Companies looking to manufacture in Mexico have two options on how to proceed. They can either invest in standalone operations or partner with a shelter service company.
Creating a Mexico-based subsidiary puts on a company all responsibility for registration with the IMMEX program (more commonly known as maquiladora), finding or building a suitable facility, navigating staffing and training hurdles, and working to comply with customs requirements — all before production actually begins. While some large companies may feel undaunted by this task, others may recognize that cultural nuances can present challenges that slow down the time to production.
On the other hand, shelter companies can remove some of the hurdles to ramping up operations. For starters, a shelter company already has an IMMEX license, so foreign companies can enter the country as a division of the shelter company. But that’s only the beginning. Organizations that opt to work with a shelter company also have a choice to make. Tetakawi's survey of the 25+ shelter service providers in the market identified six distinct types of services available from shelter companies in Mexico.
Depending on the level of direct oversight your organization wants to hold into specific functions, there is likely a shelter company able to help you get started.
The Six Types of Shelter Companies in Mexico:
While we will discuss six distinct types of shelter companies in Mexico, it's important to note that these categories are not rigid. In reality, some shelter companies may operate under multiple modalities, providing a combination of services from different models. This flexibility allows them to better meet the diverse needs of various manufacturers. Therefore, when selecting a shelter company, businesses should consider their specific needs and objectives and look for a provider that can offer the most suitable combination of services
1. Manufacturing Communities
Manufacturing Community shelter companies offer a comprehensive suite of services under the Mexico Shelter Plan, often operating in a campus-style setting. Services provided by these organizations encompass a broad spectrum, including legal guidance for IMMEX registration, adherence to local labor laws, and permit requisites; expert HR management for recruitment and hiring processes; and insightful accounting assistance for tax compliance, among other crucial administrative functions.
What sets these Manufacturing Community shelter companies apart is their unique real estate model. They own and lease industrial properties in Mexico, creating an integrated, on-site environment for all their operations. This allows foreign manufacturers to embark on their ventures seamlessly and conveniently, with everything they need located within the same Manufacturing Community.
Moreover, these companies enhance their on-site offerings by investing in services and amenities directly in the Manufacturing Community. These additional resources help their clients establish themselves as employers of choice in Mexico by creating an appealing workplace.
This strategy offers dual benefits: it allows companies of all sizes to access large-scale resources and facilities, thereby leveraging economies of scale, and it promotes operational predictability. This ensures a consistent, efficient production process, contributing to the stability and success of their clients' manufacturing operations.
2. Full-Service Shelter Companies
Full Shelter Service companies provide a broad range of services that typically fall under the Mexico Shelter Plan, similar to their counterparts in the Manufacturing Community. They offer comprehensive support in a variety of areas such as legal advice for IMMEX registration, compliance with local labor laws, and fulfilling permit requirements; skilled HR management for recruitment and hiring procedures; and valuable accounting guidance for tax compliance, among other indispensable administrative tasks.
Unlike the Manufacturing Community model, Full Shelter Service companies do not own real estate. Their unique proposition lies in their extensive network of partnerships with local landlords of industrial buildings. Although the Full Shelter Service companies operate differently than the Manufacturing Community model, they still aim to provide a comprehensive, supportive environment for their clients.
3. Start-Up Shelter Companies
Start-up shelter companies specialize in helping foreign manufacturing entities establish their operations in Mexico. Their primary goal is to ease the learning curve associated with setting up a new business in a foreign land. They provide tailored support in essential areas such as legalities, HR management, tax compliance, and more, which are crucial for startups to hit the ground running.
The unique value of these startup shelter companies lies in their approach to fostering independence. While they provide the necessary support to help startups get up and running, they also focus on equipping these companies with the knowledge and tools they need to eventually operate on their own.
This means that, from the beginning, these shelter companies work with a future-oriented perspective. They understand that the ultimate goal for many large companies is to operate independently, and they structure their services to support this aspiration.
At an agreed-upon time, the startup shelter company steps aside, and the manufacturer assumes the costs, risks, and responsibilities associated with performing essential administrative functions.
4. Contract manufacturing plus some shelter services
Contract Manufacturing shelter companies primarily operate as contract manufacturers, focusing intensively on the manufacturing process. Unlike some other shelter models, these companies take a more hands-on approach in production, often dedicating specific resources, spaces, and personnel to a single client's manufacturing projects.
These companies are unique in the sense that they allow their clients to be more involved in the manufacturing process. This approach can offer clients greater visibility and control over their products, while still providing the benefits of working with an experienced manufacturer.
In addition to their primary role as contract manufacturers, these companies also offer some shelter services. This is not their main focus, but they do provide necessary administrative support in areas like IMMEX registration, local labor laws compliance, and recruitment and hiring, among others.
The provision of these shelter services is designed to complement their manufacturing operations, ensuring that clients have all they need to run a successful operation. The end result is a model that combines the benefits of dedicated contract manufacturing with the supportive infrastructure of a shelter company, providing a unique blend of involvement and support for clients.
5. Real estate companies that also offer shelter services
Real Estate Shelter companies primarily function as real estate businesses that also provide shelter services to their clients. Their core focus is on the rental and sale of industrial real estate in Mexico, positioning themselves to cater to the spatial needs of foreign manufacturers in the country.
Unlike traditional shelter companies, these firms prioritize the real estate aspect of their business. They own and lease Mexican industrial properties, thereby providing a physical location for companies looking to manufacture in Mexico.
Despite their real estate focus, these companies understand the value of shelter services and offer such services as an added benefit to their clients. These may include assistance with IMMEX registration, local labor laws compliance, recruitment and hiring processes, tax compliance, and other necessary administrative functions. However, the extent and depth of these services might not be as comprehensive as those provided by companies where shelter services are the primary focus.
In some cases, Real Estate Shelter companies might collaborate with third-party service providers to deliver these shelter services within their buildings. This approach allows them to focus on their real estate business while still offering a range of supportive services to their clients.
Overall, Real Estate Shelter companies present a unique model where the real estate provision takes center stage, but the necessary shelter services are still accessible, offering a blend of physical infrastructure and administrative support.
6. Pick and choose shelter service providers
Pick and Choose Shelter companies offer a unique model that empowers their clients with choice. Unlike other shelter companies that provide a set package of services, these firms allow manufacturers to select from a range of shelter services according to their specific needs.
Operating in a 'cafeteria-style' manner, these companies present a list of shelter service offerings, from which clients can pick and choose. This flexible approach enables manufacturers to customize their service package, focusing on the areas where they require assistance and skipping those where they don't.
Services on offer may span across various areas such as IMMEX registration, local labor laws compliance, recruitment and hiring processes, tax compliance, and other essential administrative functions. This model provides companies with the opportunity to tailor the services to their unique operational requirements.
One of the main benefits of this model is its adaptability. As the business environment changes or as the manufacturer's needs evolve, the selection of services can be adjusted accordingly, providing a level of customization that's hard to match.
While Pick and Choose Shelter companies are less common, they represent a flexible and adaptable option that can be highly beneficial for manufacturers with very specific needs or for those who prefer a more hands-on approach in certain areas of their operation.
Questions to ask to select a shelter company in Mexico
Knowing that there are different versions of the shelter program, companies looking to manufacture in Mexico must make sure that they are making “apples to apples” comparisons among providers. Asking the right questions upfront can ensure you’re getting the cost, service and level of risk that’s comfortable for your organization.
Some important questions to ask include:
- Does the manufacturer enter the maquiladora industry under the Mexico shelter service provider's business license? Or does the shelter company obtain a separate license for each client? The answer to this question has important tax, labor, customs and environmental law ramifications that buyers should fully investigate.
- What is included in the facility’s lease costs? Will the tenant be responsible for real estate taxes, building insurance, maintenance and other costs? Or does the Mexico shelter service provider assume all costs associated with the facility?
- What are the detailed services included in the shelter service provider’s fee? Does it include janitorial and security costs? What about logistics and customs fees? Request a full list of all services that will be provided.
- Does the Mexico shelter company bill inclusively for its services, or are there administrative or other charges billed to the client that are over and above the quoted shelter fee?
Find the right shelter service provider
Identifying the right shelter service provider is a critical aspect of establishing successful operations in Mexico. As with many things in business, the value received often correlates with the investment made. Opting for a provider solely because they offer reduced fees may result in a compromise on essential services. Therefore, it's crucial to understand precisely what the quoted fees cover when considering different providers.
Armed with the knowledge that not all shelter service companies provide a comprehensive solution, you can make an informed decision about your partner in Mexico. The right provider will not only offer you necessary protection but also provide invaluable guidance and expertise to ensure the success of your operations.
At this point, reaching out to a trusted expert can be immensely beneficial. Tetakawi, with its deep understanding of the Mexican manufacturing landscape and a wide array of shelter services, can provide the support you need. To learn more about what to consider when choosing a shelter service provider, consider downloading Tetakawi's 'Buyer's Guide to Choosing a Shelter Service Provider in Mexico.' This guide will provide additional insights and help you make the best choice for your company's needs.
Thinking about manufacturing in Mexico? Download this ebook to learn about the different types of shelter companies in Mexico.
