Mexico Shelter Services Offer Simple Start-Up Options
January 06, 2020
There are many benefits to manufacturing in Mexico, but one that stands out for many startups is the ease of launching operations here. The federal government works hard to provide breaks and incentives for foreign investors to strengthen the already strong supply chains found in Mexico. By partnering with a shelter service provider, manufacturers can set up their own factory in Mexico, in as little as 30 days.
Shelter companies can remove many of the hurdles to launching a new operation in Mexico. Shelter service providers hold an IMMEX license, which allows foreign companies to enter the country as a division of the shelter company. Organizations that work with a shelter company can gain support in selecting real estate, administrative services, hiring and supporting staff, and more.
Leonard Ottosen, a project manager for Tetakawi in Saltillo who has helped many companies establish a Mexico-based manufacturing presence, offers some advice for manufacturers beginning to research a potential launch into Mexico. “Mexico is a different country with a different culture and different ideas. This is not rocket science, but you have to be aware that some things need to be managed differently in Mexico,” he says. “We will do everything that is in our hands to avoid problematic issues, and will help our clients to perform as well, or even better, than at their home office.”
Build the connection
For executives considering partnering with a shelter service provider in Mexico, a meeting with a project manager like Ottosen would be the typical first step. Ottosen works closely with prospective manufacturing companies to help those companies understand the level of access they’ll have to resources in building their operations in Mexico. These might include finding qualified laborers, a top-notch industrial location and access to the local supply chain.
Once the contract for providing shelter services in Mexico is signed, Ottosen continues to serve as a liaison between the shelter service provider and the newly established manufacturer. He becomes a touchpoint for questions and provides updates or insight on activities ranging from utilities setup to compliance with environmental regulations to navigating customs requirements. In this role, Ottosen also helps companies ensure they time their entry into the marketplace just right.
Timing is everything
Shelter service providers present a strong advantage for companies at startup by ensuring speed to market. This speed is critical for manufacturers today in responding to consumers’ demands for rapid innovation. This speed can serve as a major differentiator for manufacturers seeking to expand their client base.
“Since manufacturing moved to Asia in the 1980s, the retail supply chain has taken months to deliver a new product from initial concept to inventory in the stores,” retail consultant Greg Petro writes in Forbes. “The challenge? …[W]hile the supply chain moves at a snail’s pace, the consumer is moving at the speed of light.”
As a result, speed at launch is often critical to meeting demand. “To rapidly get products to market and gain the advantages of manufacturing in Mexico through a shelter provider, the manufacturing plant must be setup fast and right,” Ottosen says. “As a rule of thumb, plan for four to six weeks for an assembly operation and eight to ten weeks for more complex processes, such as machining, press brakes, etc.”
There will, of course, be exceptions to this rule. Setup might be quicker or take longer than expected, depending on how closely the operators attend to the planning phase and the level of help they secure in preparing to launch.
While the time it takes to set up manufacturing in Mexico varies, a few strong foundational principles can help speed the process along. As Ottosen notes, “When setting up a plan to start a manufacturing operation in Mexico, good communication and trust are very important to the success of the project.”
When executives clearly communicate plans and expectations in early discussions around the manufacturing operations’ launch, shelter service providers like Tetakawi can begin to make plans for hiring specific contractors or putting more people in place on certain activities to speed processes along.
“For example, a metal-stamping operation might need to move quickly,” Ottosen says. “We will put more people in place to make the process installation happen faster.”
Create a solid foundation
Once the startup is operational, companies can select the range of support services they want. With the shelter service provider managing non-core functions for Mexico manufacturers, those clients can fully concentrate on their field of manufacturing expertise and benefit from their provider’s experience in reducing total costs.
Tetakawi’s Mexico Shelter Plan, for examples, offers autonomy and flexibility for nearshore manufacturers seeking to expand their niche within the aerospace, automotive, electronics, medical device or other manufacturing industries. Companies pursuing leveraged-growth strategies may find the Mexico shelter business model particularly attractive because the manufacturer absorbs only a portion of the additional overhead that such expansion requires.
A shelter service provider can serve as an advisor in cost estimation, helping companies new to manufacturing in Mexico prepare a detailed cost analysis for their operations and provide up-to-date pricing for products manufactured in Mexico. A reliable cost calculation is critical for making informed decisions on how to ensure expansion into Mexico is cost-effective and profitable. However, it can be difficult to get reliable data on operational costs without the support of a consultant experienced in managing these costs.
Skip the stumbling blocks
In 2019, Mexico became the United States’ largest trading partner and, thanks to its numerous free trade agreements, serves as a strong trading partner with countries across the world. It’s becoming an increasingly popular location for foreign manufacturers; foreign direct investment increased 1.5 percent in the first half of 2019. Thousands of companies have found benefits to manufacturing in Mexico. However, at some point, each of those companies was a startup seeking to understand unfamiliar regulations and requirements.
Those companies looking to maximize their profit, produce the highest quality goods, and stand apart in the market are best served by working closely with a trusted shelter service advisor like Tetakawi.
“In summary, a company needs to understand that Mexico is another country, but that it is a good place to manufacture profitably,” Ottosen says.