Are Mexico Shelter Services Worth the Cost?
06.03.21
Partnering with a Mexico shelter company is one of the main strategic decisions U.S. manufacturers are considering as they pivot out of the pandemic and put their eyes toward the future. According to a 2020 Gartner survey, 33 percent of global supply chain leaders have already moved manufacturing activities out of China or plan to do so by 2023, with many of them setting up operations in Mexico instead.
Although foreign manufacturers have benefited from Mexico shelter services for decades, those new to the space question: is it worth the cost? In short, the answer is yes. Despite the fact each manufacturer will have unique project specifications that will determine their final budget, there are general hard and hidden costs already included underneath a shelter’s umbrella.
Identifying these helps to highlight savings involved when working with a shelter operator and showing that the cost is worth it.
Hard Costs of Manufacturing in Mexico
The process of operating in Mexico is comprehensive, with several hard costs to consider pre- and post-launch. It begins with setting up an entity. Manufacturers that decide to incorporate as a standalone operation face thousands of dollars in application fees and permits. Whereas, when working under a Mexico shelter company, there are no incorporation fees, as the shelter serves as the company’s legal presence in Mexico.
Salaries and software are two other key areas where the savings of working with a shelter company is impactful. Mexico shelter services include coordinating:
- General Administration
- Accounting
- Taxes
- Finance
- Labor
- Health & Safety
- Payroll
Each of these departments require recruiting costs, salaries, and benefits. The chart below illustrates the dollar amount approximation saved in several of these areas:
All costs listed are included as part of Mexico shelter services. Without a shelter, these individual costs could equal upwards of $18,400 or more per month. This is in addition to other areas of hard costs, such as shipping and industrial real estate. The breakdown of savings by percentage when working with a shelter company is as follows:
- 55 % less for a company with 50 employees
- 44 % less for a company with 75 employees
- 33 %less for a company with 100 employees
Hidden Costs of Manufacturing in Mexico
When setting up a new operation in Mexico, there are several hidden costs to consider as well, although these are better controlled when working under a shelter. Hidden costs include software compliance, executive oversight, and a reduced learning curve.
Most manufacturing companies already have HR software in place to handle payroll and taxes. However, any software used will have to be customized to adhere to Mexico’s tax compliance. Foreign manufacturers must consider the differences when calculating salaries, work weeks, benefits, and tax laws, all of which is handled by a shelter operator.
Additionally, there are hidden costs associated with appointing a company executive to oversee a project’s setup. It puts a strain on a manufacturer’s internal resources and could cause delays. However, when selecting an experienced Mexico shelter company partner, like IVEMSA, all coordination is taken care of without compromising the time and salary of high-level positions.
Lastly, when working with a shelter company, there’s a reduced learning curve. This saves both time and money by ensuring proper permits are in place to avoid penalty fees or project delays. A shelter company also takes on the task of performing site selecting and coordinating utilities. Plus, a shelter company is up-to-date on all legal and trade law to ensure a manufacturer is always in compliance.
Mexico shelter services are worth the cost for those who want to focus on production and get their new operation up and running as efficiently as possible. Each manufacturing company maintains full control and ownership of all manufacturing activity, scheduling, materials, and inventory management.
Working with a shelter company is an ideal partnership well worth the cost for those who want to save time, money, and alleviate the hefty burden of setting up an operation in Mexico. To learn more about the cost-saving benefits of Mexico shelter services, contact IVEMSA today.
Sources:
https://www.gob.mx/cms/uploads/attachment/file/202840/Manual_of_procedures_to_invest_in_Mexico..pdf