nearshoring option, as it is both geographically close and politically aligned with the United States and Canada. Furthermore, the USMCA agreement presents an opportunity for companies to enjoy the advantages of duty-free or reduced duties on products shipped within the block.

Choosing the right carrier amidst changing business models

As business models change, we can expect the cross-border trade and investment between Canada, the U.S. and now Mexico to take on an even more important role. Carriers are an important partner in any nearshoring strategy, and those that offer broad coverage, speed and expertise in cross-border regulatory requirements are an important resource.

Here are a few key considerations when choosing a carrier to meet your needs:

Single carrier, single pickup: Having multiple carriers is inefficient and costly, so the best-case scenario is a transportation provider that can pick up various shipment types at once, thereby reducing pickup charges and shipping all cross-border freight at the same time. At Purolator, we call this a “sweep the dock” approach. Customers have the benefit of shipping small packages together with LTL volume as one consolidated shipment, which helps to simplify the process and support transportation savings.

Skip the hub-and-spoke model: The fewer touchpoints the better between pickup source and delivery. Find a carrier flexible enough to manage the expanded territory that’s needed. Our team at Purolator consolidates packages in Mexico, or close to the border, and from there travels straight to a main distribution centre in Canada.

High visibility: Ideally, customers can maintain end-to-end visibility on their shipments – and easily, through one online portal, and with the support of one customer service team.

Efficiency at customs: A consolidated entry at the border for all Canadian imports produces significant cost-savings when extrapolated out over a year. A strong partner will bundle freight into a single entry, saving fees and time at customs.

Discounted pricing: With a single carrier, customers can leverage their overall cross-border shipping volume to bundle products and maximize savings.

Seamless returns: For both B2C and B2B shipping, an easy, efficient returns process is critical to a problem-free comprehensive supply chain as well as proper inventory management. A carrier with broad coverage allows customers to align their cross-border returns and give their own customers a single carrier experience. Purolator, for example, manages the returns process and disposition so our clients don’t have to, providing a smooth, single carrier experience.

At Purolator, we’ve met the rise in nearshoring by developing lanes out of Mexico that feed into an established U.S.-to-Canada network. With a foundation in place for infrastructure, operations and customer service in English and Spanish, these new trade lanes to Mexico can be met with the efficiency companies need to remain competitive in today’s business landscape.

In my next article, we’ll take a closer look at the key considerations for companies implementing a nearshoring strategy in Mexico.