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If you’ve ever considered moving some or all of your manufacturing process to Mexico to reduce costs and strengthen your company’s bottom line, then you’ve probably thought of working with a shelter service or at least heard of the popularity of this option.

working with a shelter

And there’s a big reason shelter providers are so popular for US manufacturers. Well, actually, there are at least five reasons. Shelters make all of the benefits of Mexico more accessible to US companies – especially small-medium-sized companies.

And just what are these unique advantages that can only be enjoyed through a shelter partner? Why are so many companies turning to the shelter option rather than saving that money to just go it alone? Isn’t the primary benefit of manufacturing in Mexico the duty-free imports and exports? 

If you’re wondering just what a shelter is and how working with a shelter partner provides unique advantages over flying solo, stick around. Below we are exploring five of the many strategic advantages outsourcers get only by going the shelter route.

What Is Shelter Manufacturing?

US and foreign producers who want to manufacture in Mexico have different options: 

  • They can open a wholly-owned subsidiary in Mexico. This is particularly popular with large, multi-national firms who want total control and long-term investment in the country and have the wherewithal to navigate the complexities of owning a subsidiary in a foreign country.
  • They can place orders with contract manufacturers already established in Mexico. Contract manufacturing is very popular with small companies who need the flexibility to scale up or down and are willing to sacrifice control over the process in order to avoid long-term commitments/liabilities.
  • They can partner with a shelter manufacturer to get the best of both worlds. This option is hugely popular among small and medium companies who want the most control with the least hassle. 

Shelter manufacturing is when a foreign company contracts with a company in Mexico to jointly operate a factory. That Mexican company is the owner of record, but the other company calls the shots. This is sometimes called shell manufacturing, because the shelter partner is essentially a shell, but they have so much more than the paperwork under control. They’re also highly integrated into the local culture, labor market, supplier networks, and so much more. They often already have factories ready to go to work for you or they offer step-by-step help in building a new factory. 

And the best part? They handle all the red tape and let the US company focus on the product. This option creates an opportunity none of the other modes of entry afford foreign-owned businesses seeking access to Mexico’s lower labor costs and other benefits. 

Here are five critical advantages that are unique to working with a shelter service to enter Mexico.

  1. Turnkey Startup

Outsourcing to Mexico can take a year or two when you open a subsidiary in Mexico. The process is varied and prone to pitfalls. Regulatory compliance is tricky, there are scores of forms and permits to attend to, and the financial risk of opening a company in a country you’re not familiar with is immense.

But with a shelter partner, you can begin manufacturing in your own Mexican factory in as little as a few weeks. If you choose to build your own factory through a shelter service, it might take a few months. In fact, one of the best ways to know when the shelter option is right for you is when you need speed and simplicity.

And the process is well laid out and turnkey. Simply follow the steps outlined by your partner, provide the inputs required, and leave the compliance and personnel matters to them. Most outsourcers are up and running in about 6-12 weeks.

  1. Instant Relationship

A reputable shelter provider has been working in Mexican manufacturing for many years. They are well respected among labor groups, vendors, supplier networks, government agencies, and distribution chains. When you enter Mexico holding hands with them, you aren’t the new kid on the block trying to establish your credibility. You’re the friend of that local shelter provider. You’re in!

This means you can immediately access these relationships, developed over years of working together, to see instant results. Your shelter provider knows what engineers and assembly staff to hire, what security firm is most reliable, which vendors have the best prices, and what suppliers will have the materials soonest. They are plugged into the best industrial parks and infrastructure. And you inherit all those relationships and savings instantly.

  1. Next-Level Efficiency

So much effort goes into learning the rules of doing business in a foreign country. But working with a shelter partner means all that effort can go directly into producing a superior product. This option allows outsourcing companies to forego the inefficiency of the learning curve. Your inside man already has best practices under control. Maintenance concerns and operational busy work are their problem. You go straight to results.

  1. Tax Savings

There’s something called “gringo pricing” in Mexio. Foreigners often feel they are being charged a premium for being outsiders or “gringos.” But really, they’re simply paying the price of ignorance and inexperience. This is especially true when it comes to taxes and regulatory compliance.

In Mexico, there are so many ways to save on different taxes and compliance issues – but only if you know about the loopholes and proper avenues to follow. A shelter service automatically positions your business for maximum tax savings by leveraging every exemption and applying for every credit or discount. No falling through the cracks.  No gringo pricing. Just immediate savings.

  1. Maximum Safety

There’s a lot of fear about doing business in Mexico. Cartel violence, kidnappings, and drug wars have led many to believe Mexico is unsafe. While some of this is deserved, the fact is Mexico is a vibrant, modern, and relatively safe country with a drug-crime problem in some areas. As such, it pays to have a balanced perspective on safety in Mexico.

A unique advantage shelter partners offer US firms is the ability to set up an operation in the safest manner possible. Shelter providers are insiders. Your shelter partner will have an established presence in the safest industrial complexes. They will contract the most reputable security firms. They will understand what to watch out for and how to run a factory to prevent theft or other risks. And they will know what parts of town are safe and which are not. 

Working with a shelter partner may not be for everyone. But for those companies wishing to access Mexico’s savings, the prospect of skipping the wait and foregoing the hassle make the shelter option more than worth it.

 

It’s easier than you think.

Get in touch and we’ll show you how.