BUSI 360 Week 6 PowerPoint Presentation Example

Should We Move Production to Monterrey? A Nearshoring Briefing

Slide 1: Should We Move Production to Monterrey?

• Nearshoring briefing for the leadership team
• Prepared for the quarterly strategy meeting

Speaker notes: I appreciate everyone making room for this. My goal is to help us decide whether to move part of our production from our contract manufacturer in Shenzhen to Monterrey, Mexico. I will cover why companies like ours are rethinking China, what the research says, why Mexico has become the leading alternative, what can go wrong there, and three options with a recommendation at the end.

Slide 2: The Decision in Front of Us

• 80% of our controls are built in China
• Tariffs and shipping delays cut our margin by 6 points since 2018
• Customers are asking about delivery reliability

Speaker notes: Most of our product line is assembled in China and shipped to our distribution center in Ohio. Since 2018, tariffs and freight disruptions have eroded our gross margin by about six percentage points, and two of our largest customers now ask about our supply chain in every contract review. The question is not whether to act but how.

Slide 3: We Are Not Alone

• Many U.S. firms are diversifying away from China
• Trade has shifted toward Mexico and Southeast Asia
• Globalization is being rearranged, not ended

Speaker notes: Our situation is common. The course reader describes how quickly the global business environment can change (Maidment, 2013), and the last few years have proved it. Trade has not collapsed, but it has shifted, with Mexico and countries in Southeast Asia gaining share of U.S. imports as China's share fell.

Slide 4: Who Paid for the Tariffs? We Did

• 2018 tariffs passed almost fully into U.S. import prices
• Foreign suppliers did not absorb the cost
• Our experience matches the research

Speaker notes: When the 2018 tariffs took effect, our supplier did not lower its prices to offset them, and we paid the duty. That was typical. Amiti et al. (2019) showed that U.S. importers absorbed nearly all of the tariff cost themselves. In other words, tariffs on Chinese goods are, in practice, a cost on companies like ours.

Slide 5: The Wider Cost of the Trade War

• Full pass-through to U.S. buyers
• Retaliation hit U.S. exporters, especially farm regions
• Net loss to U.S. real income after offsets

Speaker notes: Fajgelbaum et al. (2020) studied the whole trade war and reached a similar conclusion. After counting tariff revenue and the gains to protected industries, U.S. real income fell modestly, and retaliation hurt American exporters. The lesson for us is that trade policy can change suddenly and that its costs land on importers.

Slide 6: Concentration Is the Real Risk

• One country, one supplier, one route
• Pandemic closures and port backlogs hit us hard
• Diversification reduces exposure

Speaker notes: Tariffs are only part of the problem. During the pandemic, factory closures and port congestion added weeks to our lead times. Baldwin and Freeman (2022) review the research on supply chain risk and conclude that concentration in a single country leaves firms exposed to shocks they cannot control. Our risk is not China alone; it is having almost everything in one place.

Slide 7: Why Mexico

• Two to four days by truck to Ohio, versus five weeks by sea
• USMCA allows duty-free access for qualifying goods
• Same time zones as our engineers and customers

Speaker notes: Mexico offers what China cannot: proximity. A truck from Monterrey reaches our Ohio warehouse in a few days, compared with five weeks or more by ocean freight. Under the USMCA, in force since 2020, goods that meet its rules of origin enter the United States duty free. And our engineers can visit the plant without a day of travel.

Slide 8: The Data Show the Shift

• U.S. imports moved from China to other countries after 2018
• Mexico and Vietnam among the biggest gainers
• Some gains reflect real new production

Speaker notes: Freund et al. (2024) studied U.S. imports after the trade war and found that products hit by tariffs on China saw imports shift toward other countries, with Mexico and Vietnam among the main beneficiaries. By 2023, federal trade statistics showed Mexico had passed China as the largest source of U.S. goods imports. The shift is real, and our competitors are part of it.

Slide 9: The First Risk: Hidden Chinese Inputs

• Countries that gained share often rely on Chinese components
• Final assembly may move while inputs do not
• USMCA rules of origin require real regional content

Speaker notes: There is a catch. The same research noted that many of the countries winning U.S. share depended heavily on Chinese inputs (Freund et al., 2024). If we assemble in Mexico with Chinese circuit boards, we may still face tariff risk and may not qualify for USMCA treatment. We would need to map our components down to the second tier of suppliers.

Slide 10: The Second Risk: Policy Swings

• 2025 tariff threats against Mexico and Canada
• Exemptions for goods that meet USMCA rules
• USMCA joint review scheduled for 2026

Speaker notes: Mexico is not immune to U.S. trade policy. The 2025 tariffs on Mexican and Canadian imports spared goods that qualified under USMCA, and the agreement itself comes up for review in 2026. A move to Mexico reduces some policy risk but does not remove it, which is why compliance with the rules of origin matters so much.

Slide 11: The Third Risk: Capacity and Infrastructure

• Industrial parks near Monterrey are filling quickly
• Power, water and skilled labor are tight
• Security planning required

Speaker notes: Demand for space in northern Mexico has risen fast. Industrial parks report high occupancy, and power and water supply have struggled to keep up in some areas. Skilled technicians are in demand. We would need a partner with reliable utilities, and we would need to budget for security and for training.

Slide 12: Three Options

• Option A: Stay in China, absorb tariffs, add safety stock
• Option B: Move all production to Monterrey
• Option C: Assemble U.S.-bound units in Monterrey; keep a second source

Speaker notes: We have three realistic choices. Option A keeps our current costs but leaves us exposed to tariffs and delays. Option B moves everything to Mexico, which is fastest to explain but concentrates risk in a new place and stretches a new supplier. Option C moves final assembly of products for U.S. customers to Monterrey while keeping a second source for key components.

Slide 13: What the Research Says About Resilience

• Reshoring alone does not guarantee resilience
• Diversifying across locations reduces exposure to any one shock
• Supports Option C

Speaker notes: Grossman et al. (2023) modeled supply chain resilience and found that the best protection often comes from diversifying across several locations rather than concentrating in one, even a nearby one. That argues against simply swapping China for Mexico. The goal is not to find the one safe country; it is to make sure no single country can stop our business.

Slide 14: Estimated Costs of Option C

• One-time transition: about $2.4 million over 18 months
• Unit cost in Mexico about 8% above China before tariffs
• Below China once tariffs and freight are included

Speaker notes: Our estimates, prepared with the operations team, put the one-time cost of qualifying a Monterrey partner, moving tooling and training staff at about $2.4 million over eighteen months. Labor and overhead in Mexico are higher than in China, but once tariffs, ocean freight and inventory carrying costs are included, the landed cost of U.S.-bound products falls by about 4 percent.

Slide 15: Recommendation

• Approve Option C
• Phase 1: qualify a Monterrey partner and move two product families
• Phase 2: expand after six months of on-time performance

Speaker notes: I recommend Option C in two phases. In the first, we qualify a contract manufacturer in Monterrey and move two of our highest-volume product families. In the second, if the partner meets quality and delivery targets for six months, we move the remaining U.S.-bound products. Our China supplier would continue to serve other markets and act as a backup.

Slide 16: Next Steps

• Map tier-two suppliers for hidden Chinese content
• Visit three candidate partners in Monterrey this quarter
• Build tariff scenarios into pricing and contracts

Speaker notes: If you approve, operations will begin mapping our component suppliers within thirty days so we know which parts must change to meet USMCA rules. We would visit three candidate partners this quarter and return with a selection. Finance will build tariff scenarios into next year's pricing and customer contracts.

Slide 17: References

Speaker notes: Amiti et al. (2019); Baldwin and Freeman (2022); Fajgelbaum et al. (2020); Freund et al. (2024); Grossman et al. (2023); Maidment (2013). Full references in APA format follow.

References

Amiti, M., Redding, S. J., & Weinstein, D. E. (2019). The impact of the 2018 tariffs on prices and welfare. Journal of Economic Perspectives, 33(4), 187-210. https://doi.org/10.1257/jep.33.4.187

Baldwin, R., & Freeman, R. (2022). Risks and global supply chains: What we know and what we need to know. Annual Review of Economics, 14, 153-180. https://doi.org/10.1146/annurev-economics-051420-113737

Fajgelbaum, P. D., Goldberg, P. K., Kennedy, P. J., & Khandelwal, A. K. (2020). The return to protectionism. The Quarterly Journal of Economics, 135(1), 1-55. https://doi.org/10.1093/qje/qjz036

Freund, C., Mattoo, A., Mulabdic, A., & Ruta, M. (2024). Is US trade policy reshaping global supply chains? Journal of International Economics, 152, Article 104011. https://doi.org/10.1016/j.jinteco.2024.104011

Grossman, G. M., Helpman, E., & Lhuillier, H. (2023). Supply chain resilience: Should policy promote international diversification or reshoring? Journal of Political Economy, 131(12), 3462-3496. https://doi.org/10.1086/725173

Maidment, F. H. (Ed.). (2013). Annual editions: International business. McGraw-Hill.