A response to the labor crisis in the manufacturing sector

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Record shipping backlogs are making international headlines. As organizations rethink their supply chain strategy in the midst of a global crisis, board discussions focus on moving manufacturing in-house or closer to home.

The Brookings Institution, a Washington DC-based nonprofit think tank, suggests alloying as a solution.

Ally-shoring has recently established itself as a collaborative variant of the concept of nearshoring. It is a relatively new concept promoted by the United States-Mexico Foundation and Brookings to strengthen and deepen the common manufacturing, R&D, commerce, security and governance ties between the United States and Mexico. Allied contracting is the process by which a country rethinks critical manufacturing and supply chains by sourcing essential materials, goods and services from trusted democratic partners.

A recent Brookings article detailed the importance of supply chain resilience and described where Allied Offshoring fits into that model: going it alone. This is because rotating supply chains at home is not always realistic; we rely on components and materials from many parts of the world. There is a better way forward, and it starts by selectively looking at our business and co-production relationships with friends and allies we trust, what we call “the alloy”.

Ally-shoring recently received a push from the White House to help rectify supply chain issues and labor shortages that have emerged in the wake of the pandemic.

But these problems are not new. Labor shortages in the manufacturing sector have been a growing problem for several years, fueled by an aging workforce. One-quarter of manufacturing workers are 55 or older. Combine that with the reality that millennials, for the most part, are not interested in manufacturing jobs, and an already strained supply chain is approaching its flashpoint. At the same time, the demand for manufactured goods is skyrocketing. Something must be done to address this disparity. According to a study published by Deloitte and The Manufacturing Institute, up to 2.1 million manufacturing jobs will be unfilled by 2030. The report warns that the labor shortage will hurt incomes, production and could ultimately cost the US economy up to $ 1 trillion by 2030.

Nearshoring in Mexico has been around for a long time. In fact, it started in the 1960s with a concept known as Maquiladoras, in which US-based manufacturing companies opened factories located in border towns in northern Mexico.

Since then, American companies including P&G, Honeywell, Johnson & Johnson, Ford, Nissan, Toyota, LG, Whirlpool and other big names have been manufacturing in Mexico for years.[KV1]

The main reason ? Mexico’s low operating costs, abundant workforce, and proximity to the US and Canadian markets.

Yet setting up manufacturing operations in Mexico is a very complex and sometimes overwhelming process. Challenges include location; availability of labor; reliable local expertise; unions; constantly evolving regulatory compliance; and legal, fiscal and business ramifications.

Partnering with a hosting service company simplifies the Allied relocation process. Hosting service companies are growing in popularity with mid and small-sized manufacturers who can set up a satellite site in Mexico quickly and efficiently by partnering with companies designed to meet their needs.

Dave Vrioni, President and COO of Eastek International explained why Eastek recently chose to expand into Mexico. Cited in a Industry Today In the article, Vrioni said, “To my company and many others, manufacturing in China seems less competitive than before. Labor, freight, rent, tariff and compliance costs have all increased, some significantly. Intellectual property issues have not yet been resolved.

For Eastek, the expansion was the choice to develop a strategic relationship with The Entrada Group rather than investing in their own greenfield. “Working with a strategic partner like Entrada Group allowed us to cut the tape for our first installation just six months after signing the contract. The speed was impressive given that we now have a world-class facility, a skilled workforce and all the business infrastructure we need in Mexico, as well as the means to scale if necessary. ”

Paul Karon, co-founder of The Entrada Group, believes that a collaborative and profitable base of operations is ideal for companies looking to manufacture in Mexico for the first time.

Karon also believes Allied Offshoring is a solution to the labor shortage: “While the average age of manufacturing workers in the United States is 55, at our two manufacturing campuses in Mexico, we have more than 5,000 employees and their average age is 27 years. Unlike the United States. millennials, millennials in Mexico embrace manufacturing jobs and are ready to do the job.

The bottom line

Manufacturing in Mexico is on the rise for a reason. With unprecedented demand and an insufficient domestic workforce, Allied Offshoring in Mexico is an attractive solution for manufacturing companies.


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