Over the past several decades, U.S. and other foreign companies have continuously relied on Mexico for their manufacturing needs. These manufacturers benefit from a lower labor cost and closer proximity than other countries, such as China, while retaining excellent quality. Although contract manufacturing is an option, a majority find the value of Mexico’s IMMEX maquiladora program to be far more favorable.
There are a few ways to launch production when manufacturing in Mexico. Contract manufacturing in Mexico may be a good solution for companies that are looking for predictable, consistent runs of a particular product or products. They may be in the earlier stages of business growth, and demand for their product is greater than their current production capacity.
However, with contract manufacturing, companies do not retain full oversight over production consistency and quality assurance. Contract manufacturing is for U.S. and other foreign companies interested in:
Even though a company may initially lean toward contract manufacturing to lessen its burden, finding a local partner is time-consuming and can be challenging to find the right fit.
For certain industries, it can also be difficult to find a regulated contractor that meets licensing and other legal requirements. All of these factors should be considered before outsourcing.
An advantageous alternative is the IMMEX program, which allows U.S. and other foreign manufacturers to temporarily import raw materials, machinery, and components into Mexico when used for production.
Benefits:
There are five categories within the IMMEX program, including the shelter company option.
If you’re planning on manufacturing in Mexico long-term, working with a shelter company is the way to go.
It minimizes risk and liability for U.S. and other foreign manufacturers, reduces costs, accelerates startup time, and allows companies to maintain production control and intellectual property rights – all of which is not included in the contract manufacturing solution.
U.S. and other foreign manufacturers that work with a shelter like IVEMSA can use the maquiladora licenses already in place without the need to establish a separate business entity.
A shelter alleviates a majority of the responsibilities and liabilities associated with manufacturing in Mexico while still allowing companies full control over operations. The team will coordinate and implement all logistics of your operations. This includes but is not limited to:
Not all contractors have the same benefits and outsourcing work presents a greater risk for lower quality and project delays, which is why having your own operation under the IMMEX maquiladora program is often the more effective, efficient solution for companies that want to begin manufacturing in Mexico.
Contract manufacturing is quicker. Typically, it takes a few weeks for production to begin. Whereas, the usual launch time when working with a shelter company is three to four months after signing a lease.
However, there’s more included with the shelter company solution and savings to consider that make the extra few weeks worth the wait.
The shelter business model can be a fit for a small company. However, the more employees a company has, the more cost-effective it is for the manufacturer.
Transition from contract manufacturing to a shelter model is similar to that of a foreign manufacturer getting started for the first time.
The difference is that a company with contract manufacturing experience will be more familiar with labor costs, production timelines, supply chains, and other knowledge that comes with manufacturing in Mexico.
Either way, the quickest and safest way to launch production is working with a shelter company that is already equipped with experience and local expertise.
No. When handing your production over to a contract manufacturer, you relinquish control of production, employee recruiting, hiring, and onboarding, and any other operational aspects of the business.
Manufacturers with a large volume usually find it makes more sense to have a shelter operation.
With contract manufacturing, quotes are typically priced per unit – the more volume, the more it costs. However, when working with a Mexico shelter company, there is a set fee for the administrative work involved in production launch, regardless of how many units are produced or how much revenue is generated.
No. IP protection is limited as production is in the hands of a third party.
For specialized manufacturing, in particular, secured IP protection is essential. This benefit is one of the many that make the shelter model a preferred choice.
Rather than outsource production through contract manufacturing, companies can work directly under IVEMSA’s shelter program or take advantage of its consultation services available for companies that wish to set up operations as a standalone entity.
A shelter has unique benefits when manufacturing in Mexico, such as:
However, when companies choose to move forward as a standalone, IVEMSA also provides guidance and expertise to ensure all permits and other documentation are in place for a successful start to any project with the exact same scope of shelter services. The only difference is standalone customers are not under the IVEMSA umbrella; they operate under their own legal business name.
Both the shelter and standalone solutions are preferred over contract manufacturing because companies maintain control over timelines and quality. Fortunately, IVEMSA handles both options and will customize plans based on a company’s unique needs. Manufacturers can feel confident in the experienced and well-established presence IVEMSA offers throughout the entire process to get operations up and running as smoothly and quickly as possible.
Get checklists to guide you through the process of setting up a shelter or stand-alone entity in Mexico, covering everything from the initial set-up to finding a site to preparing for trade compliance. Our Quick Guide will give you an idea of the differences between setting up a shelter vs. a stand-alone entity.
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