How Mexican Shelter Services Make Manufacturing in Mexico Easier
By Doug Donahue
Understanding the benefits of using a Mexican Shelter services company can help your business set up a manufacturing operation in Mexico. There are many benefits to making such a move to a nearshoring manufacturing destination like Mexico. Because of that, it’s often useful to look at not just the benefits of engaging with a shelter service provider, but also the nature of services they will provide you with.
First, the benefits:
- Low labor costs for direct employees: According to research by the Boston Consulting Group, hourly wage for Mexican manufacturing staff can be as low as $3.50 per hour (excluding benefits), versus $23 per hour average in the US and $26 per hour average in Germany. In some regions of Mexico, the hourly rate can be as low as $1.50.
- Mexico’s stable currency: The peso has nearly two decades of relative stability. This lack of fluctuation is a boon to manufacturers, who have been put off by the steadily increasing Chinese currency, which introduces uncertainty and cuts into profit margins.
- Proximity to North America: Mexico’s nearby location to the US and Canada keeps transport costs down (thanks to a solid road and rail network between the US and Mexico) and makes it easier for manufacturers to make a quick visit to the manufacturing site in as little as a single day, especially in comparison to visiting Asia, which could take a full week.
- The NAFTA advantage: Mexico’s membership in NAFTA eliminates customs costs and tariffs found with offshore factories in China or elsewhere.
- Strong economy: Mexico’s strong performance helps reassure companies looking to establish manufacturing in Mexico via a shelter provider. Mexico boasts the 13th-largest economy in the world, with expected growth through 2012 of 3.5%. This is bolstered by low debt in Mexico (under 20% of GDP – compared to the US level near 100% in 2011).
And now, the Services you can appreciate from a shelter services company:
- Fully equipped industrial parks: Smaller companies can sign on with a shelter provider like Entrada and avoid having to start from scratch with locating a site to establish their own manufacturing facility.
- Human resources/administration: The shelter provider handles the entire employee lifecycle, freeing the manufacturer to prioritize their operational processes. This HR management typically covers: recruitment, interviewing, negotiating, hiring, training, administration of pay and benefits, staff retention, and employee separation.
- Facility maintenance: The facility will be tailored directly to your manufacturing processes and requirements, including daily maintenance, security and the ability to expand as your business grows.
- Import and Export: Often people are surprised to learn that a shelter provider also covers the import and export of materials and products. Not only will the shelter company cover this service by virtue of their Mexican Custom Certification, they will also enable an expedited border crossing (saving time delays at the border and lowering costs) through their special relationship with the authorities.
- Transportation: The shelter company even manages the logistics of transportation, keeping costs down by consolidating the transport costs of all tenants into single trucks and negotiating volume discounts with transport providers.
- Navigating local tax and fiscal regulations: Running a nearshore manufacturing facility in Mexico can be difficult or impossible if you don’t have the necessary knowledge and expertise to work with the local bureaucracy. Shelter providers like Entrada can offer optional legal and accounting services as a “pass-through” because they are registered as legal entity of record in Mexico. Such services allow clients to hand off the burden of issues like compliance to their shelter provider, who shoulder these responsibilities along with their own legal compliance.