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Shelter services: The cost-effective way of manufacturing in Mexico

A marn writing the key components to a business' strategy.
17 Dec 2013

More manufacturers are offshoring their fabrication and assembly of goods to Mexico. For instance, Manufacturing.net reported automotive parts company UGN is building a new maquiladora in order to begin producing products at a lower cost but higher quality. But, how do companies offshore manufacturing to Mexico? When companies consider expanding to Mexico, they often have multiple options: doing it independently, using an outsourcing company or employing the help of a shelter company.

Partnering with an experienced shelter company allows manufacturers to focus on producing great products without having to worry about finding the right location, managing the human resources side of the maquiladora and monitoring the logistics process. Manufacturers are able to receive all the benefits of fabricating and assembling goods in Mexico without much of the hassle that comes with it. 

Advantages of shelter company assistance
At Mexico's Auto Industry Conference, Dave McQueen, regional business development director for the Offshore Group, as well as two other professionals in the shelter services industry in Mexico, gave a presentation about the industry. Many suppliers decide to offshore manufacturing to Mexico with a shelter company to receive expertise and support, as many Tier 2 suppliers require experience and resources, according to the presentation,"Facilitating Manufacturing in Mexico". In addition, expanding to Mexico through a shelter company offers three general benefits:

  1. Lower costs due to operating maquiladora in strategic locations
  2. Lower financial and legal exposure in Mexico
  3. Increased focus on worker productivity, the quality of goods and reducing the cost of production

Many companies believe they should offshore independently, as working with another business can be costly. However, when it comes to shelter services this is incorrect. The presentation cited research by Boston Consulting Group that noted offshoring manufacturing independently is more expensive in terms of operating costs and productivity, as well as in the development of new technology and product lines. These factors combined with the need to hire, transport and pay workers, building relationships with suppliers and complying with Mexican legislation, it's more risky to offshore independently.

Why automotive manufacturers love shelter services
Mexico has a thriving, vibrant automotive manufacturing sector, with companies like General Motors and Nissan having plants in the country. According to the presentation, there are currently 19 original equipment manufacturers in Mexico and more than 300 Tier 1 suppliers, making Mexico a hot bed for automotive manufacturers. One key reason why so many auto makers have part of their production processes in Mexico is because they know shelter services can acquire expert workers so the companies produce the best products. Manufacturing in Mexico is low cost, but it is high quality as well. Numerous auto makers understand this advantage, and know shelter companies can mitigate any costs that may creep up, such as taxes.

The automotive conference presentation highlights the ongoing benefits of working with shelter services. Without the help of shelter companies, manufacturers can see operational costs skyrocket after expanding to Mexico instead of experiencing cost cuts.

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