Nearshoring and offshoring manufacturing solutions
Entrada Group has been helping manufacturers establish and operate in Mexico for nearly 25 years.
Co-founder Doug Donahue explains how the IMMEX (Maquiladora) model allows manufacturers to operate under Entrada’s established legal and administrative infrastructure, walks through realistic startup timelines and separates USMCA facts from tariff headline noise. He also discusses why U.S. labor shortages, more than trade policy, continue to push manufacturers to consider Mexico.
Key Issues for Manufacturers Considering Mexico
The conversation touches on several of the questions manufacturers are weighing right now, from startup timelines and labor availability to tariffs, USMCA and trade compliance. Below, we break those issues into the specific business challenge, why it matters and Doug Donahue’s perspective from nearly 25 years of helping manufacturers operate in Mexico.
How Can Entrada Group Help Companies Start Manufacturing in Mexico?
Manufacturers considering Mexico often understand the opportunity but are less clear about who handles the legal, administrative and operational responsibilities. Building those capabilities internally can take significant time and expertise.
Doug Donahue explains how Entrada Group’s model works and which responsibilities Entrada manages versus those that remain with the manufacturer.
What Types of Manufacturers Is Entrada Group Built For?
Many small and midsize manufacturers see the opportunity in Mexico but do not have the internal resources or local expertise to manage the complexity themselves.
Doug describes the types of manufacturers Entrada Group typically supports and why the model is particularly relevant for companies without extensive Mexico experience.
How Long Does It Take to Start Manufacturing in Mexico?
For manufacturers evaluating Mexico, one of the first questions is how quickly they can move from a decision to actual production. Startup timing affects customer commitments, capital planning, staffing and the economics of the expansion.
Doug walks through realistic startup timelines and explains why the complexity of the manufacturing operation makes a significant difference.
What Might Surprise You About a Manufacturing Buildout in Mexico?
Getting a manufacturing operation ready for production involves a lot of moving pieces,and what takes the most time may not be what manufacturers expect.
Doug explains where the most time is typically spent when preparing a new operation at an Entrada Group manufacturing campus.
How Should Manufacturers Think About USMCA, Tariffs and Trade Compliance?
Tariffs, USMCA and changing North American trade policy continue to create uncertainty for manufacturers. The challenge is understanding how those changes affect aspecific product, bill of materials and supply chain rather than reacting to every headline.
Doug explains how Entrada Group approaches trade compliance, USMCA qualification and the changing tariff environment.
What Happens When a Tariff Changes While Your Shipment Is Already Moving?
Trade-policy changes become very real when goods are already moving toward the border. An unexpected tariff can affect landed cost, customs documentation and whether a shipment moves as planned.
Doug shares a real example involving a copper tariff and explains how Entrada Group’s trade compliance team responded.
Can Manufacturers Find the Technical Skills They Need in Mexico?
Manufacturers considering Mexico often want to know whether the local workforce can support specialized and increasingly sophisticated operations. Labor cost matters, but so does the ability to recruit and develop the technical skills an operation requires.
Doug discusses Mexico’s technical workforce and the training infrastructure available to manufacturers.
Is Labor Availability Becoming a Bigger Reason to Manufacture in Mexico?
For many manufacturers, the challenge is no longer just controlling labor costs. It is finding enough qualified workers to support production and future growth.
Doug explains why workforce availability has become one of the strongest factors driving manufacturers to consider Mexico.
For more of Doug Donahue’s perspective on manufacturing in Mexico, USMCA, labor and trade compliance, watch the full episode here: https://industrialtalk.com/episodes/doug-donahue-with-entradagroup/
Listen to the full episode on the Industrial Talk
Doug Donahue: I kind of backed into what I'm doing. I finished graduate school, I guess it's now 35 years ago. Like all graduate students, I had to do an internship. They were negotiating the NAFTA agreement at the time.
Scott MacKenzie: Oh yeah.
Doug Donahue: And I got an internship with a division of the Mexican embassy that was responsible for negotiating the NAFTA agreement. I worked for a Mexican economist there, and when I finished my graduate degree I said, "I don't know what I'm going to do." He said, "Avoid real life for a while and go work for my brother in Mexico City and learn some Spanish." I thought I'd be there a year, maybe two. I ended up in Mexico City for 12 years, three different jobs, learned some Spanish, got a Mexican wife. The whole thing.
Scott MacKenzie: Yeah.
Doug Donahue: And I enjoyed it. I had a couple of different jobs. One was in the entrepreneurial spirit: I set up an Asian Mexican joint venture trading company and built it from zero to about $10 million in sales, and made the owners a decent amount of money. I decided that someday I was going to do this for myself. But I then got recruited to work for the State of Ohio to run their commercial office in Mexico City. That was pretty fun.
Scott MacKenzie: See, I didn't know that. I'm looking at your LinkedIn and I'm going, I don't understand that. I'm looking at it: Ohio Department of Development, Director of Mexico Office. Right there.
Doug Donahue: Yeah, the State of Ohio was very aggressive at the time in helping its manufacturers set up distribution networks and sell throughout the world. Mexico was one of its larger offices, and that was a great experience. I have nothing but good things to say about it. But in the end, government work is a little too slow for me.
Scott MacKenzie: Is that what the internet says?
Doug Donahue: You know, I don't mean to speak poorly of podcasters, but I hear a lot of podcasters repeating that about government.
Scott MacKenzie: Not me. I'm not going to join those voices.
Doug Donahue: And so, around that time, my brother-in-law, married to my sister (not my Mexican wife, ironically), was leaving his company, which did something similar to what we're doing now, and asked me to join for sweat equity. He had been living in Arizona; we're all originally from Arizona. He was doing it in Sonora, the Mexican state just below Arizona.
Doug Donahue: He decided he was either going to go out on his own or he was never going to do it. He asked me to come along for sweat equity. He had a non-compete in Sonora, so we moved to Texas and drove through every community from Mexico City north to Laredo, Texas. We were looking for a community of about 250,000 people: large enough to have a labor force to support it, but not so big that the OEMs would move in and dominate that labor force.
Doug Donahue: At the time, this is 23, 24 years ago, China was eating Mexico's lunch on cost. So we wanted to go into the interior, where labor was more cost effective. It also had to have an airport people could get in and out of, and where trucks could reach the border in a reasonable amount of time. We narrowed it down to about three locations and finally chose the state of Zacatecas, Mexico.
Doug Donahue: And I've been doing that for 23 years now.
Scott MacKenzie: Yeah, yeah, it's 23 years and 10 months?
Doug Donahue: There you go. That's correct, to be precise.
Scott MacKenzie: Now, that's an interesting approach, and we'll get into your organization. This is always interesting: so you find that location, you set up shop, don't ask me how to spell the name, but I trust you, and then you have a workforce, and you start pulling clients in. How do you train your workforce?
Doug Donahue: Well, without getting into the model in too much detail, Entrada Group is really the legal entity that the manufacturer piggybacks onto in Mexico. We have all the permits to manufacture under what's called the IMMEX program, which people better know as the Maquiladora program. Our clients piggyback onto our legal presence, and they're responsible for the manufacturing of their widget.
Scott MacKenzie: Sure.
Doug Donahue: We're providing the labor force, doing all the trade compliance work, and basically indemnifying them from everything that is the Mexican government. But they are managing the manufacturing day in and day out.
Scott MacKenzie: Got it, that makes sense. So you need it: I'm a manufacturer, and I want to take advantage of nearshoring, so I'm going to go across the border and do it. There's a lot of paperwork that needs to happen to make that happen. I might have grand visions and the ability to manufacture something pretty spectacular, but the reality is I need that structure and paperwork in place.
Doug Donahue: That's right. Our clients are small to medium sized, first and second tier suppliers, typically privately held, often still family run. They don't have the internal Mexico knowledge. They're not GE, they're not GM. So they're thrilled to say, "You guys take care of all this, and we'll train anybody to build our widget if you give us the right labor, but we don't want to deal with anything else. We don't have the internal knowledge to deal with Mexico."
Scott MacKenzie: No, that is a definite service, that's a must if you want to do that. So let's go into the process: I'm Scott, I'm a manufacturer, I'm interested. I've got a great widget, I check the right boxes. What's that process? How long before I can start breaking ground?
Doug Donahue: Assuming our director of business development has gotten to you first, and convinced you that we're the only option, so you're not going to run a multi-site selection study, and assuming he's done his job correctly, we'll build you a cost model for your manufacturing. We'll also analyze your bill of materials to make sure it qualifies as NAFTA-made, depending on where all your components come from. If those two things fit, the cost structure and the tariff structure, then you come down and visit us. We have a campus of a million square feet in one location, another relatively new campus with about 100,000 square feet, and another 100,000 under construction. You'll tour all the different operations and plants, and you'll say, "All right, this makes sense."
Doug Donahue: Then there's the contract work, and once you start, depending on your widget, for example a wire harness, if we already have a facility, you can be up and running in 9 to 12 weeks. If you're more complicated, like a medical device, and you need to fit out a clean room and more sophisticated processes, we've had a number of medical device companies in full production within four to six months.
Scott MacKenzie: You've got to admit, that's pretty impressive. What you're saying is, you already have a campus, you have land, you have a facility already built. Is that what I'm hearing?
Doug Donahue: That is what you're hearing.
Scott MacKenzie: Then I wander in, I look at it, it's an enormous amount of square footage, I'm exaggerating, but because the brick and mortar is already there, I could see that.
Doug Donahue: The only thing in the buildout that takes time is your electrical buildout and the design of your floor, because that's customized to your processes. But the brick and mortar is there.
Scott MacKenzie: That's cool. That's a heck of a business model. I like it, and it fits with your persona, Doug, of doing things a little faster.
Doug Donahue: Yeah, absolutely. And again, although my business partner, who's a lawyer by training, hates when I say this, the number one thing is that we're indemnifying you from what is Mexico.
Scott MacKenzie: I have a note here that says "stability." The reason I want to talk about stability is, when you talk about power, quality of power, stable power, that's all part of my decision-making process, so I can feel comfortable heading down there and saying, "I've got Doug, I've got it all." Stability.
Doug Donahue: Yep. Stability, and just minimizing your risk.
Scott MacKenzie: Exactly, that's what your model does. So here we are, I've heard it in the news, we're having some sort of dispute with Mexico and Canada, specifically around NAFTA and trade and tariffs. How do you, at Entrada Group, keep up with that dynamic environment of trade?
Doug Donahue: We have four or five large departments, and one of them is trade compliance. For basically every widget our clients produce, we break it down using that bill of materials process I mentioned, and we see what it takes to qualify as NAFTA-made, or USMCA-made. If it isn't there, we coach our clients and help them get it there, because that's really been the saving grace over the last 35 years.
Scott MacKenzie: Everything you hear in the news is interesting, and it has created a lot of confusion. It makes people very nervous to consider manufacturing anywhere in the world, including Mexico.
Doug Donahue: But when you really get down to it, whether it be Trump 1.0, Biden, or Trump 2.0, they have respected the NAFTA and USMCA agreement from the beginning to today, including the announcement last week.
Scott MacKenzie: Yeah, the announcement last week, where President Trump indicated he's, I don't even know the exact words he used, not happy with NAFTA.
Doug Donahue: Not getting into NAFTA. It was rhetoric. He didn't say the second part, that he's pulling out of USMCA. The agreement itself says that any of the signature countries can pull out with six months' notice. But in the US's case it's not an executive decree, it has to be approved by Congress, and he didn't say that.
Scott MacKenzie: So what does that mean?
Doug Donahue: That means the current agreement lasts another 10 years. I know he has the image of a doer, and I don't want to offend anybody, but he kicked this can down the road 10 years to the next administration.
Scott MacKenzie: So here's the thing: I imagine you have a phone, and the people at your campus and your clients who are listening to this, I bet your phone starts to chirp pretty quickly.
Doug Donahue: Yeah, and I won't tell you it's been easy. We had, I would say, 40% of the workforce, not in terms of clients but in terms of workforce, manufacturing wire harnesses. We had a client that ships at 10 o'clock at night on a Monday, and it's driving to the border Tuesday morning. I'm not sure of the exact dates, but they implemented a 35% tariff on copper, and the whole product is copper. We worked through it and worked through it, and got it through under NAFTA, but it took an extra day. That's what our trade compliance department does. They figure out how to do it.
Scott MacKenzie: So it's really NAFTA that hasn't been the issue.
Doug Donahue: Yeah.
Scott MacKenzie: But this is where you need a trusted sherpa to help you along on this journey of international trade and manufacturing. You just do.
Doug Donahue: Yep. I want to make one last point, because I've really been talking about USMCA, but I think this is important. Take USMCA out of it, and just talk about trade between Mexico and the United States. We had our corporate event last April, and we brought in speakers who deal with everything, not just USMCA and the Maquiladora or IMMEX program, but agriculture, services, everything across the board. The average tariff on a product produced in Mexico into the United States is 4%.
Scott MacKenzie: Oh, come on.
Doug Donahue: 4%, at the end of it, with everything included.
Scott MacKenzie: All of the rhetoric, and it's 4%?
Doug Donahue: 4%. I know, when he told me that I didn't believe him either, and I challenged it, but it turned out to be true. Nobody wants their avocados taxed, nobody wants their tomatoes taxed. It's 4%.
Scott MacKenzie: Guilty as charged.
Doug Donahue: Yeah, all that drama, all that tension, all that talk. It's not worth it. But it does create an environment of macro instability, and that's where it's hurt us. Not necessarily our current clients, but our prospects don't want to make million-dollar investments right now, and that's true today, and that's where it's hurt us.
Scott MacKenzie: I was just going to get into that point about the market going forward. If I have a confused mind, I'm not going to make any decision. If I see a glimmer, just a sliver of risk, I'm going to slow down and pull back until I properly evaluate everything. It's got to be challenging.
Doug Donahue: That's fair enough. But there are two other things going on that companies can't wait for. You can't find labor in the US, much less labor that wants to work in a manufacturing operation. In Mexico, manufacturing is still the most sought-after job there is. People want to work in manufacturing, and it's not just basic labor anymore like it was 20 or 30 years ago. You have engineers who know continuous improvement methods, whether it's Kaizen or Six Sigma, and when an engineer comes out of college, international manufacturing is the job they're seeking. So if you can't find labor, you're limited on growth.
Doug Donahue: People are being more cautious, as you said, but at some point, we're at what, 10 years now of insecurity? Trump 1.0, Biden wasn't much different on trade, he didn't add more but he didn't change Trump's policies either, and now Trump 2.0. That's 10 years of macro insecurity. People can't grow if they don't have labor. We have two prospects right now, one in Iowa and one in Michigan, and they can't get labor, or the labor they can get isn't cost-effective. One told me they left $2 million on the table last year because they didn't have an operation that could support their clients. The other left $8 million.
Scott MacKenzie: Yeah, so it eventually catches up.
Doug Donahue: I really respect them for taking the risk, but at some point, am I going to grow the business or not?
Scott MacKenzie: This is an interesting topic, I speak on it all the time. I've got the technology, I've got everything, and the technology is fine, but I can't find people. I believe, and this is just my own view, that our education system in the United States isn't nimble enough to deal with the demands of the labor market.
Doug Donahue: Which is completely different, and I don't have an answer for it.
Scott MacKenzie: Yeah, I'm not a big fan of government policy getting too involved, but you've put me right in the thick of it.
Doug Donahue: Mexico actually copied the German technical training programs and really customized them. If you came in as a foreign direct investor and needed people who could learn how to maintain a mold, not build one, just maintain it, you could hire six people with some experience and send them to a school with your program, and the government will pay for them to be in that program for a period of time. And you don't have to take the top six, only the two you like the most.
Scott MacKenzie: When I was a lineman, when I first started out and had hair, I worked for Southern California Edison, and we had an apprenticeship program. You're not just going to stick me on a tower and say, "Do the work." I had to learn, and I had to get yelled at by a bunch of old crotchety linemen. But it was the process. Every segment of industry here in the United States is struggling with people, and with retaining them. It's like, it's too dirty for me, whatever the reason is, retaining them. Then you add the fact that people are older and leaving the workforce, going off to Mexico and retiring on the beach. How do you extract that knowledge? It's a challenge of our time.
Doug Donahue: So that's where we're getting a lot of interest, just from the labor side.
Scott MacKenzie: I think it's a cool thing. With all this going on outside, I see the risk, I understand it, I see the hesitation and the realities. I think the market will eventually come to terms with it, and I've got to keep my business open, which means I need people, so I need to figure it out. So we still have, from your words, about 10 more years of NAFTA. I didn't know that, is that accurate?
Doug Donahue: Yeah, under the current rules and conditions. And this is just my own view, but I believe the Mexican government and the US government, led by the Trump administration, will come to some deal in the next year or two, and that President Trump will do a good job getting the automotive manufacturers back to the US. There was a period where, whether it was Toyota, Honda, or the Big Three, every new OEM was going to Mexico, and they said, "Enough, that is enough." That has been the focus of the Trump administration to date. I think they will get a deal. Mexico doesn't need the OEMs, they need the suppliers to the OEMs.
Scott MacKenzie: I agree with you. All right, Doug, you're absolutely fantastic, I hate to wrap it up, but I have to. For somebody who's saying, "I hear what Doug's saying, he seems like a nice guy," how do I get a hold of you?
Doug Donahue: The easiest way is my email, ddonahue@entradagroup.com. You can also go through the website, entradagroup.com, and get a hold of me or our director of business development, JP McDaris. We'd love to have an opening conversation. Also on the website, we do a monthly webinar, a big overview of Mexico, the areas we're in, and our services. There's really no commitment. You don't have to let me or JP push you into business to come on down. You can watch the webinar and see if we really have any depth to what we're saying.
