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When it comes to being competitive on a global scale, many companies choose to manufacture in Mexico. But if you’re new to the process, you may be wondering what the best methods are. Fortunately, regardless of your unique situation or needs, you have options.
Let’s look at the most popular ways to manufacture in Mexico and consider their pros and cons. Each method is right for some, but not all. Depending on your current needs, capacity, and desired outcome, you will probably find one of these options better suited for your company than the others.
Let’s break each of them down one at a time.
Contract marketing is simply when one company contracts with another company to manufacture components or parts on their behalf. If your company has demand for a developed product but doesn’t have quite the infrastructure required to meet this need, contract manufacturing may make sense if you want to manufacture in Mexico.
This option enables companies to meet changing customer demand rapidly. Yet they don’t need the capital commitment required of a full-scale manufacturing facility in Mexico. Put simply, contract manufacturing is a very low-risk, cost-effective, and short-term investment.
Knowing when contract manufacturing in Mexico is right for you requires evaluation of the pros and cons. This specific option means:
If your business is small, prioritizes simplicity and convenience, and experiences frequent changes in product demand, then you may want to choose a quality contract manufacturer to open the benefits of Mexico to you.
Many companies opt to open a standalone factory in Mexico called a maquiladora. In a nutshell, a maquiladora is a factory that operates on a tariff-free or favored duty basis, while the parent company provides administrative support and oversight from within the US. Sometimes called maquilas, these factories are owned and operated by US companies who staff them with Mexican workers and import materials and export finished goods duty free or near duty free, providing certain restrictions and requirements are met. The company is responsible for all aspects of this factory just as they would be at home.
This method can be a very cost-effective way to manufacture in Mexico. Manufacturers can take advantage of Mexico’s lower cost of labor, free-trade savings, and reduced shipping costs in comparison with other outsource destinations. It further affords other pros and cons, depending on your company’s needs. For example, opening a standalone maquiladora in Mexico means:
In short, shelter manufacturing is like taking a shortcut to unlock Mexico’s advantages. A shelter service is the owner of record for the Mexican factory, but the US company wanting to manufacture in Mexico controls the facility. The shelter service handles all administrative and regulatory issues, including labor relations, tariff certifications, government and tax reporting, and can even assist with site selection and more.
In this way, this option is a turnkey process. Companies can skip ahead of the line and let the shelter company handle cultural and local matters, legal compliance, vendor and supplier networks, acquiring assets, and even logistics and freight considerations. The shelter service handles all the day-to-day processes, freeing up your company to focus on production quality.
There are many reasons companies benefit from choosing this third option, some of which include:
Using this option, companies may manufacture in Mexico as a division of the shelter company. The US manufacturer hits the ground running, already fully compliant with Mexican regulations and standards, and fully plugged in and equipped from the start with all the tools necessary for success.