Most manufacturing executives will agree that outsourcing production to a foreign country is difficult. But shelter manufacturing simplifies the process for companies and benefits them in ways many executives are unaware of. Let’s explore some of the many benefits afforded to manufacturers who outsource to Mexico via a shelter company.
What Is a Shelter Company?
Outsourcing can be a daunting task. And outsourcing to another country can be too complex and difficult for many manufacturing executives. But shelter manufacturing is somewhat of an enigma, and many don’t consider it as the far-simpler alternative to outsourcing that it is. There are too many unanswered questions that come to mind when the prospect comes up. For example: what is a shelter company? How will they be able to work with our business model? What amount of oversight will be needed from HQ? How much paperwork will this require?
To simplify, let’s start with the basics.
Shelter services have been around for approximately 50 years. It is not a new phenomenon brought about by NAFTA or any recent trade deals. Shelter manufacturing is a well-established process that allows foreign manufacturers to set up a maquiladora – or manufacturing facility – in Mexico without having to go through any of the red tape of opening a Mexican company. Indeed, Mexico shelter services typically find the location, acquire appropriate equipment, apply for and secure all necessary import and export permits, and handle any other necessary regulatory or tax paperwork.
Why Is Mexico Superior for Shelter Manufacturing?
The world – and not only the United States – is quickly learning that Mexico is extremely suited for shelter manufacturing. The Latin American country offers a deep pool of highly skilled and trained workers for wages on par with or lower than Chinese wages. And with over 40 free-trade agreements in place with consumer markets around the globe including Europe, Asia, and the US, manufacturing inputs and finished products manufactured in Mexico are typically eligible for nearly duty-free import/export.
Mexico has aggressively pursued modernization and foreign direct investment for over a decade. In fact, the country has reformed many of its economic and infrastructure institutions, strengthened intellectual property (IP) protections, and signed numerous trade deals. The result has been the rise of manufacturing clusters throughout the country, primarily in the border region, but also sprinkled throughout the country. Mexico shelter services have rapidly grown in tandem with their manufacturing and economic capacity, and manufacturers in the US and globally are taking advantage of this unique match.
The Benefits of Shelter Manufacturing in Mexico
Numerous shelter companies have perfected the process of providing turnkey access to Mexico for US and other foreign producers. Through a simple partnership, US manufacturers can avoid and simplify many of the complex aspects of establishing a successful, foreign plant. Companies don’t have to worry about onboarding a workforce, learning a new tax regime, integrating with a different culture, or learning a new supply chain. Instead, they can invest in their core manufacturing functions and product quality goals while their embedded shelter partner handles the rest.
Additional benefits of manufacturing in Mexico include:
- Seamless interactions with Mexican labor unions
- A swift startup experience
- Full customs compliance assurance
- Labor recruiting by experienced Mexican professionals
- The best possible wage and benefits scale for labor
- Immediate insider access to trusted vendors and providers on location
- Absolutely no responsibility to report to the Mexican government
- Reduced border crossing and associated costs
- No Mexican income tax
Opening a facility in Mexico can be challenging for those going it alone. From construction permits to acquiring resources and equipment to paying taxes to handling labor, the headaches associated with manufacturing in a foreign country are significant. But shelter manufacturing eliminates these challenges and simplifies the process. And the insider access and stress-free partnership with a Mexican maquiladora ensures that US companies can take advantage of highly skilled and affordable labor south of the border without costly exports or administrative hassle.