Nearshoring: Secure Growth and Connections in Railway Transportation

By @dM1nBlog
In the world of business and logistics, the term Nearshoring has gained prominence in recent years. This strategy, which involves relocating business or production operations to nearby countries instead of distant locations, is transforming various sectors, including the railway industry. In this article, you’ll discover how Nearshoring is influencing the expansion and modernization of railway networks, with a focus on Mexico.

The Importance of Nearshoring in Railway Transportation

Nearshoring has emerged as an alternative to offshoring, which involved outsourcing activities to distant countries with lower labor costs. However, offshoring came with challenges such as long transit times, language and cultural barriers, and geopolitical risks. In contrast, Nearshoring offers a closer geographical solution, resulting in greater agility, less logistical complexity, and improved communication. It also stands out as a more sustainable option.

In the context of railway transportation, Nearshoring has proven particularly beneficial. Companies are adopting this strategy to optimize their supply chains and increase efficiency in the delivery of goods. Mexico, in particular, has become a key destination for Nearshoring due to its proximity to the United States, one of the world’s largest consumer markets. Additionally, the renewed USMCA trade agreement with the northern neighbor and Canada offers extraordinary advantages for the country’s economy.

However, one challenge to consider is the need to accelerate the expansion of both railway and road networks to accommodate the expected growth in Nearshoring over the coming years. While companies have many expansion plans, these could be hindered if adequate infrastructure is not in place for the movement of goods.

Another factor is the shortage of workers and operators to carry out the anticipated surge in activity, but this challenge also presents new job opportunities, provided that workers receive proper training to meet the required needs.

Modernization of Railway Infrastructure

To meet the growing demand and capitalize on Nearshoring opportunities, the federal government is spearheading significant projects focused on railway development. Substantial investments are being made in expanding railway lines, implementing technology in the units, and ensuring proper planning of transportation services.

One of the most notable and controversial plans is the Maya Train, an ambitious initiative aimed at connecting key tourist destinations in the Yucatán Peninsula through a high-speed railway network. In addition to promoting tourism, the Maya Train is expected to boost trade and investment in the region, contributing to economic growth.

Benefits of Nearshoring in Railway Transportation

Nearshoring is generating several tangible positive aspects for Mexico’s railway transportation:

  • Logistics cost reduction: By relocating operations closer to final markets, companies can reduce transportation and storage costs.
  • Faster speed and efficiency: Geographical proximity allows for quicker transit times and more timely delivery of products, improving customer satisfaction.
  • Resilience to global crises: In an increasingly interconnected world, having a shorter and more diversified supply chain can help mitigate the impacts of adverse events, such as health crises or geopolitical conflicts.
  • Stimulus to economic development: Investment in railway infrastructure not only improves internal connectivity but also attracts foreign investment and fosters the growth of local industries.

A key issue to address is the ongoing threat to Nearshoring posed by train theft, which must be tackled to ensure the safety of operators and the cargo transported in the wagons.

In 2023 alone, rail transportation in Mexico grew by 2.4%, driven by Nearshoring and the relocation of factories, according to the Mexican Association of Railroads.

As companies continue to seek ways to optimize their supply chains and adapt to a constantly changing business environment, Nearshoring will play an increasingly critical role in the expansion and sustainability of railways globally.

Share