When manufacturing executives are tasked by their respective boards and ownership to calculate the costs of operating a Mexicomanufacturing facility, there is often a tendency to place an undue amount of emphasis on the cost of labor. In addition to the cost of both direct and indirect Mexican labor, there are many items that must be factored into any study aimed at determining the “all-in” cost to manufacture in Mexico. Determining the total manufacturing costs in Mexico should be the goal of any analysis.
Beyond labor, executives must closely examine and estimate the following:
Projected customs brokers fees and duties, going both in and out of Mexico.
Possible Mexican employee transportation costs (usually in the form of busing).
Depending on the Mexican labor market that the plant is to operate in, the costs of additional benefits paid to employees in the form of monies and/or goods and services.
Projected costs of utilities needed to heat and cool the plant and to run lighting and production equipment.
Estimated communications costs. This item includes: telephone, IT infrastructure, Internet access hardware and software.
Estimated MRO purchases in Mexico. These include consumables items that are utilized in the production facility, and may include things like solvents, cleaning materials.
Listed price of Mexican industrial real-estate in the market(s) under consideration.
Over and above the aforementioned, estimates of the following additional Mexico manufacturing plant cost categories must be examined and calculated:
Office supplies such as furniture, paper, computers, etc.
Medical supplies that must be on hand in case of accident or injury.
Maintenance equipment for the upkeep and calibration of machinery.
Cleaning materials for offices, common areas, bathrooms and the shop floor.
Travel expenses that accrue as a result of the need to move between various company manufacturing sites.
Vehicles that will be required by plant personnel to perform company business.
Insurance on automobiles, and on key employees.
Rent for a property that may be kept by a company to house visiting customers.
Extra pay for special bonuses or early vacation pay.
Miscellaneous outside services
In addition to ongoing expenses, new manufacturers in Mexico also are often subject to the payment of many of the following one-time costs:
Water, gas and sewer hook-ups
Telephone line(s) installation
Leasehold improvements on rented Mexican industrial buildings
Installation of time-attendance equipment and payroll and accounting software
The cost of operating a nearshore facility tomanufacturing in Mexicois not the function of a calculation of labor costs in Mexico. To get a true manufacturing cost analysis (one that can be compared to what a company is currently paying to produce its product or products), an exhaustive study should be conducted. Such accurate information will create the conditions for optimal decision-making by company ownership.
Thinking about expanding into Mexico? Step 1 of your due diligence process is answering all of these questions. Over the last 33 years, thousands of companies have used this guide to accelerate their expansion into Mexico.
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