Following the supply disruptions of the COVID-19 pandemic, many U.S. companies began looking for alternative supply chain strategies, with nearshoring emerging as a potential solution. The allure is undeniable. By switching their business operations or manufacturing centers to a country closer to the import destination, companies can reduce their lead times, save on transportation costs, and enhance their overall supply chain resilience. Consequently, there’s been a surge in nearshoring operations, with Mexico taking center stage.
However, as more U.S. companies embrace Mexican nearshoring, they must consider not only how to move goods into the U.S. from Mexico but also how to move goods back into Mexico for returns. This is because e-commerce is a two-way street: people buy, sure, but people also return what they buy. In fact, e-commerce retailers typically deal with significantly higher return rates than brick-and-mortar stores.
Fortunately, amid the ongoing boom in nearshoring, Mexican logistics providers are recognizing the need to provide comprehensive services that handle both purchases and returns.
Reverse logistics in nearshoring
Reverse logistics—sending a product back down the supply chain—has always been a highly expensive and complex process. Products need to be collected from the customer, inspected to assess their condition, and sorted based on whether they should be restocked, repaired, recycled, or disposed of. All of this costs time and money and can easily become a retailer’s biggest expense if they don’t manage the process efficiently.
Regardless of how expensive and unpleasant product returns can be, it’s a process that businesses can’t afford to ignore. Making returns as smooth and hassle-free as possible can go a long way in boosting customer satisfaction, loyalty, and the chance of repeat purchases. This is especially true in e-commerce, in which 67 percent of customers will check an online store’s return policy before purchasing an item.
However, amid all the excitement of the nearshoring boom, reverse logistics has been largely overlooked. Companies that have switched their operations from Asia to Mexico must ensure that they have a robust and efficient reverse logistics system in place. That means finding warehousing and storage space for returned products and setting up processes for the transportation, inspection, and sorting of returned products. This also means ensuring that any returned products are in strict compliance with international shipping regulations and customs procedures.
Bridging the gap
Any cross-border logistics chain will depend heavily on building relationships with local logistics providers. This is already underway, with many U.S. companies establishing partnerships with their Mexican counterparts to facilitate the forward transfer of products from Mexico to the United States. By acquiring experience in the nuances of Mexican customs, regulations, and infrastructure, these local professionals will have a strong grasp of both what’s necessary and what is possible when setting up a successful supply chain operation.
For U.S. businesses seeking to cultivate these connections, my advice would be to create a short list of potential partners by engaging with local industry associations, participating in trade shows, and leveraging personal networks. Focus on companies that have a strong track record in successfully handling cross-border shipments. Ideal partners should also be familiar with handling the specific goods to be shipped, as certain products may carry specific tariffs or fees that the logistics provider needs to manage effectively.
Concurrently, companies should apply the same due diligence when seeking partnerships with local reverse logistics providers. This is an expanding market segment that includes both established local logistics companies venturing into returns management and specialized startups focusing solely on returns. These companies have significant advantages in reverse logistics due to low labor costs in Mexico, particularly as reverse logistics has historically been a labor-intensive industry.
Moreover, costs continue to fall as more companies embrace new technologies that can minimize bottlenecks, predict demand surges, and reduce reliance on human labor. For example, internet-of-things (IoT) sensors attached to transit vehicles can provide real-time location data, allowing warehouse workers to predict arrival times and coordinate efficient unloading schedules. Additionally, artificial intelligence (AI)-powered predictive analytics can enable providers to optimize routing, predict demand surges, and anticipate potential disruptions. These and numerous other smart technologies can greatly enhance the efficiency and cost-effectiveness of the reverse logistics process.
Clearly, American businesses should evaluate Mexican reverse logistics providers by examining how effectively they have incorporated these new technologies into their daily operations. This ensures that the selected providers are not only technologically adept but also aligned with industry advancements. As the landscape of nearshoring continues to evolve, prioritizing technologically progressive partners in both the forward and reverse logistics spheres will become imperative for businesses aiming to stay ahead in the market.
Foreseeing and mitigating problems
Any two-way cross-border logistics system is bound to encounter occasional disruptions and breakdowns. By recognizing the inevitability of such issues, businesses can implement robust contingency plans to swiftly address challenges and minimize their effect on operations. For instance, establishing clear communication channels with all stakeholders—including forward and reverse logistics partners, customs authorities, and manufacturers—can facilitate real-time information exchange. This transparency can enable quick decision-making in response to unexpected events such as border delays, labor shortages, or unforeseen regulatory changes.
Furthermore, businesses should also consider diversifying their logistics partners in Mexico. Depending on a single source for outbound shipments and another for handling returned goods can be risky. By contrast, distributing responsibilities among multiple forward and reverse logistics partners can mitigate the effects of any disruptions or unforeseen challenges.
Additionally, by analyzing historical data and market trends through predictive modeling, businesses can anticipate challenges, optimize routes, and allocate resources more effectively. This forward-thinking approach not only mitigates the impact of disruptions but also contributes to the overall efficiency of the cross-border logistics system.
Final thoughts
While the advantages of Mexico as a forward logistics hub are evident, e-commerce companies must not overlook the crucial aspect of reverse logistics. Establishing a robust two-way cross-border logistics system will be essential for success in the evolving landscape of nearshoring. To that end, businesses should seek partnerships with Mexican logistics providers for both forward and reverse logistics, ensuring a comprehensive and efficient supply chain.
