ManufAi

For the past year, I’ve been talking to teams who are in the middle of “nearshoring transformations,” and the pattern is almost always the same. Everyone is excited about moving production to Mexico or LatAm…

…and then six months later they realize the problems they hoped to leave behind got on the plane with them.

And look. The logic is solid.

• Shorter lead times
• Lower geopolitical risk
• A chance to fix the “container bingo” trauma we got from the COVID years (2020 to 2022 and to some extent early 2023 if I remember right)
• Proximity to the U.S. market and USD-denominated deals
• A labor pool that understands manufacturing at scale

So yes, the macro story is real. But, geography rarely fixes the things we avoid addressing.

Let me explain with a few real-world examples I’ve seen (or lived personally)

First Example:

A company I worked with moved a major assembly from Southeast Asia to Mexico. The business case promised an 8–10 week improvement in lead time.

Fast-forward a year:

• Transit time dropped from 7 weeks to 1 week. (Yay!)
• Actual delivered lead time? Still 22–26 weeks
• Why? Engineering change approvals were still taking 12+ weeks, no matter where the supplier lived.

The root cause wasn’t distance — it was internal decision lag.

Second Example:

The Logistics Director of a company I worked with announced “We’ve cut freight costs by 40%!”. The announcement was followed with a beautiful presentation to the leadership of the company.

This is what was NOT on the deck.

• Their Mexico supplier required bigger batch sizes
• Production scheduling was less flexible
• MOQ-driven overbuys skyrocketed
• Inventory carrying costs doubled
• Cash flow tightened

The company saved on freight… but accidentally created a balance sheet anchor. (This is a great example of a partial optimization. I will bring some examples on how disastrous partial optimization could be in Supply Chain, but we will leave that for another week. )

You didn’t reduce landed cost — you redistributed it.

Third Example:

Not a company I worked with, but, a story from a friend in the same line of work.

Procurement was excited about the nearshoring and this phrase became the company’s ideology. “We can drive to our supplier! We can visit anytime!”  Great. Except:

• They still didn’t have formal supplier governance
• There was no capacity model
• Forecast accuracy was 40% at best
• They were still expediting every other week

They had visibility, sure.

Control? Not so much.

Nearshoring amplified the operational noise they never cleaned up.

Last Example (I could probably talk about another 10 examples. But, I will stick to four for now):

The team I worked with expected quality issues to disappear because the supplier was “closer.”

What really happened:

• Defects were caught sooner
• But more defects were caught
• Rework cycles increased
• Line-down risks surged

They didn’t improve quality; they shortened the time it took for bad quality to reach them.

Proximity ≠ process discipline.

The uncomfortable truth

Moving a supplier closer doesn’t automatically

• Improve quality
• Shorten production cycles
• Fix MOQ issues
• Reduce COGS
• Increase transparency
• Make engineering changes magically cleaner

If the operating model is broken, the zip code isn’t the solution.

This is how teams fall into the trap. They feel like they made a bold move, but all they did was shift the constraint geographically, not operationally.

Nearshoring can be a massive win, when it’s paired with real operational change

Based on some of the processes I have implemented, before nearshoring and the ones that helped me, here is the list.

1. My first focus is to clean up the data and internal processes before moving production to Mexico.
2. I would establish supplier governance instead of relying on “good relationships”.
3. I would model a strategy for constraints, capacity, and buffer.
4. Connecting S&OP to Finance is not going to be enough, I would tie it to our S&OP process.
5. Another key deliverable prior to the move would be to build flexibility into volumes, MOQs, and production sequencing
6. Ultimately, what helped me is treating nearshoring like I am redesigning the operating model, it is not just a re-lo project.

When those pieces are in place, nearshoring becomes a competitive advantage. Without them… it becomes a shorter-distance version of the same problems.

Why This Matters Now

We’re entering a phase where:

• China + Southeast Asia are still strong manufacturing hubs
• Mexico/LatAm capacity is tightening
• Freight volatility is calming, but not gone
• OEMs are rebalancing their footprints for risk, not just cost
• Regulators (especially EU/USMCA) are forcing COO transparency

Companies that treat nearshoring like a “plug-and-play fix” will struggle. Companies that treat nearshoring like an operating model redesign will WIN.

My Take:

In supply chain, the bottleneck is rarely geography.

It’s always misaligned incentives, unclear ownership, and processes that depend on heroics instead of systems.

Nearshoring doesn’t change any of that.

It just makes it show up faster.

And sometimes that’s exactly what companies need: Pain with less delay, so they’re forced to finally fix the root cause.