Top Questions to Consider When Nearshoring in Mexico

08.15.19

Due to the cost-effectiveness of expanding operations south of the border versus opening up factories in the U.S., many companies are taking advantage of the benefits of nearshoring in Mexico. It’s a solution for foreign businesses that want to stay competitive.

Knowing all areas to consider when establishing a new manufacturing operation and which questions to ask is the key to making a well-informed decision. Companies that perform their due diligence will have a more sound strategy with a higher probability of long-term success. Among the topics that should be addressed are:

  • Selecting the right operations site
  • Hiring qualified employees
  • Establishing legal compliance

Manufacturers must understand what’s required from a legal and compliance standpoint as well as a cultural and communications framework. This process is less overwhelming when teaming up with a shelter services company. It alleviates the burden from the manufacturer and allows for a quicker, more seamless experience. It also ensures that all pieces are in place to begin operations.

Selecting the Right Operations Site

Companies often think Tijuana or areas immediately across the border are where the majority of operational sites can be found. While there is real estate available in this area, it’s important to consider the rest of the country and what works best in terms of cost and space. Questions to consider are:

  • Which criteria are most important in the site selection process? Is it cost? Location?
  • Do you need a space that can easily grow if production expands over the years?
  • What are the facility requirements in terms of square footage, office space, and other real estate?
  • What region is most desirable?

In order to narrow down site selection options, answering these questions can help to prioritize and filter what’s valued the most.

Hiring Qualified Employees

The next area of nearshoring services to consider is recruitment. Mexico’s manufacturing workforce is highly competitive. Every year, there are over 110,000 engineer graduates who have been specifically trained for industrial jobs. The success of a manufacturing facility is dependent on securing the right employee fit. It’s important to ask:

  • What is the hiring process like?
  • Will there be different hiring needs at various phases of the operations? How will they be sourced sufficiently?
  • What is the availability and labor cost in Mexico?
  • Are there any glaring differences between U.S. and Mexico labor laws and cultural expectations?

Human resources is one of the main investments companies must factor into their plans. This specialized department requires knowledge of the industry, but also experience and insight into Mexico’s labor force. While a U.S. manufacturer can hire a separate person or firm to solely handle this area, it’s more practical and economical to use a shelter company that already includes human resources and recruiting as part of its services.

Establishing Legal Compliance

Lastly, compliance is essential. Without it, there’s no “green light” to the project. There are several regulatory channels to go through in order to operate in Mexico. For U.S. companies that choose to take on the process as a standalone entity, it takes a strong proficiency in local laws and regulations.

One of the many benefits of working with a shelter company is that manufacturers are protected under the shelter’s legal entity and compliance. To determine which route is best for your company, questions to consider are:

  • What are the big differences between operating as a standalone versus under a shelter?
  • What permits, registrations, and costs are required to complete the compliance process?
  • How are taxes tracked especially when there are updates to the law?
  • What is the legal framework for manufacturing goods in Mexico as a foreign company?

Those that decide to start on their own quickly realize how beneficial a shelter provider can be when it comes to the ongoing questions and requirements involved when manufacturing in Mexico.

Seek the Support of an Experienced Shelter Provider

The process of nearshoring can seem overwhelming due to the various protocols and requirements that are necessary prior to expanding operations. In addition to site selection, employee recruitment, and legal compliance, conducting business in Mexico requires an understanding of the local landscape, culture, and business dynamics. Having a shelter partner to guide you through the process helps to reduce time, cost, and resources, while also offering peace of mind.

To learn more about how IVEMSA’s nearshoring services will benefit your manufacturing company, contact us for a consultation today.
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