As producers in the United States face ongoing challenges and a tightening economy, it’s important to consider alternatives. Many US producers considering Mexican relocation have found that shelter manufacturing benefits their bottom line and solves other critical problems they face.
In spite of global economic uncertainty, there are savings to be had by outsourcing expensive labor to markets with cheaper labor costs. But offshoring to Asia presents a whole new set of problems for many manufacturers. The answer for many is nearshoring, which allows the US producer the convenience and proximity of manufacturing just south of the US-Mexico border.
And using a shelter service makes those benefits all the more accessible. Let’s examine a few of those benefits.
Sometimes misunderstood as a competitive rival to United States manufacturing, Mexico is actually a vital US trade partner and key component in a vast, North American manufacturing dynamo. Nearly 40% of inputs in Mexican-made products were actually produced in US factories. Trade data shows that outsourcing to Mexico benefits US industry in the long run, through partnering along the value chain.
And while the US is losing skilled workers at a rapid rate, Mexico is training thousands of new engineers each year through industry-academia partnerships fine-tuned to meet specific manufacturing needs. While the US provides the bulk of design and innovation, Mexican factories and skilled labor bring these concepts to fruition. This partnership allows both the US and Mexico to compete at a dominant level in a global market.
Manufacturing in Mexico reduces expenses for US companies in several critical areas:
Shelter manufacturing in Mexico is a unique assist for those US companies seeking to nearshore manufacturing operations. While Mexican factories or maquiladoras allow for duty-free manufacturing for US export, setting up a factory in Mexico can be quite daunting for a company not familiar with the process.
Fortunately, shelter manufacturing benefits these companies by shortcutting the process and providing a turnkey option. A shelter company already owns a corporation under Mexican law, already owns property or even factories, already has relationships with suppliers and labor, and already understands all of the compliance and cultural nuances required to make a Mexican operation successful.
This company can assist the US producer at every turn, from site selection to hiring and payroll to logistics. The client becomes a joint partner for the purpose of this already established legal entity, and delegates previously agreed upon administrative tasks. This allows the US firm to shorten the learning curve and forgo the hassle of starting up a foreign operation.
Within a matter of weeks, the company is overseeing product development and quality, while all of the administrative tasks are carefully overseen by the shelter service provider.
Shelter services offer an insider advantage in a country that poses certain safety challenges. In addition to providing dedicated site and personnel security services, shelter companies also understand the culture and geography to create a situation of maximum advantage and security. Often, manufacturing operations are established in highly secured industrial parks owned by the shelter partner.
US companies that partner with a shelter company are not liable for Mexican income tax and do not deal directly with any Mexican tax authority. The shelter service typically includes all tax paperwork preparation and compliance, resulting in little to no tariffs on raw materials and equipment as well as the finished product.
Partnering with a shelter means cutting out of the equation the time required to manage day-to-day operations of a plant. Maintenance is also handed off to the shelter provider. The US producer is free to focus on core activities like product quality, innovation, and increasing market share.
Any newcomer to Mexico may have the advantage of long-term, well-established relationships with vendors, suppliers, and labor unions. These extensive networks provide a bedrock of stability and access in an otherwise uncertain and new venture through shelter manufacturing. Shelter providers can often get the best deals and secure lasting labor relationships in ways a foreign company could not.
Taking advantage of the many advantages and costs savings of outsourcing your manufacturing operations to a foreign country need not increase your administrative hassle or destabilize your standing in the market. Shelter manufacturing in Mexico benefits US manufacturers by reducing overall costs, maximizing insider access, and eliminating the risks and stress of opening a foreign factory.
A shelter service is not only a legal shell for your manufacturing operation, it is also a trusted partner and guide in Mexico.
