Doing business in the 21st Century is a global affair. This notion applies to manufacturing, as well as to marketing and distribution. While the planet continues to “shrink” in business terms, there is one immutable truth that remains constant - - no matter how you look at it: Mexico is in closer geographic proximity to the U.S. than China and other parts of Asia, including another rising low-cost manufacturing country, Vietnam.
Statements regarding geography relate directly to manufactuing economics. Up until recently companies that have been pressured to become more cost competitive have sought to lower labor costs by choosing to “offshore” in Asia, and in China, in particular. The new reality is there is an increasingly viable solution, and that is “nearshoring.” The foremost destination to which to nearshore manufacturing is Mexico. This is because of its proximity to the United States, and the effects that such a location has on reducing costs related to the manufacturing supply chain and the cost of carrying inventory. This and rising wages in China, Foxconn manufacturing recently raised wages there by 16%-25% and has boosted worker salaries in its China plant three times since 20101, has resulted in Mexico steadily advancing its competitive manufacturing cost postion vis a vis China.
An electronics manufacturing firm, based in Reno, Nevada, EE Technologies, faced severe competitive manufacturing cost pressures in 2005. They established an operation in Guaymas, Sonora, Mexico under The Offshore Group's Shelter Plan, and soon discovered that by executing its electronics manufacturing in Mexico, they were able to not only expand the plant they established in Sonora, but also, that their Reno plant grew proportionately in size as well. By “near-shoring,” the company saved manufacturing production costs and actually created additional jobs at the its Reno headquarters, instead of eliminating them. Not only was EE Technologies able to supply its North U.S. clients with advantageously priced product, but also the company was able to offer potential customers competitive electronics manufacturing services in Mexico. EE Technologies “landed” new manufacturing clients to whom they could now sell their product cost competitively.
As is the case with any other endeavor, utilizing an EMS provider in Mexico is not without its challenges. One of the first challenges that may be encountered are those related to cultural differences. For example, it is critical to remember that in Mexico family is of paramount importance, and, in some instances, trumps work issues. Other issues that may require expert guidance from organizations such as The Offshore Group include: transporting raw materials and finished components in and out of Mexico; dealing with the Mexican government concerning possible regulatory, labor and instrastructural issues; and recruiting the human resources needed and attending to labor issues and the payment of Mexico's government mandated benefits.
Shelter companies in Mexico such as The Offshore Group attend to these issues, while companies are free to focus fully on their core manufacturing competencies.
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50+ Questions to ask before expanding into Mexico
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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