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Dipesh Patel is the President & CEO of DP Gayatri, partnering with OEMs and Contract Manufacturers to automate and scale operations. A seasoned management consultant and graduate of the UofM Carlson School of Management, he brings strategic leadership to a portfolio of manufacturing and automation companies delivering factory automation, contract assembly, facility relocation and expansion, and supply chain localization across the U.S. and Latin America.
Tariff uncertainty on Asian imports, lengthened lead times from offshore production, and post-pandemic supply chain risk premiums have made the nearshoring conversation real for US OEMs that would have dismissed it five years ago. The question is no longer whether to consider Mexico — it is whether your specific business case actually pencils.
Plan for 6 to 12 months and $300K to $1.5M in transition cost for a meaningful production move. That covers: site selection and lease, equipment relocation or new buy, hiring and training, IT and ERP integration, regulatory setup, dual-running, quality system buildout, and engineering travel. The number scales with operational complexity, not with revenue.
Longer pipelines mean more inventory. Expect to carry 30 to 60 days of additional working capital for inbound material, in-transit finished goods, and safety stock. For a $10M-revenue program, that is $800K to $1.6M of additional capital deployed.
Bilingual program management, cross-border quality coordination, finance and tax compliance, USMCA documentation. Plan for 1 to 2 FTE of additional management overhead at the corporate level, indefinitely.
The headline number. For medium-skill assembly, expect 3-to-1 labor savings. For low-skill, closer to 4-to-1. For high-skill controls and engineering, closer to 2-to-1.
Real but smaller. Roughly 2-to-1 on indirect labor, supervisors, quality.
Industrial real estate in Jalisco runs 40 to 60 percent of comparable US Class A. Power and utilities are competitive.
Often overlooked. Production in Mexico can serve Latin American customers faster than US production can. For OEMs with growing LatAm demand, this is a sales lever, not just a cost lever.
For a typical $5M-$15M annual revenue program with 30 to 50 percent direct labor as a share of unit cost, nearshoring usually pays back transition cost within 18 to 30 months and produces 12 to 25 percent total landed cost reduction at steady state.
For programs under $5M annual revenue, the transition cost is rarely justified. For programs over $30M, the savings compound and the case becomes obvious.
Nearshoring does not pay when: labor is less than 20 percent of unit cost, volumes are low, the work requires constant engineering iteration with US customers, IP risk is acute, or the product cycle is so fast that 6 to 12 month transition timelines outrun the SKU's life.
Most of our clients end up with a hybrid US-Mexico footprint rather than a pure shift. NPI and low-volume high-mix in the US. Scaled production in Mexico. Single integrated quality system across both sites. Single supplier base where it makes sense, dual sources where it matters.
DP Gayatri operates that model — Minnesota for high-mix and NPI, Jalisco for scaled production. If you are running the math for your own footprint, we can pressure-test your assumptions before you commit capital. That is the heart of our consulting practice.
