Are Mexico Shelter Services Worth the Cost?

Partnering with a Mexico shelter company is one of the main strategic decisions U.S. manufacturers are considering as they put their eyes toward the future. With the rapid technological evolution across various manufacturing sectors, business leaders want cost-effective ways to ramp up production without sparing quality.

Although foreign manufacturers have benefited from Mexico shelter services for decades, many companies are entertaining the idea for the first time. Either they’re transitioning from manufacturing in China to Mexico or expanding internationally for the first time. No matter what the circumstances, the first question is always: what’s the cost?

Despite the fact each manufacturer has unique project specifications that will determine their final budget, there are general hard and hidden costs already included underneath a shelter’s umbrella. Identifying these highlights savings involved when working with a shelter company and shows how the cost is worth it.

 

Hard Costs of Manufacturing in Mexico

The process of operating in Mexico is comprehensive, with several hard costs to consider pre- and post-launch. It begins with setting up an entity. Manufacturers that decide to incorporate as a standalone operation face thousands of dollars in application fees and permits.

Whereas, when working under a Mexico shelter company, there are no incorporation fees, as the shelter serves as the company’s legal presence in Mexico. Additionally, industrial leases and labor are two other key areas where the savings of working with a shelter company is impactful.

Site Selection Services

Industrial real estate is competitive as more foreign companies establish a presence in Mexico. Though the area along the U.S/Mexico border is the most popular due to proximity and transportation conveniences, there are several industrial areas throughout Mexico well-equipped to handle manufacturing processes.

A shelter company saves manufacturers time and money by creating a site selection analysis. This analysis narrows down viable locations and facilities based on the needs of the company and the project. The analysis includes a comparison of costs, benefits, capabilities, and features of each area to guide manufacturing leaders in making informed decisions on where best to expand.
Since securing a building for production is the first step when manufacturing in Mexico, having local expertise and research available speeds up the process.

Employee Recruiting and Retention

Labor is another key factor when expanding production to Mexico. A shelter company has the network and connections to recruit qualified workers based on a company’s job descriptions and guidelines. Also, a shelter provides recommendations regarding competitive salaries and benefits to recruit and retain top talent.

Mexico is known for its industrial workforce. The availability and cost-effectiveness of qualified workers along the entire spectrum of roles has made the industry quite competitive. Knowing what will entice employees to join a company is beneficial to improve productivity and reduce costs associated with high turnover rates.

Administrative Departments

In addition to the main hard costs of leasing and labor, Mexico shelter services also include the day-to-day coordination of the following departments:

• Finance and Accounting (Mexico)
• Recruiting and HR
• Local Accounts Payable
• Trade Compliance / Import – Export
• Site Selection

Each of these departments require recruiting costs, salaries, and benefits. The chart below illustrates the dollar amount approximation saved in several of these areas:

 

 

All costs listed are included as part of Mexico shelter services. When operating under a shelter, foreign manufacturers can expect costs to be approximately 20-25% less than operating as a standalone entity. Meanwhile, it alleviates the time and resources it takes to hire each department individually.

 

Hidden Costs of Manufacturing in Mexico

When setting up a new operation in Mexico, there are several hidden costs to consider as well, although these are better controlled when working under a shelter. Hidden costs include software compliance, executive oversight, and a reduced learning curve.

Software Compliance

Most manufacturing companies already have HR software in place to handle payroll and taxes. However, in Mexico, it’s necessary to be in local compliance with Mexico’s labor and tax laws. In addition, foreign manufacturers must consider the differences when calculating salaries, work weeks, and benefits, all of which is handled by a shelter operator. When operating under shelter, this software is included as part of the full scope of services, eliminating the need for an additional software investment.

Executive Oversight

There are also hidden costs associated with appointing a company executive to oversee a project’s setup. It puts a strain on a manufacturer’s internal resources and could cause delays. However, when selecting an experienced Mexico shelter company partner, like IVEMSA, all coordination is taken care of without compromising the time and salary of high-level positions.

Reduced Learning Curve

Lastly, when working with a shelter company, there’s a reduced learning curve. This saves both time and money by ensuring proper permits are in place to avoid penalty fees or project delays. A shelter company also takes on the task of performing site selecting and coordinating utilities. Plus, a shelter company is up-to-date on all legal and trade law to ensure a manufacturer is always in compliance.

All of this leads to a quicker start-up time to launch production in three to four months compared to the six to seven months it takes to set up a new legal entity. With all managed services and administrative departments already in place, it saves on time, resources, and associated costs.

Shelter vs. Standalone: Is One More Favorable?

Mexico shelter services are worth the cost for those who want to focus on production and get their new operation up and running as efficiently as possible. Each manufacturing company maintains full control and ownership of all manufacturing activity, scheduling, materials, and inventory management.

However, the same shelter services can apply for those operating as a standalone entity. Companies that are already established as manufacturers in Mexico or new companies that prefer to operate through their own new Mexican entity may still require administrative assistance to prepare for production launch.

Since each company has its own specific requirements, IVEMSA can outline the options, so you can decide which is best based on your company’s structure and goals.

Working with a shelter company is an ideal partnership well worth the cost for those who want to save time, money, and alleviate the hefty burden of setting up an operation in Mexico. The local expertise and experience alone is beneficial to keep operations running smoothly.