Let’s say you’re interested in Mexican shelter manufacturing, but you’re still in the info-gathering phase. You’ve never actually used a shelter service and don’t really know where to start.
Not to worry. In this beginner’s guide, we’ll catch you up to speed and hopefully answer all your questions to help you make the right decision.
Manufacturers today are under a lot of pressure to keep margins down and keep up with the competition. One of the ways in which US manufacturers do this is by partnering with a shelter manufacturing service in Mexico. And here’s what all that entails.
First off, shelter manufacturing offers one of the most efficient ways to establish a manufacturing presence in a foreign country. Opening a new factory can be a rather complicated and risky process. Securing permits, registering the foreign company, dealing with compliance and HR issues, and managing vendors and personnel can be incredibly difficult in a foreign country like Mexico.
Fortunately, with a shelter service, you don’t have to worry about such things. The shelter provider does all of that for you. Rather than worry about the administrative side of things, you are free to utilize their resources and expertise to go straight to product design and quality control.
This frees up companies to enhance their competitiveness and operational efficiency with less risk and headache. In fact, it’s the most popular mode of entry for foreign companies in Mexico. Lower labor costs and free-trade access to such a large consumer market allows competitive companies to keep up with the dynamic demands of the industry.
Depending on who you contract with, there is some variability in the process. But overall, a shelter service will fulfill key functions like:
Many shelter services own factories you can lease or at least have preferred providers for industrial space and equipment. They can help you craft your package or provide turn-key solutions to allow you to hit the ground running. Typically, a foreign company can be operational within a couple months or sometimes even less. Shelter manufacturing in Mexico lets you tap into an existing network of providers of everything from real estate to skilled labor to Tier 1, 2, and 3 suppliers.
Mexico is a vital trade partner with the US, not a competitor. In fact, of the goods made in Mexico, approximately 40% of their inputs were made in the USA.
The two countries work as partners. US firms typically provide the bulk of research and design, while the skilled assembly and crafting is done by a highly trained Mexican workforce. A lot of the materials and parts are made in US factories and assembled in Mexican maquiladoras.
And because labor costs are lower in Mexico, this assist allows US producers to make the same goods at a fraction of the cost. And because of the USMCA, duties and tariffs are also no obstacle.
As many US companies have found, doing business in Mexico doesn’t mean opting out of regulatory oversight. In fact, Mexico’s regulatory framework can often be quite different and confusing for US companies. This is why a massive amount of homework is required before opening a wholly owned subsidiary or maquiladora in the country.
However, Mexican shelter manufacturing is different. Using this mode of entry, companies can simplify regulatory compliance and outsource this responsibility. Often the shelter service partners with local agents already highly competent in local regulations and compliance to make sure the process is perfectly legal and streamlined.
Environmental regulations, customs processes, duties and tariff forms, taxes, and all other regulations are simply handed off to a partner that has not only the experience but the legal responsibility to handle compliance on behalf of the US business.
Mexican shelter manufacturing usually appeals to companies for one or more of the following five reasons:
Companies going it alone can expect the process of opening up a new and foreign culture, industry, and regulatory framework to take many months, whereas the shelter option reduces this down to usually about 6-12 weeks.
Because a shelter factory is technically owned by a local company, the overall tax exposure is less than for a foreign company merely working in Mexico.
Rather than starting from scratch, a company partnering with a shelter service is taking advantage of well-established relationships to immediately benefit from years of networking.
Shelter companies specialize in handling the complexities for maximum efficiency.
Operating in a foreign country can be risky; but shelter services operate in the better parts of town in highly secured industrial parks with vetted security firms and trusted logistics partners.
So now, you know the advantages of using a shelter service. You’ve seen why there is an appeal for US companies wanting to lower their costs without adding to their hassle. But how do you know when it’s the right time for your company? Is outsourcing to another country really right for you?
Well, that depends on a few key factors.
Whether Mexican shelter manufacturing is right for your company or not, it helps to understand what all this option offers. Perhaps now is not the time for your company to open a new factory in a foreign country. But on the other hand, with a shelter partner to walk you through the process and take on the complex side of things, perhaps now is the perfect time.
If in doubt, or to hear more about how a shelter service can save you time and money, contact one of our shelter experts today.
