Mexico Manufacturing Solutions By the Numbers: Labor, Site Selection, Savings
Significant factors like favorable trade agreements and a close proximity to the U.S. market make Mexico manufacturing an increasingly attractive option for U.S. manufacturers who want to expand their production. However, between factory leases and labor rates, the question is: exactly how much will it cost?
Manufacturing in Mexico is already considered a cost-effective option when compared to operating in the U.S., and working with a shelter services company delivers further savings. Here is a general overview of common expenses to consider, and the advantages shelter services offer.
The Cost of Industrial Real Estate
Before any manufacturing in Mexico can begin, the first step is to source a building and sign the lease agreement. While Tijuana, Monterrey, Juarez, and Mexicali remain the most popular regions, the availability of factories, and their specific pricing, ebbs and flows depending on demand. However, operators can generally expect to pay:
● $0.80/sq foot per month for Class A buildings (Tijuana)
● $0.65/sq foot per month for Class A buildings (Mexicali)
● $0.69/sq foot per month for Class A buildings (Monterrey)
● $0.74/sq foot per month for Class A buildings (Juarez)
● $0.65/sq foot per month for Class A buildings (nationwide)
In addition to leasing the building space, there will also be expenses for building improvements, and modifications, as well as utility setup, security, and other requirements to meet the needs of the project. A shelter company like IVEMSA can help manufacturers save time and costs while also minimizing risk by speaking with reliable suppliers and gathering all necessary permits for production.
Additionally, IVEMSA can assist companies in effectively scaling. Often, manufacturers seek a bigger space to eventually grow into. Landlords are not inclined to hold vacant space, though may offer the first right of refusal.
Therefore, operators may have to lease additional square footage within the same business park or fully move operations to a bigger building. As a shelter services partner, IVEMSA communicates about open contracts, building availability, and lease rate trends, which helps operators be proactive in their growth needs for future production.
Labor Rates in Mexico
In many cases, building availability and lease expenses may be similar to industrial real estate in the U.S. Labor costs are where manufacturers will experience the most savings and benefits.
Because of the comparatively low labor rates in Mexico, the industrial workforce is competitive. On average, rates equal $5.60/hour USD for a fully burdened, semi-skilled worker. Meanwhile, labor rates in the U.S. for a similar role average $23/hour USD.
Through its HR resources, IVEMSA helps with designing attractive compensation packages to attract and retain top job candidates. Additionally, shelter services include maintaining compliance with Mexico’s labor laws, which differ from the U.S.
Shelter Service Savings
Working with a shelter services company saves U.S. and other foreign manufacturing companies significantly on hard costs, including lease and labor rates in Mexico. Part of the benefit also includes a site selection analysis.
IVEMSA researches and organizes viable locations based on guidance from the manufacturer. The matrix compares different regions, factories, and their features and benefits, such as proximity, recruiting forecast, and overall costs. This saves operators time and money, while also narrowing down options to secure a lease more quickly.
Additionally, IVEMSA has the infrastructure and experience necessary which allows manufacturers to launch production within three to four months. By handling all administrative departments, project managers can fully focus on production. In addition to site selection, these services include:
● HR and recruiting
● Finance and accounting
● Local accounts payable
● Trade compliance
● Payroll processing
● Support for identifying vendors and building improvements
● Cross-border logistics
● Fiscal, customs, and labor consulting
These operational costs necessary for production can add up to an estimated $25,000 per month. Although, when implementing shelter services, operators can expect savings of 30% to 40%, on average.
