Starting a manufacturing business in Mexico
Q&A with NovaLink CEO Jason Wolfe
Knowing where to begin is the most important hurdle of any large business project; this is no more true than when considering starting a manufacturing business in Mexico. NovaLink CEO Jason Wolfe answers the most common questions associated with manufacturing outsourcing and provides some insight on what it takes to get your business up and running in Mexico.
Why should I be starting a manufacturing business in Mexico?
There are multiple reasons. Available labor pool that is trainable and ready to make a career out of manufacturing. Like the US of the 80’s and 90’s. Proximity to the market. You save time and money by being nearshore versus overseas. You are now planning to a shorter time period versus months out. This means you hold fewer items in finished form because you are ordering weeks out opposed to months. You also commit less to inventory. You are more flexible of what to convert your raw materials into. What do I need a week from now? That is what I will convert. You also are more able to customize your product to your customer requests. Build closer to the sales cycle and orders while nearshore versus offshore. Labor savings. Mexico is less costly than US labor and is in most cases comparable to other offshore countries as their costs continue to rise disproportionately to Mexico.
How do I know if my business is a good or bad fit for starting a manufacturing business in Mexico?
Simply put, ask NovaLink. We will run you through all of the items to consider. What is the labor content is the primary focus. No labor, no savings will be found in Mexico.
Starting a manufacturing business in Mexico: How much does it cost to get started? Do I need to have a lot of money ready?
There will always be a need for capital when you are starting up manufacturing outsourcing in Mexico or relocating one. However with Novalink, we have the infrastructure in place. We also provide the ability for a company to start small and grow into a larger footprint. This means you absorb exactly the overhead proportional to the space and employee level required. Further, NovaLink saves our clients upfront investment in that the client does not need to incorporate in Mexico, hire legal to negotiate union contracts or acquire permits. We already have this in place. NovaLink is also positioned to assist our clients with capital investment if so required.
Do small or big companies do better in Mexico?
Both have succeeded extremely well and failed just the same. Size does not matter! It is how you do it. Who you partner with and what you know. It usually boils down to partner with the right company and people. Those that will learn your business and truly become your partner. You fail, they fail!
Is there a lot of government red tape? What should I prepare myself for?
Just as dealing with any foreign country, there are intricacies that can become challenges. This is why it is important to have NovaLink partner with you so that these issues never become yours. We have been doing this for 30 years and know how to wade through the details of Mexican regulations and laws.
Do I need to understand Spanish or have someone in my organization that does?
It never hurts, but, no. NovaLink has a bilingual staff at the management levels that will be dealing with your personnel. Aside from this, at the corporate level, the executive management and many of the upper management are fully bilingual.
Should I have a spec of my product ready? Is it necessary to have one? If so, how do I get one made?
All companies should strive to have detailed spec packages along with costed Bills of Materials for their products. However, if you don’t, NovaLink’s experience across multiple industries and ERP systems means we can assist you in building not only these items but work aides, line balances and reporting systems for your company.
In your opinion and experience, what are some common mistakes companies are making when starting a manufacturing business in Mexico?
For starters, assuming they know enough about Mexico to dive in and do it alone. Secondly, committing to an overhead structure that they must grow into rather than starting with a partner that allows them to grow into their needs.
With NovaLink, it is up to the client. We welcome expat involvement and work diligently to make them feel a part of the Mexican, NovaLink family. However, there is no need to commit long, term resources to the Mexican operation. Teach us and then we will run with it and manage the operation for our new partnership.
How much do I need to understand about outsource manufacturing in Mexico?
It is preferential that you have an understanding of your manufacturing so that you can be a part of the success of the program. It is your product that we would be manufacturing so it is important that we make them to your satisfaction. It is also beneficial when the client has involvement in the manufacturing process set up and approval. However, if that is not available, NovaLink engineers can often times step in and engineer the process and necessary equipment. Mexico and Mexican labor? This is an area that is covered by NovaLink. So the general rule of thumb is that you do not need to know anything getting started, but, rest assured you will learn a lot through the process and the transparency with which NovaLink works.
How long does it take to get my product setup and manufacturing running?
Typically set up under our model is quick; within a month. This is dependent on many variables. Lead time on equipment and raw materials to be used, etc. Since NovaLink is the incorporated business in Mexico and holds current maquiladora permits, the time constraint is not on the legal side of setting up. Then of course you have the set up of equipment time and the process of training the operators in the processes.