Scaling Businesses Through Nearshoring: Nine Benefits of Outsourcing to Mexico

Maximizing productivity while reducing overhead costs is vital for scaling businesses. Outsourcing fills this gap, with nearshoring to Mexico becoming increasingly popular among U.S. companies.

Hiring virtual assistants in Mexico can be the missing key for businesses seeking to grow sustainably and enhance cost-efficiency.

This article discusses the growing popularity of nearshoring in Mexico and the unique ways it can help your business. It also provides examples of commonly outsourced functions and successful nearshoring engagements in Mexico.

What Is Nearshore Outsourcing?

Before discussing nearshore outsourcing and its benefits, let us first answer the question: what is business process outsourcing (BPO)? It is a practice that involves delegating specific job functions to a third-party service provider. 

The main objective of outsourcing is to improve operational efficiency and allow client companies to focus on central business functions, which is thoroughly explored in our nearshore business process outsourcing guide. The three models of this strategy include onshoring, nearshoring, and offshoring.

Nearshore outsourcing involves companies subcontracting tasks to a BPO partner in a neighboring country. It is often contrasted with offshoring, which entails outsourcing to a provider on another continent.

An excellent example of nearshore outsourcing would be U.S. companies partnering with service providers in Mexico following the recent reshoring trend. 

According to CNBC, businesses in the United States are considering reshoring for various reasons. China’s diminishing dominance as a center for global manufacturing is among them. Other factors include shipping disruptions caused by the Ukraine war and the pandemic.

Mexico Rises as a Preferred Nearshoring Hub

Mexico has become a popular choice for reshoring and nearshoring among businesses in America. Here are the factors that encourage U.S. companies to outsource to Mexico:

• Political and economic stability. Mexico’s economy and political landscape make it a safe nearshoring destination for U.S. businesses. Such conditions reduce the threat of government disruptions and interference and the risk of currency fluctuations and inflation.
• Strong government support. The Mexican government supports the industry through legislation, such as the National Nearshoring Strategy launched in 2022. Nearshore outsourcing is a key sector in Mexico that attracts foreign investment, creates jobs, and boosts the economy. 

Nine Unique Ways Nearshore Outsourcing to Mexico Benefits Businesses

Nearshoring to Mexico offers several nearshore outsourcing advantages for businesses of all sizes. It provides clients with scalable processes, cost-efficient fees, and improved focus on core functions, much like other types of outsourcing.

It offers significant benefits that distinguish it from onshoring and offshoring. Check out the unique advantages of outsourcing to Mexico below:

1. Improved time zone alignment. Significant time zone differences make scheduling meetings and coordinating tasks challenging. In contrast, Mexico shares several time zones with the United States and Canada. The minimal time difference allows businesses to communicate and collaborate with nearshore teams in real time.
2. Geographical proximity. Mexico is just south of the U.S., so traveling between the two countries is inexpensive. Mexico’s proximity enables businesses to reduce lead time for project kickoffs and even perform face-to-face training and quality control visits. It also helps companies manage nearshore teams and resolve issues better.
3. Better cultural affinity. Cultural affinity goes hand in hand with geographical proximity. Mexico and the U.S. share many cultural traits, which can simplify cross-cultural interactions, communication, and understanding. Close cultural ties can also lead to smoother collaboration and better outcomes in cross-border partnerships.
4. Enhanced language proficiency. Language barriers between team members can lead to miscommunication, project delays, and unproductiveness. English proficiency is widespread among Mexican professionals. This ensures effective and efficient communication with U.S. clients and partners.
5. Favorable trade agreements. The U.S. and Mexico recently signed the United States-Mexico-Canada Agreement (USMCA) to replace the North American Free Trade Agreement (NAFTA). The USMCA eliminates tariffs on most goods traded between the countries, making nearshore outsourcing to Mexico less expensive.
6. Reliable infrastructure. Mexico has a developed telecommunications system, including fixed-line and mobile phone service and high-speed internet access. This reliable system enables Mexican BPO providers to communicate and collaborate effectively with their U.S. clients. It also allows them to offer exceptional services remotely.
7. Specialized workers. BPO firms in Mexico employ professionals specializing in various job functions. The country has a notably ample supply of technical talent, such as engineers, scientists, and software developers. In addition, Mexico’s workforce ranked ninth best out of 60 countries in 2022.
8. Up-to-date technology. Outsourcing to Mexico provides businesses with access to advanced technology. The country is a growing tech hub, with Mexico City, Guadalajara, Tijuana, and Monterrey leading in technology and innovation. Third-party service providers leverage artificial intelligence (AI), robotics, and the Internet of Things (IoT).
9. Increased cost-efficiency. While Mexico is not as low-cost as some offshoring destinations, outsourcing to the country is still more cost-efficient than hiring an in-house team. It also reduces travel expenses, the risk of costly mistakes, and investments in communication and collaboration improvement software.

Job Functions Frequently Outsourced to Mexico

Businesses can rely on BPO companies in Mexico for front-office and back-office outsourcing services. Here are some of the functions you can outsource to Mexico:

• Information technology (IT). Technical support outsourcing involves a variety of functions, including software development, application maintenance, IT support, quality assurance, and cybersecurity. Many U.S. tech giants, such as Amazon, Facebook, and Intel, outsource their technical teams to Mexico.
• Manufacturing and production. Mexico is a central manufacturing hub for the automotive, aerospace, electronics, and medical industries. Many businesses outsource their manufacturing to Mexico to leverage the country’s low labor costs, geographical proximity to the U.S., and favorable trade agreements.
• Data entry and processing.  Entering and interpreting information from printed information, electronic data, and audio and video recordings requires specialized skills. U.S. businesses rely on data entry outsourcing companies in Mexico to acquire such expertise without incurring heavy labor costs.
• Accounting and finance. Outsourcing accounting and finance tasks helps businesses streamline time-consuming and repetitive procedures. BPO providers in Mexico cover several accounting and finance functions, such as payroll, tax preparation, filing, auditing, and financial reporting.
• Customer service. With Mexico’s robust telecommunication systems and increasing tech hubs, many U.S. businesses outsource customer service to Mexico. Aside from the traditional approach to customer support, nearshore service providers also offer contact center as a service (CCaaS) solutions. 
• Human resources (HR) functions. Businesses delegate recruitment, hiring, and onboarding tasks to BPO providers in Mexico. They also outsource other HR functions, such as employee benefits administration, performance management, and employee relations.

Companies That Achieved Nearshore Outsourcing Success in Mexico

Let us look at real examples of nearshore outsourcing to better grasp how beneficial outsourcing to Mexico is for U.S. companies. The next section explores a few success stories of nearshoring to Mexico.

Ford’s Influential Nearshoring Beginnings

The Ford Motor Company supplies one of Mexico’s earliest successful examples of nearshoring. In 1925, Henry Ford established the first auto manufacturing plant in Mexico, making him one of the first industrialists to establish nearshore manufacturing operations.

Mexico saw the production of the famous Ford Model T, the first mass-affordable automobile. This success led Ford’s competitors, including General Motors (GM) and Chrysler, to follow suit. Foreign car manufacturers, such as Nissan and Volkswagen, have also recently started nearshoring manufacturing operations to Mexico.

Ford’s decision to move manufacturing operations to Mexico paved the way for other U.S. companies. Mexico is now well-known for its production and assembly outsourcing services.

Whirlpool’s Successful Supply Chain

Whirlpool, a world-renowned furniture company and home appliance brand, outsourced its marketing and manufacturing operations to Mexico in 1987. They established three production facilities, two distribution hubs, and two technology centers in the country. 

Soon, other home appliance brands such as Samsung and LG started nearshore outsourcing to providers in Mexico, too.

By maximizing Mexico’s qualified talent, robust infrastructure, and lower labor and overhead costs, Whirlpool positioned itself on top of the market. The company’s Mexican plant now exports 80% of its appliances, such as fridges, washing machines, and stoves, to North America. In 2022, it reported approximately $20 billion in annual sales.

Boeing’s Growing Nearshore Wiring Plants

Known for manufacturing and designing airplanes, satellites, telecommunication equipment, rockets, and missiles, Boeing outsourced its wiring functions. The aerospace company initially partnered with Safran, a French multinational firm that operated in Mexico for over 25 years.

Safran helped Boeing build the first aerospace manufacturing facility in Mexico in 1996. The plant has a wiring system design, an engineering center, and four production units. 

Recently, the company established a new aircraft wiring facility in Chihuahua. Boeing’s plants in Mexico manufacture 75% of the wiring on the world’s biggest jetliner, the Airbus A380, and 95% of the wiring for the Boeing 787 Dreamliner. 

Speck Products’s Increased Cost-efficiency Strategy

Speck Products was founded in 2001. It is well-known for designing and selling unique, creative, and durable gadget accessories that reflect each customer’s taste. It creates accessories for iPhones, iPods, smartphones, and laptops.

The company’s 2019 cost analysis report showed that nearshore outsourcing of retail packaging and establishing a facility in Mexico would be beneficial. It would save costs and add significant value. Due to the proximity, bulk shipping of phone cases to Mexico would reduce lead times and air freight expenses.

After more research, Speck discovered the most cost-efficient location would be Tijuana, Mexico. Immediately, the brand partnered with a reliable nearshoring company, and its facility was operating within eight weeks. 

Speck increased operational success and efficiency by finding a way to reduce costs while maximizing productivity and flexibility. The company saved a significant amount of money thanks to lower logistics rates.

The Bottom Line

Following global economic shifts, more businesses in the United States now turn to nearshore outsourcing in Mexico. The several benefits unique to location and culture, along with solutions to common outsourcing disadvantages, prove why the country has become a popular nearby hub.

Let’s connect if you want a reliable nearshore BPO partner in Mexico. Unity Communications is an Inc. 5,000-recognized outsourcing company providing skilled virtual assistants to fill your needs.