Considering Mexico Shelter Services? See What Makes a Manufacturer a Good Fit

Mexico shelter services are an invaluable resource for U.S. and other foreign manufacturers and have been an essential part of their growth for decades. However, as more companies are exploring the option of expanding production to Mexico for the first time, it’s best to identify what makes for a good fit.

Though partnering with a shelter company eases the transition to manufacturing in Mexico, there are a few misconceptions regarding what shelter services do and do not entail.

To clear up confusion and help determine if implementing shelter services is the best route, here is an overview of what you need to know.

Manufacturing Partnership: What a Mexico Shelter Company Offers

A Mexico shelter company works with U.S. and other foreign manufacturers to share strengths in a safe, efficient manner, creating a win-win situation for all parties involved. However, many mistakenly believe a shelter company takes on the production itself, which is not true.

Rather, a shelter company handles all the administrative tasks necessary for manufacturing so leaders can focus on their operational processes uninterrupted. Other unique benefits include:

● Lower overhead on administrative functions
● Reduced learning curve
● Tax advantages through the IMMEX business model
● Quicker setup times
● Reduced legal risk and liability
● Competitive cross-border costs
● Economies of scale
● Leverage and support with the Mexican government
● Allowance to focus on your core business from day one

Additionally, this type of partnership is flexible enough to allow manufacturers to part ways (or alternatively, ramp up production) at any time. While most extend working with a shelter for several years, it doesn’t have to be a permanent solution. A shelter company like IVEMSA will ease the transition for companies that wish to “graduate” from the program and eventually operate on their own.

Therefore, Mexico shelter services are a perfect fit for:

● A manufacturing company eager to expand versus one that wants to assign a third-party operator
● A manufacturing company with good products and intellectual property value
● A manufacturing company with a plant, equipment, and materials already in place that simply needs shelter services to assist with production launch

Having the local expertise of a shelter company helps to streamline the process of setting up production in Mexico. It also saves on costs, time, and resources so manufacturing leaders can concentrate on all things production.

What Shelter Services Entail

As mentioned, a Mexico shelter company provides all the necessary administrative departments that manufacturers need to operate. This includes:

● Traffic and Customs
● HR, Accounting, and Taxes
● Payroll Processing
● Local Accounts Payable
● Talent Recruiting
● Dedicated Project Manager for Project Launch
● Full Compliance for Your Mexico Operation

It also includes assistance with site selection, permitting and certifications necessary for operating in Mexico, as well as consulting needs. The majority of foreign manufacturers often choose this option because it costs less than hiring these departments individually. Plus, they benefit from the local expertise, experience, and network a Mexico shelter company provides.

What Shelter Services Don’t Entail

A shelter company is not a third-party manufacturer. Shelter services don’t include advice on where to buy equipment or materials or involve creating the product itself.

Additionally, it is important to clarify that all the costs related to your operation will be handled as a pass-through expense. This means a shelter company will not finance your costs for utilities, employee salaries, or taxes.

These types of expenses can be estimated by your shelter partner but are paid by the manufacturer. Though the shelter company can provide guidance in these areas, the costs and any purchase or expense made in Mexico are ultimately at the discretion of the manufacturer, with the shelter as the facilitator.

Those interested in Mexico shelter services need to be involved in production. Although a shelter company assists with recruiting and finding qualified workers, the manufacturer is tasked with onboarding and training production teams.

For companies exploring production in Mexico without establishing an actual physical presence, contract manufacturing is likely the more favorable option.

Questions to Ask If You’re Considering Shelter Services

Shelter services are not required for manufacturers operating in Mexico. In some cases, it may not even be the most optimal fit. To determine if working with a shelter company is beneficial or if exploring a contract manufacturing option is best, consider the following questions.

Does the project require specialized labor?

Mexico shelter services are valuable when placing technical labor for various manufacturing sectors. However, when companies produce a consistent, predictable run of products, contract manufacturing may be the better option. This often applies to companies in the earlier stages of business growth when the demand for low-mix, high-volume products is greater than their current capacity.

Is outsourcing production the goal?
Shelter services are only available and applicable to foreign manufacturers running their own production. Companies that wish to outsource these processes to a third party will need a contractor manufacturer. Keep in mind, with contract manufacturing, companies do not maintain full oversight over quality assurance or consistency like they do when working with a shelter company.

Do you want to establish a legal presence in Mexico?
A shelter company serves as a foreign manufacturer’s legal presence in Mexico and takes on the administrative responsibilities associated with manufacturing. Though shelter services typically apply to those operating under the shelter umbrella, they are also applicable and can be customized for standalone entities as well.

Do you own your equipment, materials, and processes?
To benefit from shelter services, a company must own all of its equipment, materials, and operating processes. These are not provided as part of a shelter company partnership. Foreign manufacturers that use shelter services to delegate administrative tasks find value in maintaining full ownership over the full scope of production including their intellectual property rights.

Do all shelter companies operate in the same way?

In general, shelter companies offer similar services. However, it’s best to clarify what is included as some differ. For instance, some shelters may require manufacturers to use facilities they already own.

This can lead to complications down the road if a manufacturer graduates from the shelter program because they might have to leave their lease as well. However, IVMESA provides flexibility for manufacturers to choose their buildings and tailor shelter services to adapt to their specific needs.

Partnering with IVEMSA

As a well-established Mexico shelter company, IVEMSA has nearly 40 years of experience helping U.S. and other foreign manufacturers reach their production goals. With a 15-year average customer retention rate, the success of our shelter services speaks for itself.

However, if you’re unsure about whether this solution makes sense for your company or want to learn more about whether your project is a good fit, we are happy to discuss your options.

Contact IVEMSA today.