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Mexico Shelter Company Choice: Comparing Apples to Apples

10 Aug 2011

Executives that have examined all available options and have chosen to initiate manufacturing in Mexico under the auspices of an outsourced manufacturing support, or Mexican shelter company, should bear in mind that the term "shelter" is in no way a homogenous one, when used in the context of the Mexican maquiladora industry.  The Offshore Group’s survey of the market of service provides has identified six distinct types of shelter service providers in Mexico:

  1. I. Full Service Mexico Shelter Companies:

These are organizations that, in addition to providing all of the Mexico Shelter Plan services that are typically offered by companies in the market, own and rent Mexican industrial real estate to their clientele.

  1. II. Full Shelter Services Only:

Full shelter service companies offer a menu of non-core , but essential services commonly provided by Mexico shelter companies, but do not own real estate.  They do, however, partner with landlords that offer Mexico industrial buildings in the cities and towns in which they operate to supply their clients’ needs.

  1. III. Mexico Shelter Company Start-Up Companies:

Shelter start-up companies in Mexico are those which provide services to help a foreign manufacturing entity to get up and running.  At certain agreed upon time, the start-up company steps aside, and the manufacturer assumes the costs, risks and responsibilities associated with performing non-core functions.

  1. IV. Contract Manufacturing Plus Some Shelter Services:

These firms are mainly Mexico subcontract manufacturing entities.  Often they will dedicate workers to a particular company’s projects and work.  They provide other value-added services to their manufacturing firm customers on an as needed basis.

  1. V. Mexico Shelter Companies that Emphasize the Real Estate Component of the Business

Some companies that offer Mexico shelter services have, as their primary interest, the rental and sale of Mexican industrial real estate.  As such their infrastructure for providing non-core services to manufacturers in Mexico may not be as developed as that of other companies that emphasize the service end of the business.   Additionally, the firms that emphasize the sale and lease of industrial real estate in Mexico may have a third party involved in providing Mexico shelter services in their buildings.

  1. VI. Pick and choose from a menu of Mexico shelter services

There are a very small number of companies that allow manufacturers to pick and choose, “cafeteria style,” from a list of shelter service offerings.

With the knowledge that there are different versions of the shelter concept offered to companies that are seeking to manufacture in Mexico, companies should ask the right questions to make sure that they are making “apples to apples” comparisons that truly reflect  the cost, service and risk differences between  the various alternatives that are available to them.  Some important questions to consider are:

1. Does the manufacturer enter the maquiladora industry under the Mexico shelter service provider's business license, or does the shelter company obtain a separate license for each one of its clients?  The answer to this question has important tax, labor, customs and environmental law ramifications that should be fully investigated by buyers.

2. What is included in the lease costs for the building?  Is the agreement triple net, or does the Mexico shelter service provider assume all costs associated with taxes, insurance and maintenance related to the facility?

3. Does the shelter service provider in Mexico include janitorial and security costs in the fee that is being quoted?

4. What services in the area of logistics and customs are included in the shelter company's fee?

5. Does the  Mexico shelter company billing “inclusively” for its services, or are there  "administrative" or other charges billed to the client that are over and above the quoted shelter fee?

It is important to keep in mind that some companies offer a less than comprehensive "turnkey" solution to manufacturers in Mexico.  Although they may present a lower shelter fee when providing cost estimates to potential customers, executives should be clear as to what those fees actually cover.

 

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