Will manufacturing move out of China?

Companies are leaving China in droves. A Gartner survey of supply chain leaders showed that 33% have plans to move at least a portion of their manufacturing out of China and away from Chinese companies in favor of other countries by 2023.

The list of companies rethinking their subcontracting strategy includes everyone from Apple and Dell to the toymaker Hasbro.

The WTO

china manufacturing

The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to ensure that trade flows as smoothly, predictably, and freely as possible.

Chinese Manufacturing

When China joined the World Trade Organization (WTO) in 2001, it was a minor player on the global manufacturing stage. But after years of reforming its economy around being the world’s factory for global companies, its formal entrance to the WTO helped its production capacity soar.

In the years since it has become the low labor costs global stage. So why are American companies and multinational companies moving production out of China’s manufacturing hub?

Supply Chains

A supply chain disruption is a breakdown in the manufacturing flow of goods and their delivery to customers.

Supply Chains and the Pandemic

The pandemic has disrupted nearly every aspect of the global supply chain. From raw materials to manufacturing facilities, Chinese exports have been greatly affected by more than just the US/China trade war. 

Scarcity

Scarcity, driven by the supply chain slow down has caused the prices of many things to go higher. The world’s electronics factory in places like China and those utilizing the South China Sea was hit hard by the spread of coronavirus cases in the same period.

Many factories were shut down by the Chinese government or were forced to reduce output at production facilities. In response, shipping companies cut their schedules in anticipation of a drop in the value chain for goods moving out of China and around the world.

Trade War

US Chine Trade war

A trade war is when a nation imposes tariffs or quotas on imports and foreign countries retaliate with similar forms of trade protectionism. As it escalates, a trade war reduces international trade.

Why Trade Wars are started

A trade war starts when a nation attempts to protect its domestic industry and create jobs. Tariffs are can give a competitive advantage to domestic producers of a product by creating lower prices.

As a result, they would receive more orders from local customers. As their businesses grow, they would add jobs.

But in the long run, a trade war can cost jobs. It depresses economic growth for all countries involved. It also triggers inflation when tariffs increase the prices of imports.

How the Trade War has effected China

China’s manufacturing sector slowed for the sixth month in a row last October and experienced weaker consumer demand activity in the world’s second-largest economy.

The slump mirrored a drop in retail sales growth back to a near 16-year trough and the weakest growth in investment in new plant and machinery on record.

Analysts said uncertainty about a possible pact between Beijing and Washington over a “first stage” trade deal dampened business and consumer confidence.

China was hit by a slowdown in GDP growth to 6% in the third quarter, from 6.2% in the second quarter, its lowest level in 30 years. Analysts said the latest data pointed to a further slowdown in growth in the fourth quarter.

China’s steel output fell to a seven-month low in October, while the cement production contracted for the first time in more than a year.

Global Supply Chain Leaders

Global supply chains are networks that can span across multiple continents and countries for the purpose of sourcing and supplying goods and services, such as electronics manufacturing. Global supply chains involve the flow of information, processes, and resources across the globe.

Global vs Local Supply Chain

A global supply chain utilises low-cost country sourcing and refers to the procurement of products and services from countries with lower labor rates and reduced production costs than that of the home country.

A global supply chain will usually flow from your own organisation in your home country as a buyer across your supplier tiers; it is these suppliers who will be located in other areas of the globe.

“Home Grown” Suppliers

supplier godown

A local supply chain will look to optimize suppliers who are regional to your own organization, in some instances organizations will look to leverage “homegrown” supply routes, manufacturing imports so that all suppliers feeding into your supply chain will be located within the country in which your organization is based.

This way, the supply chain can be even closer in to your organization and may even be within the same state/city/district, which often gives clearer visibility of the whole supply chain from raw material through to the consumer.

However, there are both positives and negatives with global supply chains and the total landed cost or total cost of ownership should always be factored into the true costs.

What Are the Disadvantages of Globally Sourced Goods?

  • Longer lead times – While the production time can be quite quick the lead time can often be much longer as the goods will require shipping which can add to the lad time, this means that forward planning can be a challenge.
  • Reputational risks – Risk exposure to modern slavery, brand and financial risk exposure can all be increased.
  • Fluctuations in Exchange rates – Global markets are more susceptible to regional influences that can impact trading markets.
  • Challenges in communication – There needs to be careful consideration of terminology and the type of communication methods used to interface with a global supplier to ensure information is interpreted correctly.
  • Increased risk exposure based on STEEPLED factors – As the supply chain spans over multiple countries there are increased risks of unrest in other countries having a direct impact on your supply chain activities.
  • Loss of control – Due to the distance in the working relationship it can be difficult to manage communications and oversee technical aspects of the production process. Quality issues can also be complex to manage.

For the reasons outlined above, a significant number of companies are leaving China as their manufacturing base in favor of more local industries.

Manufacturing in Mexico

Location

Especially for U.S. companies, Mexico’s location offers huge advantages. It’s easy for managers at U.S. companies to visit facilities in Mexico on a regular basis—you could even get there and back in a day, unlike spending at least half a day just to get to China. Travel to Mexico doesn’t require as much advance planning.

Your Mexican facility will likely be in your time zone, or no more than three hours ahead or behind, so communication will be simpler as well.

Quality

Mexico is now known for having a diverse, highly-skilled workforce—many of whom are at least partly bilingual. Mexico’s labor force is also relatively young, while China’s is aging and declining due to its family planning policies.

When quality issues occur, it’s relatively easy to address them when production is in Mexico. Products can be returned to be repaired or replaced, and managers can visit the plant to fix the problem. Quality issues in China are more challenging to fix.

Labor Costs

For years, wages in China were much lower than Mexico. Now, Mexico’s manufacturing labor costs are 20% lower than in China. When adjusted for worker productivity, the gap is even wider. Mexico also offers steadier wages, so companies can more easily predict labor costs. Exchange rates between the dollar and the yuan and peso also contribute to this change.

Trade Agreements

US and China Flags

Mexico has 12 multilateral trade agreements that provide preferential trade access to 44 countries, making it one of the most open countries in the world for international trade. USMCA in particular has helped transform Mexico’s economy into one driven by manufacturing and exporting.

While Mexico has a strong trade relationship with the U.S., as evidenced by the USMCA, The China-U.S. relationship suffers from battles over import duties and tariffs. Additionally, there is an ongoing geopolitical struggle between the U.S. and China that often impacts businesses operating in both countries.

Overhead & Transportation Costs

Overhead and transportation costs are much lower in Mexico than they are in China. When you manufacture in Mexico instead of China, you can expect to save approximately:

  • 4% in energy costs
  • 60% in natural gas costs
  • 40% in lease rates

 Intellectual Property

Mexico has a strong reputation for protecting intellectual property rights. By contrast, China frequently has problems with counterfeits, and courts are slow to enforce or recognize intellectual property rights.

manufacturing unit

BF&S Manufacturing

Founded in 1988, BF&S has decades of experience manufacturing in Mexico, with over 500 employees in the state of Sonora. Our warehousing and corporate offices are located in Douglas and we are incorporated in the state of Arizona.

The BF&S executive team was born and raised in the United States and runs our organization with U.S management standards and practices.

Learn more by continuing to explore our website.

When Should Your Company Develop Its Own Software?

Every company needs and uses software, and some is a significant driver of business success. But as small companies grow to midsize, software performance gaps can emerge. Finding new software solutions can fix problems and inefficiencies and help teams develop innovative products and services. But midsize company CEOs often face a difficult choice: whether to upgrade through a vendor or develop (a.k.a. “roll”) their own code.

It’s widely understood that software upgrades are always expensive and often disruptive. Sometimes they fail completely, or they don’t deliver on their original promise. That means little or no return on money spent. But sometimes, there’s simply no off-the-shelf software available to address a business’s unique problem.

For small companies, it’s usually easier (and almost always cheaper) to do manual workarounds when their operating software isn’t up to the task. But midsize companies can lose a great deal of money and stunt their growth due to the inefficiencies that inevitably spring from such workarounds. And those tortured manual processes can prevent companies from seizing opportunities in a timely manner. For those companies, custom coding is a viable option. (Large businesses with deep pockets can build software development teams and often have the talent on board to do so.)

Most midsize companies have a “super user” who’s good at helping everyone with the capabilities already built into their software (like report writers, dashboards, etc.). And most modern enterprise resource planning (ERP) software has layers that allow for customization — often a layer where value-added resellers (VARs) can make changes and a customer layer for customer customizations. If a midsize company can get what it needs from that, fantastic. But what if it can’t?

Many midsize companies get stuck trying to decide whether to buy new software or attempt to write their own code, even if that just means connecting disparate systems. Others try to outsource the problem to a software firm. While outsourcing code creation may be part of a solution, doing so successfully requires rigorous project management — a capability not all midsize businesses have.

Meanwhile, the clock is always ticking. Efficiencies that could be realized with software aren’t retrieved, eating away at margins. Market opportunities are lost to competitors. How can midsize business leaders determine when it makes sense to build their own software?

When to Roll Your Own Code

It’s inefficient to develop custom programs for core business functions like accounting, payroll, sales tax, inventory, and customer relationship management (CRM), and so many options are readily available. But if there’s no software that does what you need it to do, you may have no choice but to roll your own, especially if there’s a high-value opportunity to seize or a significant efficiency to gain. (Creating your own code is only worthwhile if there’s a big payoff; without a strong ROI, forget about it.)

For example, in 2007, BF&S Manufacturing was gaining steam as a contract manufacturer for complex, low-volume — but critical — components for aerospace, military, medical, and industrial verticals. Its customers wanted to oversee the work, but BF&S was based in Mexico, and many of its customers didn’t want to invest the time and money to travel and stay there.

BF&S depended on a close relationship with its customers, often turning to their engineers to solve production problems. But distance and a border were making that ever more difficult. Screen-sharing and cameras alone weren’t going to be enough for its customers, and BF&S feared losing them to more closely based manufacturers, even if those businesses charged more. BF&S needed to be able to port valuable production data from its core ERP system into a format its customers could use.

BF&S CEO Carlos Fernandez looked around but couldn’t find a solution to buy. Instead, he says, “We embarked on a software program that would provide 24/7 real-time data” on the company’s product builds. It started with their “computer guy,” as Fernandez calls him, just out of college, building a tool to track raw materials, work-in-progress, and finished goods inventories and provide visibility internally and externally.

It was completed and first used in 2010. Customers loved it. Fernandez began to grow the software development team in Mexico, supporting four facilities in the state of Sonora with a combined headcount of 500. Customers could now see video of the workstations, their products’ progress at each step, BF&S’s raw and finished goods inventories, who was working on their job, and all the product stories and specs.

This custom coding required a keen understanding of both the company’s business and its customers’ needs. Originally headed by Fernandez, the team of engineers and operations leaders now plan and manage the ongoing support and development of the tool.

Today, although Fernandez won’t claim that his company’s home-built code is a huge competitive differentiator, he believes it gives his customers want they want and what he couldn’t provide through off-the-shelf software: transparency into and a measure of control over the production of their products.

The Journey and the Costs

Rolling your own code is neither simple nor cheap. Software engineers are highly paid. In the United States, that means six-figure salaries. The costs of finding and hiring engineers often involves search firms, which charge 15% to 30% of the first year’s salary, and for the past several years, even they’ve been struggling to find good candidates. On top of sourcing costs, you must interview and assess candidates for technical skills, train and onboard new hires, and provide a digital environment for development and testing.

And then you have to manage the code development tasks, making sure they’re productive. As the development department surpasses five or six engineers, you’ll need a DevOps executive to supervise it — if programmers are undermanaged, days and weeks can be lost while productivity plummets.

And you can’t just hire developers and managers and expect the magic to happen. Engineers make what the business tells them to make. They thrive on clarity. So, you’re going to need to spend time getting your arms around your business’s opportunities and needs to be able to describe the features, functions, and options you want. That software roadmap must be completed before your engineers start coding. Fail to do all this well and on time, and you’ll have very expensive talent sitting on their hands, likely looking for other places to work.

Finally, when you develop custom code, you need to maintain it. Software breaks down all the time. Hackers continually find new attack vectors. New needs pop up and users demand modifications. Even programming languages age, so every five to 10 years, software may need to be rewritten. The costs keep coming.

However, while custom coding is challenging, it can be a pivotal factor and well worth the trouble for some companies that are innovating solutions for their customers.

Corefact (a Mastering Midsized client) is a full-service marketing services provider for the real estate and mortgage industries. In 2005, the company came up with a fresh idea. If a realtor could send a postcard to a potential client with a unique URL that would take the client to a website with their own home at its center, that could be hugely appealing, and a possible game-changer. Corefact’s customers, realtors, were excited, not only by the potential appeal to their clients, but also by all the data this kind of engagement would supply them with.

Corefact couldn’t buy software to do this — it was new. Corefact’s founder and CEO Chris Burnley had always been a technologist. Prior to Corefact, he started several technology-driven companies. Thanks to this technological competency, the company found a way to print variable data — unique URLs — on postcards and then move them on to web servers that would wait for a homeowner to type in the URL, after which a new, unique website would be created instantly. By 2006, the software was launched with a single engineer.

Today the engineering team has grown to 10, located in the U.S. and abroad. They’ve created custom code that’s not only customer facing, but that also efficiently brings together thousands of daily orders through order entry, graphics, and pre-press and automates the efficient flow of work onto presses and through finishing.

Burnley says, “Our original concept put us on a fast ramp for growth, but our ability to innovate with technology continues to propel us. Of course, the investment in engineers is huge and ongoing, but the list of opportunities is long.”

But they don’t build every piece of software they use. When it came to upgrading their ERP, they chose a standard product by Netsuite, into which they’re connecting their self-made order-handling systems. Similarly, they’ve recently dropped a self-made CRM in favor of Salesforce, keeping their development team focused on creating software they can’t buy.

The Three Competencies You Need to Roll Your Own

The examples I’ve discussed require different amounts of the following three competencies, depending on how complex your custom code requirements are:

Translating business needs into software projects.

Identifying business needs — and their solutions — is a necessarily iterative process, keeping in mind the limitations of existing software, as well as your resources and available data. This is neither software development nor business management; it’s a form of engineering where one leg stands in the business and the other in a thorough understanding of how your current software systems work.

This competency could be held by one executive in a smaller midsize company, or by a small team as the organization grows. What goes in is a problem or opportunity, what comes out is a series of detailed steps to create and maintain code: exactly what data is to be used and what logic or processes should be used to produce a solution. Without all these steps, endeavoring to create custom code makes no sense.

Code development.

Depending on the circumstances, a midsize business could have one programmer or a full engineering department. For example, at my prior company, we had Dave, a young warehouse employee who coded as a hobby, come upstairs now and then for small coding projects. For bigger opportunities, code development can grow into a series of engineering teams with different skills and focuses working in a complete DevOps department, led by a VP or chief technology officer.

Software operations.

The operations side of managing custom applications is expensive — you need to maintain the health of the custom code and make sure your processes, people, and tools are kept up to date. Elements of operations include user support/help desks, training, security risk management, bug fixing, ongoing additional customization, uptime and performance attributes, and more.

Leveraging homegrown software to bring innovation to your market or to create more efficient operations can be a strong growth driver. But the buy-it vs. build-it decision is a critical one. If buying the software you need just isn’t possible, building it may make sense. But there’s no denying that’s a difficult path, and only worth it if the upside is big. Before you build, make sure you understand the real costs to succeed over the long term, and only embark on those code-writing efforts you’re sure your business is capable of.

by Robert Sher

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BF&S Succeeds in Providing COVID Vaccine to Employees Internationally

BF&S is a manufacturing contractor providing products used in the aerospace, defense, medical, industrial, and commercial industries. Founded in 1988, BF&S has decades of experience manufacturing in Mexico, with over 500 employees in the state of Sonora.


As the Covid-19 vaccine became widely available in the United States, many individuals across the border in Mexico were kept waiting for a life-saving dose. As an organization that cares deeply for its employees and works closely across border lines, BF&S was dedicated to keeping their operators safe by providing access to vaccination. 
The Mexican Consulate has been working in partnership with the University of Arizona to roll out vaccines to first responders and employees working in manufacturing. Thanks to the committed negotiations between BF&S’s Director of Operations Robert Fernandez and their human relations team, and the Mexican Consulate, six busses carrying 170 BF&S operators recently traveled across the border to receive the single dose Johnson & Johnson vaccine. Departing from Cumpas, Sonora at 1:30am to make the 3.5 hour trip across the border and through US customs, the BF&S fleet was lined up and waiting in the cargo area to receive their vaccinations by 6:00am.


“It was a big company expense,” said CEO Carlos Fernandez, “Chartering 6 buses, providing meals for 170 employees, as well as the lost revenue for the two days we closed the facility to allow our team to travel as well as recover from vaccine reactions. It was one of the easiest decisions I ever made, our employees’ health is always our number one priority.” 


“It was a good day to be a BF&S employee,” said VP Robert Fernandez, “It was seamless. I give credit to our people for being so professional. A special Thank you to H.R. manager Fatima Cabrera for the incredible coordination it took to pull this off and Miria Montano for her support.” 


As Covid-19 vaccine availability continues to be uncertain in Mexico, BF&S has gone above and beyond to provide their employees with their best line of defense against the ongoing pandemic.

Stator Assembly

The stator assembly is a stationary coil in an AC motor. These types of assemblies include a stator core and a coil, which is wound and inserted in the stator core with ends connected to lead wires.

Stator Core

Stator Core Assembly - Electric Motor

A stator core is used in things like hydroelectric power but is also used in more everyday items for customers, like a motorcycle or washing machine. The outer diameter of a stator core will depend on the size of the system or generator. Stacked laminations reduce eddy current (a localized electric current induced in a conductor by a varying magnetic field) by insulating the core. Thin silicon steel plates are stacked on top of one another around the center, preventing eddy current flow. With the eddy current reduced, the stator core can maintain constant power, keeping your motor running.

Stator Core Assembly

A major component of the stator core assembly is the core itself, providing support for the windings to generate power through magnetism. The stator core is comprised of thin silicon steel laminations and insulated by a surface coating minimizing eddy current and hysteresis losses generated by alternating magnetism. The laminations manufacturers create quality rings or segments, in accurate alignment in the rotary system.

Either in a fixture or in the stator frame, having ventilation spacer components inserted periodically along the stator core assembly rotor is necessary for proper controls. The completed core device is compressed in some form and core end heating from stray magnetism is minimized, especially on larger machines, by using non-magnetic materials at the core end of the generators or by installing a flux shield of either tapered laminations or copper shielding. If an error occurred in the past utilizing a non-insulated generator, ensuring heat reduction on the rotor helps to keep the stock or stator core in quality working order.

Stator Slots

Stator Slots of an Induction Motor

Stator of an induction motor consists of stator core and stator slots. Stator core assembly slots: in general two types of stator slots are employed in an electric motor, open slots and semi-closed slots, to keep the stator winding. Operating performance of the coil in induction motors depends upon the shape of the slots and hence it is important to select suitable component slots for the stators.

In open slots, the slot opening will be equal to that of the width of the slots. In such a type of slot, stator core assembly and repair of stator winding is easy. Such slots will lead to a higher air gap, allowing larger components into the grooves. However, the hope is that this would be noted upon install and by following the manufacturer’s instructions, won’t cause an issue at a later date.

In semi-closed slots, the stator core assembly slot opening is much smaller than the width of the slot. In this type of slots assembly of windings is more difficult and takes more time to be installed compared to open slots and has a result has the ability to be costlier. However, the air gap commutator is better compared to open-type slots.

Electric Motor Stator

The stator assembly is an immobile part of the electric motor, which includes several windings. Once an alternating electromagnet current is applied to it, its polarity will be changing all the time, depending on further details that develop with contact.

When the power supply is given to the stator assembly, creating motion, an AC (alternating current) flows through the stator windings to create an electromagnetic field across the bars of the rotor. The alternating current (AC) makes the magnetic field rotate. This includes thin and stacked laminations, wounded by an insulated wire. The core in the stator includes a number of these laminations.

End Your Search for Reliable Manufacturing

At BF&S Manufacturing, the customer is our number one priority. We are able to serve our clientele best by paying attention to detail and machine efficiency to cover a variety of client preferences and specifications. Find the manufacturing to fit your needs and earn more by continuing to explore our website. Contact us for your free quote today!

Electrochemical Machining

Electrochemical Machining - Hydrogen Fuel CellElectrochemical machining (ECM) is a method of removing metal by an electrochemical process.

The electrochemical machining process is a function of electrochemistry: the branch of physical chemistry concerned with the relationship between electrical potential, as a measurable and quantitative phenomenon, and identifiable chemical change, with either electrical potential as an outcome of a particular chemical change, or vice versa.

In this article we will explain everything you need to know about the ECM process by covering the following main topics:

Electrochemical Machining Process

In the electrochemical machining process, the way that material is removed from the work material is unique. The electrochemical reactions take place at the anode (work material) and the cathode (tool), as well as the surrounding electrolyte fluid. As the electrical current is applied across the electrode, ions move between the tool and the workpiece.

Repeated electrochemical grinding using conventional methods will inevitably break down the machine’s current density. Even a concave tool can accomplish an electrochemical or galvanic coating, a coating surface finish produced by the ECM process, with known strength and longevity. This improved electrical conductivity and overall machining accuracy.

Electrochemical Deposition Process

ECM Process - Cathode and AnodeElectrochemical deposition is a process where the metallic ion can become solid metal and deposit on the cathode surface if a sufficient amount of electric current passes through the electrolyte solution. The electrolyte contains charged ions, which form by dissolving a metallic salt in water.

A suitable electrolyte balance can be achieved by mechanical engineers utilizing the ECM process on workpiece material, thus reducing residual stresses on the turning of turbine blades or other workpiece acts.

Turbine blades and other complex shapes or exotic metals can also improve their current density and decrease tool wear beyond conventional methods by utilizing ECM.

Material Removal

Electrochemical machining (ECM) can be performed on any electrically conductive materials by forcing positive ions to move towards the tool, or positive terminal, and negative ions to move towards the workpiece, which then becomes the negative terminal.

This anodic reaction removes material and metal oxides, reducing mechanical stresses by improving the metal surface quality, leaving you with the desired shape of workpiece material for your mechanical engineering process. This also improves machining speed and machining process.

Benefits of the ECM Process

Benefits of Electrochemical MachiningThe electrochemical machining (ECM) process has a number of benefits that make it a great choice for machining conductive workpiece materials.

Electrochemical machining produces an excellent material removal rate and workpiece surface finish once the material removal takes place.

Machine material(s) which has gone through the ECM process requires no further finishing because there is no contact between the tool and the workpiece and no forces of residual stress are produced. This reduces tool wear, streamlining manufacturing processes and saving your machine materials over time.

Less heat is generated in the electrochemical machining process because there is no contact and friction between tool and workpiece.

High metal removal rates are possible at the atomic level, and it’s even possible to cut small and intricate work in hard or unusual metals, such as titanium aluminides, or high nickel, cobalt, and rhenium alloys following material removal with the electrochemical machining (ECM) process.

Drawbacks of the ECM Process

Drawbacks of Electrochemical MachiningDespite the many benefits of the electrochemical machining material removal process, there are some drawbacks. If a saline or acidic electrolyte acts in such a way that it creates a buildup, it can increase the risk of corrosion for the tool, workpiece or equipment making direct contact more necessary than preferred.

An electrochemical machining setup also requires a high initial investment from manufacturing engineers and high electrical running costs. Finally, only conductive materials can be machined. But electrochemical machining does add a very useful option for precise machining of some otherwise very difficult to machine materials.

Improved Quality with BF&S Manufacturing

BF&S is committed to exceeding our customers’ and interested parties’ expectations through certified employees and continuous improvement, providing a values-based environment in the context of the manufacturing organization, where our employees can meet their potential and thrive in an atmosphere of excellence. Our careful process of electrochemical machining allows us to deliver on that commitment again and again.

Manufacturing in China – The True Cost

Manufacturing in China - China Flag with Chopsticks Grabbing EarthManufacturing in China

For decades, manufacturing companies have relied on Chinese factories to produce their products. This evolution in manufacturing practices has become commonplace across several sectors. However, the true cost of manufacturing in China is often unexplored.

What is the true cost of doing business in China? Are the goods coming out of China high-quality? What should a foreign company know before they move their business to China? In this blog, we will examine the true costs of manufacturing in China.

Why Do Companies Choose China?

Late in the 20th century, manufacturers began to embrace the concept of outsourcing. The benefits included the low cost of living in China and gaining access to cheap materials. This business model allowed businesses to stay competitive in their industry. As global demand increased, more countries sought China’s low-cost manufacturing industry.

However, as the years passed, U.S. companies have noticed a shift in China’s profitability. How has China become less cost-effective than in the past? What should a U.S.-based company watch out for before moving their business to a Chinese factory? Before U.S. manufacturers pay the “China price,” they need to understand what is driving it.

In this article, we will be covering in detail the following main factors that U.S.-based companies should watch out for before outsourcing to China, as well as alternative outsourcing options:

The High Cost of Living

For decades, China represented the most cost-effective way to manufacture goods. The low labor costs meant that a company could reap a 30-80% cost reduction in operating costs. Over the last decade, China’s wages and overseas shipping costs have increased. This increase has made loaded labor rates in China comparable to the loaded labor rates in the United States.

As China builds a strong middle-class, it becomes a less viable partner for companies who wish to move their manufacturing operations overseas. U.S. manufacturers will need to decide if the price of doing business in China is still as appetizing as it was a decade or two ago.

Poor Production Quality

China’s access to cheap materials makes it the leader in producing widgets. However, China often experiences quality issues with its products. For this reason, organizations like Aerospace often choose partners like Mexico over China.

The expense of poor-quality products extends beyond the materials themselves. The logistics associated with returning an item are often prohibitive and can result in write-offs. Some of the costly problems associated with China’s poor-quality control practices include:

  • Shipping costs
  • Manufacturing delays
  • Time consumption, and
  • Limited access to English-speaking advocates.

As the global supply chain continues to adapt to an ongoing pandemic, manufacturers need to assess whether they can afford to experience higher shipping costs and slower replacement times on the return of low-quality, defective products.

Loss of Intellectual Property

U.S. companies depend on laws and cybersecurity methods that protect their intellectual property (IP). However, when a company chooses to cut costs by moving their manufacturing operations to a Chinese factory, they forfeit those protections. The Chinese government does not recognize individual privacy, and manufacturers are increasingly at risk for cyberattacks. Anyone who moves their operations overseas must expect to have their IP copied, stolen, or misused in a way that is not in line with the brand.

What happens when your intellectual property is stolen in China? The result is more than time-consuming and irritating. These cyberattacks are designed to undermine manufacturing organizations. IP theft represents a substantial monetary loss for any business. It also has the potential to damage their reputation in the industry and kill off revenue streams.

Before a company decides to move their operations to a place with few protections against IP theft, they need to ask themselves if they are really receiving the competitive edge they crave.

The complexities of moving a manufacturing business overseas can be cumbersome and expensive. Manufacturers are vulnerable to Chinese laws and taxation practices. Without a shelter company, manufactures have few allies in the Chinese government if something goes wrong. In addition to the absence of legal protection.

If you attempt to resolve an issue through the Chinese legal system, the cost and time involved can be astronomical. In the end, you may seriously injure your ability to operate your business in China without ever resolving the issue.

Before a company moves its operations to China, they need to remember that they are signing a contract with the Chinese government and not a private business. The contracts are usually written in Chinese. U.S. factories need to be prepared to hire their own translators and international lawyers to help with the transition.

Unaligned Cultural Paradigms

China utilizes its own management standards that are vastly different from the quality standards U.S.-based companies are accustomed to using.

If you are considering moving your manufacturing operations to China, it is crucial that you understand that China’s worldview is fundamentally different from Western cultures. In China, the customer (you) isn’t always right. The lack of cohesiveness between the two mindsets can result in a breakdown of you getting your needs met.

Companies who move their operations to China often experience frustration and disappointment when the worldview that shapes their U.S. business model is not understood or respected in China.

How will a brand adapt when its primary manufacturing partner does not have the same priorities? What are the consequences of sure an unaligned collaboration? Is the “China Price” too high to pay?

Frustrating Language Barriers

Manufacturing in China - Language BarriersAnother setback is that Chinese manufacturing facilities do not hire multiple English-speaking employees. There is usually one translator available to work with your company. When you need to know what is happening at your factory or there is a production issue, you are limited to receiving information through a single source. To speak to the translator, you must be willing to work during Chinese business hours, and it can be challenging to convey your customers’ needs in a relevant way to your Chinese partners.

The process of trying to run your business remotely without clear lines of communication is sure to cause frustration and financial loss. If you are thinking about moving your factory to China, ask yourself if ongoing language barriers are worth the risk.

Disruptions in the Supply Chain

International trade came to a grinding haul when the COVID-19 pandemic shut down factories, closed borders, and incapacitated workforces. The two-week disruption quickly turned into long-term turmoil. At the same time, consumers and U.S.-based businesses wondered how long everyone would have to wait for everyday products like hand sanitizer and hygiene products.

In addition, the COVID-19 pandemic exposed manufacturing companies’ heavy reliance on foreign labor and the gaps in their contingency plans. In China, factories are still struggling to find ways to fill demand while they are short-staffed.

The Suez canal crisis further complicated supply chain issues. An estimated $60 billion (a day) worth of goods was trapped behind a stalled ship during that time. The products included everything from livestock to toilet bowls. These disruptions meant that manufacturing companies experienced several costly consequences, including missed deadlines and spoiled goods.

Before a company decides to use the standard path of outsourcing, they need to take a hard look at the reality of Chinese manufacturing. What will further disruptions to the overseas supply chain cost your organization?

Conflicting Time Zones

Have you ever needed to make an important phone call? Do you feel frustrated when you missed your contact by minutes? When you move your factory to China, you are required to conduct business during Chinese business hours.

These conflicting time zones add additional hours to your workday, If you have a time-sensitive situation, you risk missing deadlines or necessary details because you are never in sync with your Chinese partners.

The Trouble with Distance

Similar to the problems manufacturers face with the conflicting time zones, the distance between China and a U.S.-based business represents a substantial price tag to U.S. businesses.

This hefty price tag includes growing airfare prices, skyrocketing hotel bills, and potential quarantines as China restricts the movement of international travelers.

China’s distance can also make it almost impossible to resolve issues. The time and expense involved can cut into the cost-savings you were hoping to achieve. Steep differences between time zones and access to English-speaking partners in China can produce expensive manufacturing delays, resulting in a loss of consumer confidence in your company. When a problem needs to be solved, you deserve the assurance that you are working with a manufacturing partner who understands your values and customers. When a factory is overseas, the brand’s reputation is put at risk by the inability to monitor operations at your overseas factories regularly.

Paying the “China Price”

China is one of the top 10 worst countries for workers’ rights. News reports out of China continue to decry China’s slave-labor mentality. Even if their employees receive a 40-hour workweek, conditions can be brutal. Reports of abuse and sub-par benefits are not uncommon.

In the end, manufacturers need to examine the risk to their reputation in the global community. Labor conditions are often at the top of many watchdog organizations’ hit lists. Sacrificing human rights for labor costs could be detrimental in the long run.

China’s deplorable track record of exploiting its population to beat out the global market is no longer acceptable. Consumers have begun to sour on the idea that “cheap” at any cost is a cost worth paying for. Before you move your organization to China, you need to ask if the workers on the other end of the supply chain will pay the “China price.” Will your consumers be able to stomach your decision, or will they take their business to an organization that understands the value of thinking globally?

Fewer Pros, More Headaches

The true cost of manufacturing in China continues to grow. The once-lucrative partnership is now burdensome to many brands. At a time when precision, communication, and expediency are at a premium, paying the “China price” should be more than any business is willing to absorb.

The cost of manufacturing in China represents more than just lower labor rates. The contentious relationship between the U.S. and China adds additional headaches to manufacturers seeking price breaks overseas. Manufacturers are often used in a tug-of-war between the two countries. This battle manifests itself in the form of tariffs and other expenses that reduce a company’s profitability.

Growing Your Business

Now that China is no longer a sound business option for most manufacturers, how should companies view outsourcing?

Headlines that decry outsourcing as a business strategy are only telling half the story. The truth is that moving aspects of a manufacturing company’s operations out of the country often leads to expansion in their home territory. Revenue that once went toward paying loaded labor rates is now available to use for growth and development.

Another benefit to outsourcing is that companies that outsource to other firms quickly discover that they can start building their core staff in their home country. In other words, the increase in revenue means that companies have room to add their own qualified, skilled employees to the workforce, which opens the door to innovation and growth.

Outsourcing in Mexico

Outsourcing in Mexico - The Best OptionDeciding to outsource your business is not an easy one. It can be an excellent way to add value to your organization. Before your company decides to outsource, remember to ask these questions:

  1. Does the firm have access to a skilled workforce?
  2. Can they quickly meet your needs when it comes to hiring and retention?
  3. Will the time zone and language barrier negatively impact productivity?
  4. How will this decision help your business grow?

Choosing the Best Option

Whether your business is large or small, you will experience the cost-savings and uncompromising quality that sets Mexico manufacturing facilities apart from other global options.

As the economy continues to shift, you do not have to worry about how your organization will measure up against other businesses in your industry. Whatever drives your need to outsource, you do not have to pay the “China price.” Mexico has a solution that will meet your needs.

If you want to lower your loaded labor rates, while increasing production in CNC machining, the aerospace industry, or any other major industry, BF&S Manufacturing has a solution for you and is AS-9100D certified. Call or e-mail us today to discover the BF&S Manufacturing difference for yourself.

Aerospace Industry in Mexico

Aerospace Industry in MexicoAccording to the International Trade Administration (ITA), the aerospace industry in Mexico has played an integral part in Mexico’s economic growth for decades. What is aerospace? How long has the aerospace industry played a role in Mexico’s economic development? Why is Mexico an ideal location for the aerospace industry? And, finally, what certifications authorize a manufacturing company in Mexico to work on aerospace projects?

What Is Aerospace?

Aerospace is a term used to describe both the earth’s atmosphere and outer space. The aerospace industry is tasked with designing, testing, and managing the manufacturing of aircraft, satellites, spacecraft, and missiles. Sectors of the aerospace industry include Industrial, Commercial, Private, and Defense Aviation.

Aerospace Engineers

Aerospace engineers design, test, and manage the manufacturing of missiles, spacecraft, satellites, and aircraft. They are also responsible for testing prototypes created to support space exploration, aviation, and national defense systems.

According to CareerExplore.com, “Aerospace engineers can specialize in a specific type of aerospace product, such as…spacecraft, helicopters, or commercial aircraft. Or they may choose to specialize in specific areas, such as instrumentation and communication, navigation and control, structural design, guidance, or production methods.”

Aerospace Industry in Mexico

The aerospace industry is one of Mexico’s leading business divisions resulting in job growth, infrastructure development, and a growing interest from foreign investors. A recent report released by the ITA stated that 3.6 billion dollars (USD) worth of aerospace products and services were exported from Mexico in 2020. Those products included fuselages, electrical wiring systems, and jet turbines.

The ITA highlights that Baja, California (Tijuana and Mexicali) and Queretaro are aerospace clusters for aerospace manufacturing in Mexico. However, there are also facilities in other parts of Mexico that exemplify the best in what draws foreign companies to Mexico’s aerospace manufacturing firms.

Aerospace Companies

According to the Mexican Aerospace Industry Federation (FEMIA), the aerospace industry in Mexico grew from 100 manufacturing firms and organizations in 2004 to an estimated 360 by mid-2019. This growth is expected to continue as more foreign manufactures discover the unmatched benefits of choosing Mexico to meet their aerospace industry needs.

The state of Baja, California (Tijuana and Mexicali) has the largest concentration of aerospace companies with more than 82 aerospace manufacturing companies. This cluster of aerospace manufacturing companies provides a healthy supply chain throughout the world.

The United States receives two-thirds of its aerospace exports from Baja, California. Some of the other countries that benefit from aerospace manufacturing in Mexico include France, Germany, Canada, and England.

Some well-known manufacturing companies that rely on the aerospace industry in Mexico include Honeywell, Airbus, Rockwell Collins, Rolls Royce, and The Boeing Company.

What Is an Aerospace Cluster?

Aerospace Cluster in Baja, CA

Aerospace clusters are defined as manufacturers who position themselves as a magnet as parts supplier; logistics; training; support organizations; and much more! The aerospace manufacturing industry in Mexico is a leader in creating aerospace clusters that meet the needs of the international aerospace industry.

The aerospace industry in Mexico has five key clusters: Sonora, Baja California, Chihuahua, Nuevo Leon, and Queretaro.

One aerospace sector that benefits from Mexico’s aerospace clusters is the automotive parts manufacturing companies. Research shows that an estimated 53.2% of the production of these parts happens in one of Mexico’s aerospace clusters.

Why does the international aerospace industry, including the United States, rely on Mexico to meet their aerospace production needs?

Expanding Trade Agreements

In 2019, the North American Free Trade Agreement (NAFTA) ended. The transition to the United States-Mexico-Canada Agreement (USMCA) presented manufacturers with new opportunities. This new trade agreement opened the door to new aerospace manufacturing growth opportunities in Mexico. However, some manufacturers might ask: What sets Mexico apart from other aerospace manufacturing destinations?

Six Benefits to Aerospace Manufacturing in Mexico

Lowering the Cost

Mexico has emerged as a leader in the aerospace manufacturing sector because Mexico’s labor costs are 40-50% lower than in the U.S. Even skilled laborers earn less in Mexico. As wages in Mexico grow, evidence shows that productivity also increases. This ratio means companies can continue to keep loaded labor rates low while building revenue.

Aerospace Shelter & Sub-Contracting Companies in Mexico

For over 50 years, Mexico’s shelter services have simplified the process of moving a foreign company’s aerospace operations to Mexico. Providing a turnkey, start-up approach to manufacturing is only one of the benefits. Under a shelter company, you maintain all intellectual property rights, and you are shielded from liability.

This protection means that foreign companies are not vulnerable to Mexico’s legal system. In other words, a shelter company focuses on the administrative and legal logistics of a business, while the foreign company focuses on its core goal: Aerospace manufacturing. The production value of the product remains high while decreasing the operating costs.

Using a shelter company in Mexico is not a foreign company’s only option. Mexico provides excellent sub-contracting opportunities as well. By utilizing Mexico’s success as a sub-contractor, you can reap the benefits of Mexico’s skilled labor force while completing the bulk of the project in the United States. For example, BF&S Manufacturing’s quality certifications make us an ideal partner for sub-contracting products like wire harnesses, small electric motors, cargo doors, and engine parts.

Access to Skilled Labor

To work on an aerospace project, the manufacturing company in Mexico must meet international quality control standards. For example, BF&S Manufacturing is AS-9100D certified. This certification qualifies them to work on aerospace projects in Mexico. To maintain their AS-9100D accreditation, they are required to maintain the highest standards in manufacturing. They meet those standards in both the materials they use and the assembly of the finished product.

Reduced Travel ExpensesReduced Travel Expenses

The United States’ proximity to the aerospace industry in Mexico means you will reduce the cost of lengthy international travel. Your executives will be able to spend more time in their offices. When you can’t be on-site, a knowledgeable workforce will provide clear information.

Bilingual Support

Unlike other parts of the world, aerospace manufacturing in Mexico is known for employing management teams and engineers that are fluid English-speakers. This unparalleled benefit reduces disruptions to aerospace supply chains, cuts the resulting production costs that can be passed onto customers, and saves time.

Fewer Headaches at the Border

Nothing is worse than having an item stuck in Customs, especially if customers do not understand that some things are out of a company’s control. The logistics of transporting items through Mexico’s ports are less complicated than other contract manufacturing options. Once again, this benefit of manufacturing in Mexico ensures that not only does your supply chain flow smoothly, but your customers stay happy.

The BF&S Manufacturing Difference

When considering moving your aerospace manufacturing sector to Mexico, it is essential to note that BF&S Manufacturing is a United States-based company. All contracts are made with a U.S. company and not with a foreign entity. Your legal options fall under U.S. law. We also use American-based management practices in all our Mexican-based manufacturing facilities. These standards serve as a familiar benchmark for U.S. executives and allow for a smooth transition from the United States to BF&S Manufacturing’s location in Mexico. BF&S Manufacturing’s status as one of the few manufacturers in Mexico that can offer both sub-contracting and shelter company support makes us an excellent choice for your manufacturing needs.

AS-9100D Certified in Aerospace IndustryAs stated earlier, BF&S Manufacturing is AS-9100D certified. This certification qualifies us to work on aerospace projects in Mexico. To maintain our AS-9100D accreditation, we are required to maintain the highest standards in manufacturing. We meet those standards in both the materials we use and the assembly of the finished product.

If you want to lower your loaded labor rates, while increasing production in the aerospace industry (or any other), BF&S Manufacturing has a solution for you. Call or e-mail us today to discover the BF&S Manufacturing difference for yourself.

Machine Shops in Mexico

Machine Shops in Mexico - CNC Milling MachineA manufacturing machine shop is defined as a “room, building, or company where machining, a form of subtractive manufacturing is done.” One of the functions of a machine shop includes performing CNC machining, adding to the precision and quality of the overall manufacturing process.

If your company is looking for a global partner in Mexico to meet your manufacturing needs, it is essential to remember that not all machine shops in Mexico are the same. How can you ensure that your search yields positive results? Let’s take a brief look at the services that machine shops in Mexico provide and how you can find the best facility to meet your needs.

What Is Subtractive Manufacturing?

The process of subtractive fabrication in the manufacturing industry involves cutting away from a solid block of material such as metal, plastic, or wood. For example, a milling machine cutting away or hollowing out a block of metal or plastic falls under the heading of subtractive manufacturing. Like other forms of subtracting manufacturing, milling is often part of the automated manufacturing process.

What Is CNC Machining?

Anyone familiar with the manufacturing industry has heard the term “CNC manufacturing“. CNC stands for computer numerical control. CNC manufacturing services focus on the subtractive manufacturing method instead of the additive manufacturing process (3D printing).

Modern CNC machines are fully automated. They use CAD and CAM software data files to determine the cutting trajectory, tooling parameters, and fabrication of various products.

CNC machining does not refer to all of the automated processes that exist in manufacturing. The services performed under the CNC machining process include milling, grinding, drilling, turning, routing, etc.

What Are the Benefits of CNC Machining?

CNC MachiningMachine shops in Mexico rely on CNC machining for several reasons. One of the many reasons is because the process is more precise than manual machining. Since that precision is carried through the creation of each part, manufacturers experience an increase in production speed and efficiency.

Another reason that machine shops in Mexico depend on the CNC machining service is that CNC machining helps manufacturers reduce loaded labor rates, including issues related to employee safety. By using CNC machining in a machine shop in Mexico, manufacturing companies experience the benefits of a reduction in operating costs while turning products faster.

How to Find the Best Machine Shop

Mexico is home to a wide range of machine shops, but not all machine shops in Mexico are known for producing high-quality products that customers expect. When you begin your search for a machine shop in Mexico, you should start with the machine shop’s certifications.

ISO Certification

AS-9100D Certified Machine ShopA key to any successful global manufacturing partnership is tied directly to their level of certification. A manufacturing company should never partner with a company that doesn’t hold a certificate from the International Organization of Standardization (ISO), which is responsible for monitoring the quality of products produced in the manufacturing industry.

The BF&S Difference

BF&S Manufacturing holds an AS-9100D accreditation through the ISO. This certification means that BF&S is required to maintain the highest quality standards in both the materials they use and in the assembly of the finished product. Their reputation as a leader in CNC machining and other manufacturing practices has qualified them to work on projects for Aerospace. Their facilities in Mexico are uniquely capable of offering both support to companies that want to outsource their business or to those organizations that wish to delegate the creation of specific components.

If you want to lower your loaded labor rates, while increasing production, BF&S Manufacturing has a solution for you. Call or e-mail us today to discover the BF&S Manufacturing difference for yourself.

Mexico Contract Manufacturing – The Benefits

In 2018, Mexico imported $371.9 billion worth of goods into the U.S. Manufacturing imports included vehicle components; agricultural products; medical instruments; and much more. Each year, more companies choose contract manufacturing in Mexico as the solution to their supply chain needs. Despite this growth, you may wonder if moving your operations to a new country is worth the investment. Before we can determine if contract manufacturing in Mexico is the best solution for your company’s needs, it is important to look at the competition.  

The Elephant in the Room

Mexico Contract Manufacturing - Mexico Versus ChinaWe cannot talk about contract manufacturing in Mexico without addressing the elephant in the room — China. In 1973, the United States and China began a lucrative contract manufacturing trade arrangement that lasted for over forty years. In 2018, the U.S. took steps to change its contract. The U.S. placed 25% tariffs on $50 billion worth of Chinese imports. These hefty tariffs signaled the start of a “trade war” between China and the U.S. Companies on both sides of the divide continue to struggle under the tariffs. The challenge now facing North American-based companies is how to find high-quality, low-cost alternatives to their current contract manufacturing partners. To answer those concerns, here are 10 benefits to moving your contract manufacturing operations to Mexico.

Top 10 Benefits to Contract Manufacturing in Mexico

  • Lower Labor Costs
  • Reduced Shipping Costs
  • Fewer Delays Through U.S. Ports of Entry
  • Other Financial Perks 
  • Mexico Is a Safe Place to Work
  • Superior Production Quality
  • Contract Manufacturing Shelter Companies
  • Safe Working Conditions
  • Outsourcing Creates U.S. Jobs
  • Lower Travel Expenses

Mexico Contract Manufacturing Benefit #1: Lower Labor Costs

Companies who move their contract manufacturing operations to Mexico have discovered significant labor cost savings. Studies suggest that labor expenses in Mexico are 40-50% lower than in the U.S. Even skilled laborers earn less in Mexico because the cost of living is so much lower than in America. In addition to initial savings, as wages in Mexico grow, evidence shows that productivity also increases. Companies who choose to enter into a contract manufacturing arrangement in Mexico keep labor expenses low while building revenue.

Benefit #2: Reduced Shipping Costs

Another benefit to contract manufacturing in Mexico is the proximity. As a contract manufacturer, lower shipping fees mean that both the company’s cash flow and its margins are protected. Mexico manufacturing means that the savings can go to your customers or your pocketbook. 

Benefit #3: Fewer Delays Through U. S. Ports of Entry

Nothing is worse than having an item stuck in Customs, especially if customers do not understand that some things are out of a company’s control. The logistics of transporting items through the Mexican ports are less complicated than other contract manufacturing options. Once again, this benefit ensures that not only does your supply chain flow smoothly, but your customers stay happy.

Benefit #4: Other Financial Perks

Contract manufacturers know that Mexico offers better exchange rates than other countries. Also, Mexico’s facilities try to use natural gas instead of electricity. Both measures reduce operational expenses.

Benefit #5: Mexico is a Safe Place to Work

The World Economic Forum recently released its annual crime report. The forum “measures the extent to which a country exposes tourists and businesses to security risks mainly related to serious harm to people (violence and terrorism).” According to this report, Mexico (53.31) is currently ranked near the U.S (47.7). Headlines about border violence are unsettling, but these reports are incomplete. The violence that dominates the headlines revolves around a few large cities. Legitimate businesses have never been targets of this violence. Manufacturing in Mexico, like other places, depends on creating a security-conscious environment. Those tools include surveillance cameras, gated entry points, and security personnel. 

Benefit #6: Superior Production Quality

For years, Mexico’s reputation for superior manufacturing has made it an industry leader. Mexico is now the leading producer of electronics due in part to its access to skilled labor. These positions are often difficult to fill in North American countries. 

By comparison, China often experiences quality issues with its products. The logistics associated with returning an item are often prohibitive and result in write-offs. These issues usually include shipping fees, distance, time involved, and language barriers. 

What Are the Products Manufactured in Mexico?

Mexico Contract Manufacturing - Made in Mexico Product Seal

  1. TV’s and Electronics
  2. Tools
  3. Candy
  4. Toothpaste
  5. Appliances
  6. NASA Jumpsuits
  7. Inks and Printers
  8. Aerospace Components
  9. Medical Devices and Supplies
  10. Fender Stratocaster (Strat) Guitars

Mexico Contract Manufacturing Benefit #7: Contract Manufacturing Shelter Companies

Foreign companies rely on contract manufacturing shelter companies to guide them through the transition. A shelter company focuses on the administrative and legal logistics of a business. At the same time, the foreign company focuses on its core goal: manufacturing. The production value of the product remains high while decreasing the operating costs. 

For over 50 years, Mexico’s shelter services have provided their global partners with protection from liability. This protection means that foreign companies are not vulnerable to Mexico’s legal system or taxation practices. Shelter companies simplify the process of moving an operation to Mexico. Providing a turnkey, start-up approach to manufacturing is only one of the perks. Under a shelter company, you also maintain all intellectual property rights for your products and services.

Mexico Contract Manufacturing Benefit #8: Safe Working Conditions

Conditions in Mexico manufacturing have improved over the years. Contract manufacturing companies in Mexico know they must meet global standards. They provide benefits for their employees, including medical, family leave, paid sick time. Labor unions advocate for safe working conditions and fair wages. Employee turnover is lower because they want to take advantage of the perks provided by reputable manufacturing partners in Mexico. 

Mexico Contract Manufacturing Benefit #9: Outsourcing Creates U.S. Jobs

Recent headlines have capitalized on the fear that moving manufacturing companies out of the U.S. is costing U.S jobs. Indeed, millions of U.S manufacturing jobs move overseas each year, but that isn’t the whole story. 

U.S manufacturers often choose to outsource lower-level work to Mexico or China. The reduction in costs means that there is more room in their budgets for skilled U.S-based workers. In some cases, lower-level jobs can also be challenging to fill in the U.S because of the higher cost of living in that country. In that event, manufactures find it necessary to outsource parts of their business.

Mexico Contract Manufacturing Benefit #10: Lower Travel Expenses

Mexico’s proximity to the U.S means you will reduce the cost of lengthy international travel. Your executives will be able to spend more time in their offices. When you can’t be on-site, a knowledgeable workforce will provide clear information.

By comparison, China’s distance can make it difficult to resolve issues. The time and expense involved can cut into the cost-savings you were hoping to achieve. Steep differences between time zones and languages can produce added expensive manufacturing delays. 

Building Your Business the Right Way

Mexico Contract Manufacturing - Building Your Business the Right WayDo you want to take advantage of these benefits? Mexico is fully capable of meeting your manufacturing needs. Manufacturing companies around the world have discovered the value of moving their operations to Mexico. Manufacturing in Mexico means you have fewer supply chain delays and more revenue to build your business. 

If you ask a contract manufacturer in Mexico, they will tell you that while there are many manufacturing solutions out there, none of them provide the same level of help, experience, and high-quality products as Mexico. Your company can start saving today.

Our company has over 40 years of manufacturing excellence. Our ongoing dedication to high-quality, low-cost manufacturing makes us a great shelter company. We understand the pressures facing the global manufacturing industry. We understand that you want to see the advantages of lower labor costs while taking advantage of increased production. We’re prepared to help you achieve these goals, and much more. Contact us for your FREE initial consultation today!

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Mexico vs China Manufacturing

Mexico vs China ManufacturingMexico is the United States’ second-largest supplier of imported goods. In 2018, Mexico imported $371.9 billion worth of goods into the U.S. Manufacturing imports included vehicle components, agricultural products, medical instruments, and much more.

In 2019, the North American Free Trade Agreement (NAFTA) ended. The transition to the United States-Mexico-Canada Agreement (USMCA) presented manufacturers with new opportunities. The new trade agreement also raises many questions.

Should manufacturers still pursue manufacturing partnerships in Mexico? Is an overseas partner like China a better fit? In the decision between Mexico vs. China, who can provide the best value and support? BF&S Manufacturing understands these concerns. Our team knows that the decision to move your operations to a new country is not an easy one. We want to take the anxiety and guesswork out of the decision-making process. Our goal is to help you see the advantage in choosing to manufacture products in Mexico.

The best way to do this is to debunk seven common misconceptions about moving your company to Mexico.

Mexico vs China Manufacturing: Mexico Is More Expensive than China True or False?

False. For decades, China represented the most cost-effective way to manufacture goods. The low labor costs meant that companies could reap a 30-80% cost reduction in operating costs. Over the last decade, China’s wages and overseas shipping costs have increased. This increase has made labor costs in China comparable to labor costs in the United States.

In 2018, the United States took steps to place 25% tariffs on $50 billion worth of Chinese imports. These heavy tariffs signaled the start of a “trade war” between China and the United States. Companies on both sides of the divide continue to struggle under the expense.

The answer is clear. It is now less extensive to manufacture goods in Mexico. There are several components that contributed to this shift.

First, Mexico’s labor costs are 40-50% lower than in the U.S. Even skilled laborers earn less in Mexico. As wages in Mexico grow, evidence shows that productivity also increases. This ratio means companies can continue to keep loaded labor rates low while building revenue.

Another benefit to manufacturing in Mexico is the proximity between the two countries. Lower shipping costs mean companies do not have to pass the expense onto their customers. Also, the reduction in delivery times means companies can turn items faster. Both advantages keep the cost of doing business reasonable for all involved.

Mexico vs China Manufacturing: Mexico Isn’t a Safe Place to Do Business – True or False?

False. The World Economic Forum recently released its annual crime report. The forum “measures the extent to which a country exposes tourists and businesses to security risks mainly related to serious harm to people (violence and terrorism).” According to this report, Mexico (53.31) is currently ranked near the U.S. (47.7).

Headlines about border violence are unsettling, but these reports are incomplete. The violence that dominates the headlines revolves around a few large cities. Gang violence is a problem in many parts of the world. Legitimate businesses have never been targets of this violence.

Here in Agua Prieta, BF&S Manufacturing has not experienced any of the violence of other border towns. Our population of 100,000 prides itself on being a quiet, family-oriented community. We want to keep it that way.

Mexico vs China Manufacturing: The Production Quality in Mexico is Poorer than in China – True or False?

False. For years, Mexico’s reputation for quality manufacturing has made it an industry leader. Mexico is a hub for aerospace, automotive, and medical device manufacturing.

AS-9100D-Certified for Aerospace ManufacturingBF&S Manufacturing maintains an AS-9100D certification. This certification qualifies us to work on aerospace projects. To maintain our AS-9100D accreditation, we are required to maintain the highest standards in manufacturing. We meet those standards in both the materials we use and the assembly of the finished product. Our success depends on your success. We demand excellence of ourselves, so in turn, we can provide the best to our foreign partners.

By comparison, China often experiences quality issues with its products. The logistics associated with returning an item are often prohibitive and can result in write-offs. Some of the costly problems associated with China’s poor-quality control practices include shipping costs, manufacturing delays, time consumption, and limited access to English-speaking advocates at the China-based facility.

Mexico vs China Manufacturing: Mexico Is More Complicated than in China True or False?

False. Over the years, Mexico has proven to be a more reliable and transparent manufacturing partner than China. Foreign companies rely on Mexico for several reasons, including the ones listed below.

Shelter Companies: For over 50 years, Mexico’s shelter services have simplified the process of moving a foreign company’s operations to Mexico. Providing a turnkey, start-up approach to manufacturing is only one of the benefits. Under a shelter company, you maintain all intellectual property rights, and you are shielded from liability. This protection means that foreign companies are not vulnerable to Mexico’s legal system. In other words, a shelter company focuses on the administrative and legal logistics of a business, while a foreign company focuses on its core goal: manufacturing. The production value of the product remains high while decreasing the operating costs.

Sub-Contracting: Using a shelter company in Mexico is not a foreign company’s only option. Mexico provides excellent sub-contracting opportunities as well. By utilizing Mexico’s success as a sub-contractor, you can reap the benefits of Mexico’s skilled labor force while completing the bulk of the project in the United States. For example, BF&S Manufacturing’s quality certifications make us an ideal partner for sub-contracting products like wire harnesses and small electric motors.

Cultural Paradigm: When considering moving your operations to Mexico, it is essential to note that BF&S Manufacturing is a United States-based company. All contracts are made with a U.S. company and not with a foreign entity. Your legal options fall under U.S. law. We also use American-based management practices in all our Mexican-based manufacturing facilities. These standards serve as a familiar benchmark for U.S. executives and allow for a smooth transition from the United States to BF&S’s location in Mexico. BF&S Manufacturing’s status as one of the few manufacturers in Mexico that can offer bother sub-contracting and shelter company support makes us a great choice for your manufacturing needs.

Time and Location: Another crucial reason manufacturing in Mexico is less complicated than in China is time and distance. Mexico is in the same time zone as the United States. When you move your company’s operations to Mexico, you can reach one of the English-speaking management team members during your U.S.-based business hours. If you need to be on-site in a hurry, depending on the location of the U.S. office, an employee based in the U.S. can be on-site at the Mexico facility the same day.

Bilingual Partners: An unbeatable benefit to manufacturing in Mexico is that the majority of the engineers and managers at BF&S Manufacturing are bilingual. When you need to speak to someone at your manufacturing facility in Mexico, you can be assured that your needs are understood without requiring a translator. 

The Trouble with China

By comparison, the complexities of moving a manufacturing business overseas can be cumbersome and expensive. Manufactures are vulnerable to Chinese laws and taxation practices. Without a shelter company, manufactures have few allies in China if something goes wrong. In addition to the absence of legal protection, China utilizes its own management standards that are vastly different from the quality standards U.S.-based companies are accustomed to using. If you are considering moving your manufacturing operations to China, it is crucial that you understand that China’s worldview is fundamentally different from Western cultures. In China, the customer (you) isn’t always right. The lack of cohesiveness between the two mindsets can result in a breakdown of you getting your needs met.

Another setback is that Chinese manufacturing facilities do not hire multiple English-speaking employees. There is usually one translator available to work with your company. When you need to know what is happening at your plant or there is a production issue, you are limited to receiving information through a single source. To speak to the translator, you must be willing to work during Chinese business hours, and it can be challenging to convey your customers’ needs in a relevant way to your Chinese partners.

Also, it’s essential not to overlook the time difference between the two countries. For example, the 15-hour time difference between Arizona, USA and Wuhan, China could result in costly delays and losses for your company and the customers you wish to serve.

Once your product is prepared to ship from China, additional complications, such as what recently happened in the Suez Canal, are a constant threat. By comparison, the logistics of transporting items through Mexican ports of entry are less complex and historically have not been plagued with the type of delays China experiences.

Mexico vs China Manufacturing: Facilities and Working Conditions Are Worse in Mexico True or False?

False. Conditions in Mexico manufacturing facilities are comparable or better than conditions in the United States. Foreign manufacturing companies in Mexico know they must meet global standards. As a U.S.-based company, BF&S Manufacturing prides itself on caring for our employees by offering great benefits and safe working conditions.

BF&S Manufacturing Benefits PackageBF&S Manufacturing Benefits Package:

  • Full Medical Insurance Coverage
  • Paid Sick Leave
  • Paid Vacations
  • Family & Medical Leave
  • Housing Allowance
  • Retirement Benefits (401(k) Plans)
  • Performance Bonuses
  • Christmas (End-of-Year) Bonuses
  • Profit-Sharing
  • Employee Match-Saving Programs

By contrast, China is one of the top 10 worst countries for workers’ rights. News reports out of China continue to decry China’s slave-labor mentality. Even if their employees receive a 40-hour workweek, conditions can be brutal. Reports of nightmarish conditions, abuse, and sub-par benefits are not uncommon.

In the end, manufacturers need to examine the risk to their reputation in the global community. Labor conditions are often at the top of watchdog organizations’ hit list. Sacrificing human rights for labor costs could be detrimental in the long run.

Mexico vs China vs USA: Outsourcing Is Stealing American Jobs True or False?

False. Recent headlines have capitalized on the fear that moving operations out of the U.S. is costing U.S. jobs. It is true that millions of U.S. manufacturing jobs move to Mexico and China each year, but that isn’t the whole story.

United States manufacturers often choose to outsource lower-level work to Mexico or China. The cost-savings this represents makes the manufacture more competitive. The reduction in costs means that there is more room in their budgets for skilled U.S.-based workers. In some cases, lower-level jobs can also be difficult to fill in the U.S. because of a shortage of available workers. Even during economic downturns in the United States., U.S.-based employees, in general, have proven that they are not interested in filling lower-level or “menial” positions. In that event, manufactures find it necessary to outsource some of their manufacturing needs.

This doesn’t mean that only low-level jobs are moving to Mexico. Mexico’s access to a skilled workforce makes them a coveted destination for manufacturing.

Mexico vs China: Solving Manufacturing Problems in Mexico Is More Difficult than in China True or False?

False. Mexico’s proximity to the U.S. means traveling back and forth is cheaper and faster. Mexico is in the same time zone as the United States. When you want to see things for yourself, you can be on-site the same day, and you won’t have to worry about costly international travel. The time savings will allow your executives to spend more time in their offices and lower your operational expenses. When you can’t be on-site, your knowledgeable and bilingual management team will provide clear information. You will no longer have to wait for a translator or stay up all night to speak to someone in a different time zone.

By comparison, China’s distance can make it almost impossible to resolve issues. The time and expense involved can cut into the cost savings you were hoping to achieve. Steep differences between time zones and access to English-speaking partners in China can produce expensive manufacturing delays, resulting in a loss of consumer confidence in your company.

When a problem needs to be solved, you deserve the assurance that you are working with a manufacturing partner who understands your values and customers. Moving your manufacturing operations to Mexico will provide that assurance. 

Mexico Manufacturing or China Manufacturing: Who Will You Choose?

Mexico Manufacturing or China Manufacturing: Who Will You Choose?Manufacturing in Mexico doesn’t have to be a last resort. BF&S Manufacturing would like to help you learn more about why manufacturing in Mexico is superior to China’s manufacturing options.

Our U.S.-based company has over 40 years of manufacturing excellence. Our ongoing dedication to high-quality, efficient, and low-cost manufacturing makes us a great shelter company. Also, we are one of the only options in Mexico that can also offer sub-contracting services.

We believe that our success depends on our ability to earn the trust of our foreign partners. Our partnership with Aerospace and other high-profile companies proves that we have a reputation that cannot be matched anywhere else.

BF&S Manufacturing understands the pressures facing the global manufacturing industry. We want to help you take advantage of lower loaded labor rates while experiencing increased productivity and maintaining or exceeding your quality expectations. We’re prepared to help you achieve these goals, and much more.

Connect with Us

BF&S Manufacturing has over 40 years of manufacturing excellence. Our ongoing dedication to high-quality, low-cost manufacturing makes us a great shelter company. We understand the pressures facing the global manufacturing industry. We understand that you want to see the advantages of lower labor costs while taking advantage of increased production. We’re prepared to help you achieve these goals, and much more. Contact us for your FREE initial consultation today!

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