Mexico 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.
BF&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 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?
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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