US Companies just-in-time manufacturing thriving, just not from China

These days business news loves to cover things like the latest smartphone, flat screen TV or even the latest hybrid car. There is no doubt that we are experiencing a rapidly changing world due to fast technological innovation.

However, what we do not hear about so much is how these companies are able to produce products so quickly and get them into the largest economy in the world, even before their competition. So let's talk about that briefly. Companies are still using Just-in-Time manufacturing, but just- in-time is not only a carefully connected process to future orders and parts manufacturers, it also involves the proximity of the manufacturer.

Although there is air transportation like FedEx, increasingly Manufacturers are turning south of the border to shorten the time to manufacturer products that otherwise would come and be manufactured in China. The biggest reason, partnering or manufacturing in Mexico creates a lot more flexibility.  

In a recent article, by Marty Lariviere a professor of Managerial Economics & Decision Sciences with the Kellogg School of Management wrote that speed trumps cheaper labor. Although labor is still cheaper in China, Mexico, because of its proximity to the United States makes it a much more effective and efficient location to do business for US companies, especially smaller to medium size needing to manufacture products quickly and cost efficiently.  

Other positive reasons were freeing up more cash flow as the smaller order sizes did not not tie up so much of cash. In China your purchase orders need to be very big, while in Mexico they can be smaller. Another benefit is that if something goes wrong with design, you can get it fixed quicker because of the smaller size of orders.

If Marty is correct, then as the American economy and innovation continues to improve and grow we will see more and more companies adopt manufacturing from Mexico as a quicker and cheaper solution than China in net terms

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