To become more competitive and ensure business continuity in light of recent disruptions, companies across the globe are developing strategies to regionalize supply chains and reduce dependence on Asia—and Mexico is the logical choice. Reshoring or nearshoring manufacturing operations to Mexico is even more attractive considering updates to the USMCA and other practical benefits, such as similar time zones and business customs, in addition to the country’s established soft landing culture and variety of incentives and programs for importing and exporting, including IMMEX.
Despite the many advantages of manufacturing in Mexico, many companies may be hesitant to relocate due to a lack of knowledge regarding Mexico’s laws, language, market, or supply chain and regional capacities, and are unsure of where to start or how to go about the site selection process in Mexico. This is where the expertise of a provider of shelter services in Mexico is invaluable.
If you are looking to become more competitive by nearshoring or reshoring your manufacturing operations to Mexico and would like to know how to get started, this guide is for you. We will give an overview of the benefits of a Mexico shelter manufacturing partnership, and provide a summary of the site selection process.
There are a handful of legal frameworks foreign companies can use to set up manufacturing operations in the country, and working with a Mexico shelter manufacturing partner is the quickest, easiest, and most cost-effective way. This option relieves the burden of establishing brand-new facilities from the ground up while guaranteeing labor and regulatory compliance.
In addition, companies will maximize savings by taking advantage of the shelter service providers’ economies of scale while having access to experienced administrative personnel from day one and maintaining complete control over their operations. This ensures their focus is where it should be—on their production, service, quality, delivery, and technology. It is an ideal solution for companies that are new to the market and need a hands-on, comforting approach to setting up manufacturing operations in Mexico.
In recent years, the site selection process has evolved dramatically and become increasingly complex due to the availability of new site selection data, the development of advanced applications and tools, sheer economic growth and corporate expansion, and corporations’ overall globalization, among other factors. This means that it has become more challenging and time-consuming for companies to carry out the process themselves. To minimize the risk of choosing the wrong location and ensure the long-term success of your operation, you will want to work under a Mexico shelter program with experts that proactively maintain the latest intelligence data, possess the tools to evaluate locations, and have firsthand experience in the various areas of the country.
The following is a summary of our eBook which outlines in detail the 7 Steps of a Successful Site Selection Process to identify the optimal location for your manufacturing operation.
The first step in the site selection process is establishing a project team and defining the requirements. It’s essential to clearly outline the project scope and objectives and determine the size, equipment, and workforce needs. These factors will vary greatly depending on the industry and type of operation. A shelter partner can guide the team through each step and help the team define information such as key dates, employee skill demands, projected headcount, desired labor rates, capital investment, accessibility to customers and suppliers, real estate needs, and infrastructure exigencies.
The next step is to create a filtering model and customize a criteria-based selection process. This includes analyzing the geographical area to identify locations that best fit the company’s needs and business objectives. Essential components, such as population, demographics, unemployment rate, cost of living, utility costs, industry presence, inbound and outbound materials, wage rates, union rates, tax rates, time zone, and other variables, will be evaluated to create a long list of five to eight locations.
Though many companies may think they can make a decision at this level, collecting more detailed demographic data and firsthand information is necessary to make the most informed decision.
Some more detailed data categories compiled for comparison using a matrix-type approach include business, labor, and political environments, academic infrastructure, quality of life, geography and climate, accessibility, and supply base, among others. Once the five to eight potential sites have been identified, a Mexico shelter manufacturing partner will use specialized site selection tools and programs to disqualify some potential locations. This will leave only two or three to carry out due diligence and site visits.
Next, using their established relationships with public and private entities, your shelter partner will create an itinerary in each place, including visits with community leaders, regional economic development officials, workforce training representatives, staffing agencies, local employers, utility providers, and real estate brokers. Only then will you understand the subtle qualitative differences between the locations and the fullest picture of expected costs and resources necessary to best evaluate each location’s timeline, costs, benefits, and risk.
Once you have chosen the ideal site location, much work is still to be done, including negotiations for real estate terms and economic incentives. Next, the project construction phase can begin, where the team will develop detailed project budgets and schedules and follow them through to move-in.
After the start of operations, a commonly overlooked aspect of the process is compliance. This includes labor, tax, and customs laws and regulations and economic incentives. May companies might believe that site selection process is finished upon move-in, when in reality, it is an ongoing process.
To take advantage of the economic incentives approved by your executive team, you must stay in compliance. This will require you to submit payroll reports, employee training expenses, capital investment, and real and personal property tax information to multiple economic development and government entities. This data will have to be submitted monthly, quarterly, or annually depending on the specific economic incentive requirement stipulated in your agreement. If you fail to comply, you will often lose your ability to access those funds. These requirements are why so many companies fail to receive the full benefit of the economic incentives they thought they would receive.
It’s no secret that companies looking to relocate or expand operations to Mexico have many factors to consider. Choosing the right location and partner can make all the difference in the success of a project. By understanding all of the components that go into the manufacturing process, setting up an effective project team, conducting proper due diligence, and choosing the right provider of shelter services in Mexico to take that entire initiative together, you will guarantee the long-term success of your manufacturing operation.
If you would like to find out more about this topic or are interested in receiving a complimentary business case analysis for your operation in Mexico, please fill out this form or contact us at:
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