An excellent manufacturing alternative: Mexico has numerous financial benefits. These benefits once used to be exclusive only to Asia, but over the past 2 years have been disappearing. Low costs of inventory, currency stability, tax incentives and cheap labor are some of the advantages that Mexico offers.
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Advantages over Asia:
GEOGRAPHICAL PROXIMITY
While import goods from China have to travel long distances overseas to reach the USA, Mexico offers short transport routes that can also be handled overland.
Also it’s easy to go visit manufacturing companies in Mexico. Whether you want to meet in person to discuss your next order, view the operations, or work along with the local team to discuss a production issue, you are only a short flight away in the same time zone. No visas, no “red-eye” flights, no crippling jet lag, and no expensive business class airline tickets for you and your team.
SHORT SUPPLY CHAIN
While import goods from China have to travel long distances overseas to reach the USA, Mexico offers short transport routes that can also be handled overland Reducing transit time between the U.S. and Mexico by near-shoring.
A part manufactured in Mexico can be trucked to the United States in as little as one day. Short supply chains and short transport times for parts are inherently more efficient. The shorter haul length along with the fuel price volatility recently means that near-shoring is the ideal alternative to improve and maintain the operating margin for businesses.
LINGUISTIC AND CULTURAL ADVANTAGES
Due to the geographical proximity, the cultures of the two countries are closely intertwined and the language barrier is low. These factors favor efficient cross-border cooperation while reducing communicative and mentality-based misunderstandings.
The time factor contributes to smooth and efficient cooperation as well. While the time difference between Beijing and Washington is 13 hours, it is only one hour between Washington and Mexico City.
LOW-COST TRANSPORTATION & LESS STOCK
While it is true that manufacturing costs per part may be lower in some Asian countries, the cost of parts depends on more than just manufacturing. Shipping freight across the world isn’t exactly “cheap”. Also, these overseas shipping costs are likely to increase. There is also the fact that transoceanic shipping is usually only practical when you order a container full of parts or components. Shipping from Mexico, on the other hand, can be done in smaller volumes (pallet size orders are not a problem). Shorter lead and transit times allow shippers to cut down on their levels of safety stock. It allows them to allow lower costs for inventory handling and also lets them free up important working capital.
PROTECTION OF INTELLECTUAL PROPERTY
In China, imitation of US products and product designs is a common problem. As far as the protection of intellectual property is concerned, Mexico has much more stringent laws. This makes it less likely for illegal imitation to occur. However, if a violation of intellectual property laws does happen, there are legal means available to take action against it.
In terms of intellectual property laws, Mexico is very aligned with the laws and regulations of the U.S. and Canada. Besides, the Mexican legal system systematically enforces intellectual property laws.
MEXICAN WORKFORCE IS HIGHLY QUALIFIED
In terms of qualified labor, Mexico is not only able to beat China, but is also competitive at an international level. In recent decades, the country has especially promoted training programs in the fields of engineering, manufacturing and construction technology. Successfully, since 2009, the number of architects, engineers and other professionals with university degrees has doubled up.
Mexico’s steady growth in global manufacturing is largely due to its highly skilled workforce. Numerous automotive and aerospace manufacturers have facilities in Mexico, which is both an indication of the overall skill level and a driver of increased skill achievement. Innovative public and private colleges graduate tens of thousands of specialized technicians every year. From operators to maintenance mechanics to toolmakers, the number of skilled workers in Mexico is constantly growing. Mexico has more engineering, manufacturing, and construction graduates per capita than most countries (including the U.S – see article on Forbes.com).
GLOBALLY COMPETITIVE LABOR COSTS
In addition to a large number of highly skilled workers in Mexico’s manufacturing scene, labor costs have risen rather slowly in the last two decades. This is not the case in many other countries with a solid manufacturing background, where labor costs have risen exponentially in recent years. According to
AN ENVIRONMENT THAT FAVORS MANUFACTURING BUSINESSES
Mexico’s economic policies and the regulatory environment are very business-friendly. In terms of trade policies, Mexico is one of the most open countries in the world, with 12 free trade agreements with 44 countries.
POLITICAL STABILITY
US-based companies encounter few surprises or hidden costs when manufacturing in Mexico because Mexico’s maquila system has been around for about 45 years. Mexico has settled a solid democracy system and despite parties changing in leading the federal government, the country has remained a reliable business partner for U.S. companies manufacturing in Mexico.