U.S. businesses have reaped the benefits of manufacturing in Mexico for years. Currently, Mexico is the third largest trade partner and second largest export market to the U.S. An increasing number of companies have recognized the success and have moved part of their operations to Mexico or plan to do so in the near future. Among the benefits of this economic relationship are lower costs, closer factory proximity, and access to a workforce that is specially educated and trained for this level of work.
The Mexican government has prioritized its investment in education and training. There are higher education institutions where trade skills, design programs, and hands-on experience are part of the curriculum. On average, Mexico graduates 115,000 engineers annually. These skilled workers follow a 48-hour work week, which helps increase production while still delivering top quality. And, many companies automatically save up to 30% when moving operations to Mexico on labor alone due to the difference in hourly wages.
Companies that had previously relied on manufacturing in China to handle part of its operational needs now turn to Mexico due to the more favorable geographical proximity to the U.S. It’s far easier to travel to facilities south of the border versus a flight that requires nearly a full day of travel.
Time differences are also more conducive to business when manufacturing in Mexico versus China. For example, when it’s 8:00 AM in Detroit, MI, it’s 8:00 PM in Shanghai. That means any urgent communication must take place outside of regular business hours or wait until the next day. Typically, U.S. companies communicate with their Mexico factories on the same or similar work schedule.
One of the main industries that manufacture in Mexico is electronics companies, including Samsung and LG. Since the process often contains highly sensitive materials, it’s important for companies to know their intellectual property, such as trademarks, are protected. The country’s IP laws are similar to those enforced by the U.S. and Canada. Whereas, Chinese entities are responsible for between $225-$600 billion annually on intellectual property theft experienced by U.S. companies.
Read more: Understanding Intellectual Property Protection in Mexico
Manufacturing in Mexico means little to no risk, especially when under the guidance of a shelter company. Shelter services include maintaining all permits, licenses and ensuring a company is compliant with Mexican laws. This allows U.S. businesses to “set up shop” without the need to create a Mexican entity. Companies still maintain control of the business in Mexico and oversee factory production. The shelter company does the rest such as site selection, provide a legal presence, and handle all administrative tasks.
Mexico manufacturing is known for the production of high-quality goods in several technical industries, such as automotive, aerospace, and medical devices. Large corporations continue to invest millions of dollars into their facilities to stay competitive with their supply chain. It’s far easier to check on the quality of production first-hand since Mexico is closer than China. As an example, finished goods from a Mexico border city could take 4 to 8 hours to reach the U.S. after leaving your plant in Mexico; from China, it could take nearly three weeks to arrive.
U.S. companies reap benefits in multiple ways when manufacturing in Mexico. This is secured when they partner with a shelter company with decades of experience that knows the ins and outs of what it takes to efficiently and effectively start operations for foreign companies.
Nearshoring in Mexico has become a more common alternative than operating a manufacturing facility in China due to the benefits that come with it. These include better logistics, a highly-skilled workforce, and more cost-effective labor and operations. In addition, travels to China from the U.S. take at least half a day, whereas, Mexico could take mere hours for many.
The cost to ship from China also takes longer and is more expensive.
These are only a few of the main advantages of foreign companies operating in Mexico, which is why many industries have started to shift their manufacturing sites. There is an array of products manufactured in Mexico, but the top trending industries include the following:
Companies have begun to shift manufacturing operations to Mexico due to cost savings and a higher quality of work compared with China. As a result, Mexico is a primary hub for nearshoring and continues to expand due to the favorable trade relations between the U.S and Mexico. It allows U.S. businesses to stay competitive by maintaining their operations and growth. Here are a few examples of companies who have benefited over the years.
Ford has been a longstanding participant in Mexico’s IMMEX (formerly maquiladora) program. They began to expand their manufacturing to Mexico in the early 1920s and have continued expansion throughout the decades. In 2016, Ford announced they’d be moving all small-car production to Mexico over the next few years to help them compete with other small vehicle car manufacturers.
Global food and drink company, Nestle, has also expanded its operations to Mexico. In 2014, they announced a $1B investment in two more manufacturing factories in Mexico over the span of five years to meet the demands of the growing markets of infant nutrition and pet food.
Sabritas, a subsidiary brand of PepsiCo that produces Frito-Lay snacks like Doritos, Cheetos, and Tostitos, made a $5B investment in Mexico to further operations and production. This is in addition to the $3B PepsiCo has invested since 2009, much of which is primarily for the Mexico market.
As markets continue to expand, companies realize they need to keep up with the demand of consumers. As a result, they want a less expensive option that still allows them full control over their operations and delivers a consistently quality product. This goal is achieved when U.S. companies employ a Mexico shelter service company to set up manufacturing south of the border.