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
We 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?
- TV’s and Electronics
- NASA Jumpsuits
- Inks and Printers
- Aerospace Components
- Medical Devices and Supplies
- 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
Do 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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