Proximity to Market Challenge: Mexico vs. China [2023]

Last Updated on July 11, 2023

It is crucial for your manufacturing operation to have an efficient supply chain and a short proximity to your market. Often, this is not possible if your business is dependent on shipping times from overseas. 

The establishment of manufacturing facilities overseas has long been regarded as a means of reducing labor and production costs; however, businesses that wish to begin manufacturing operations in Asia consistently fail to take into account the other costs associated with this endeavor: the most significant of which is shipping your completed products back to the United States.

What Does Proximity to Market Mean?

Proximity to market refers to the distance or location of a property in relation to a specific market or area where goods and services are sold or exchanged. The closer a property is to a market, the more valuable it is considered to be, as it is more easily accessible and convenient for consumers and businesses. Factors such as transportation infrastructure and zoning regulations can also play a role in determining a property's proximity to market.

Shipping Costs , Congested Ports & COVID-19 Are Problems in China

For example, CNBC is reporting several factors in shipping from China; shortages of shipping containers, congested ports and new outbreaks of COVID-19 are hampering shipping supply chains and shipping even worse than usual:

“COVID is causing massive shipping delays in major Chinese ports, and jacking up already-high shipping costs as waiting times at berth “skyrocketed,” according to analysts and those in the shipping industry.
“The disruptions in Shenzhen and Guangzhou are absolutely massive. Alone, they would have an unprecedented supply chain impact,” said Brian Glick, founder and CEO at supply chain integration platform Chain.io, told CNBC.

Time Delays Are Just Part of the Problem

According to the New York Times, the cost of getting goods out of China has increased dramatically along with supply. Chinese shippers are passing these costs on to the manufacturers.

“Shipping rates for containers have continued to rise steeply in the weeks since Yantian Port reopened. The increase is widely expected to keep going as stores in the United States in particular race to restock shelves for returning shoppers and start preparing for the Christmas shopping season.

“Each week these rates go up another few hundred dollars,” said Simon Heaney, the senior manager for container shipping research at Drewry Maritime Research in London. “Nobody seems to have any answers, and the only thing we can hope for is Chinese New Year — and that’s obviously a long way off.”

Proximity to Market Not an Issue for Manufacturers in Mexico

Companies who wish to establish manufacturing operations in Mexico do not face these problems: shipping is primarily by rail and truck, saving a considerable amount of money compared to shopping by fleet, and having your goods ready to be delivered on the same continent will give you a strategic advantage in time to market and supply chain viability.

With its geographical proximity, shorter transit times, time zone alignment, accessibility, free trade, cross-border logistics investments, and strong political and social ties with the United States, Mexico continues to enjoy strong logistical advantages.

Approximately $27 billion of trade between the United States and China could be captured by Mexico, a substantial increase over their total exports, according to a study by UNCTAD.

Proximity to Market Benefit: Visit When You Want

However, while getting a trip to a manufacturing operation in Mexico is relatively easy here in the U.S., there is no such thing as a “quick trip” to China or any other locations for manufacturing in Asia. Trips to these locations can be 20+ hours long just to arrive! If you begin a manufacturing operation in China, expect to rely on reports from the people managing the operation or remote meetings as your assurance that all things are running well.

Having access to your manufacturing operations is an obvious strategic advantage: any size manufacturing operation is going to have to be “hands-on” if you expect to gain any success - this means you are going to have to make frequent trips to ensure that all is running smoothly.  

Conclusion: Mexico Wins The Proximity to Market Challenge

The Mexico Manufacturing Advantage on this is clear: Corporate executives and operational managers can visit their Mexico operations far more regularly and without having to fly halfway around the world. 

An increased level of collaboration between manufacturers across international borders facilitates trade and promotes a globalized economy. The move of manufacturing operations to regions where there are cost-effective prices and skilled employees provides international firms with greater flexibility, greater authority, and greater profitability, and Mexico is becoming one of the most attractive destinations for top companies looking for production facilities.

FAQ's on The Proximity Between Mexico and China

Q1: What is the proximity-to-market challenge when comparing Mexico and China?
A1: The proximity-to-market challenge refers to the geographical distance between manufacturing locations and the target market. In the context of Mexico and China, it compares the advantages and challenges of each country's proximity to key markets such as the United States.

Q2: What are the advantages of Mexico's proximity to the United States compared to China?
A2: Mexico's proximity to the United States provides several advantages. These include shorter lead times, reduced transportation costs, easier collaboration, and improved supply chain responsiveness. Being close to the U.S. market allows for faster delivery of goods, quicker response to changing market demands, and better overall customer service.

Q3: Does China's distance from the United States pose challenges for businesses?
A3: Yes, China's distance from the United States can pose challenges for businesses. Longer shipping times, increased transportation costs, and potential delays at customs can impact supply chain efficiency. Additionally, the time zone difference and cultural factors can introduce communication challenges and affect coordination between manufacturing operations and the target market.

Q4: How does Mexico's proximity help mitigate supply chain risks and disruptions?
A4: Mexico's proximity to the United States helps mitigate supply chain risks and disruptions in several ways. The shorter distance reduces the vulnerability to transportation disruptions, such as port congestions or natural disasters. It also allows for faster response to unexpected events, such as changes in consumer demand or disruptions in global logistics. Proximity facilitates more agile supply chain management, enabling businesses to adapt quickly to market fluctuations.

Q5: Are there any other advantages of Mexico's proximity to the United States over China?
A5: Yes, apart from the logistical advantages, Mexico's proximity to the United States offers additional benefits. These include cultural similarities, ease of travel for business visits, reduced language barriers, and shared time zones. These factors contribute to better collaboration, faster decision-making, and a closer alignment between the manufacturing operations and the market needs in the United States.