Last Updated on December 12, 2022
With the new trade agreement in place between the US and Mexico, companies seeking to initiate or move their operations to a more affordable environment now have a better option rather than locations in China or Asia. Contract Manufacturing in Mexico has many upsides: the cost and convenience efficiencies of Mexico full service manufacturing provide just some of the numerous benefits.
What is Contract Manufacturing?
Contract manufacturing refers to the agreement between a company that is making a product and a company or firm (“contract manufacturer”) that contracts with a firm for components or products. In short, contract manufacturing is a form of outsourcing.
At NovaLink, when a potential client approaches us with the intention of finding a contracting partner, and it is determined the client is a good fit for Contract Manufacturing in Mexico, the client is carefully put through a 9-step process to ensure the relationship and transition of business is conducted smoothly. This includes:
- Project Analysis
- Site Visits
- Program Scope
- Classifications / Permitting
- Relocation / Installation
- Distribution / Warehousing
NovaLink, not unlike other firms conducting Contract Manufacturing in Mexico, will accommodate the client with most of the logistics, labor and factory setup in getting the manufacturing project off and running.
The Contract Manufacturing in Mexico Labor Force
The most exclusively unique aspect of Contract Manufacturing in Mexico is the labor force, the Mexican Maquiladora Program.
Established in the mid 1960’s, the Mexican Maquiladora Program has allowed foreign companies to start a manufacturing presence in Mexico with the goal of taking advantage of the lower cost labor force, while still being able to produce a high-quality end product. The Maquiladora program has evolved into one of Mexico’s most important sources of employment and revenue: at NovaLink, we employ over 3,000 workers from Maquiladora program and country-wide, 1 million Mexican workers are currently employed. Read about 6 Misconceptions About Manufacturing in Mexico.
Mexico has remained consistent with costs and taxing, which allows companies to plan budgetary needs in advance and avoid any surprises that may set them back. It has also permitted U.S. companies to rely on Mexico as a manufacturing partner. As of 2015, 90% of Fortune 500 companies have investments in Mexico, making the maquiladora industry vital to the U.S. economy.
Are you a good fit for NovaLink and Contract Manufacturing in Mexico?
To better understand if your product or company is a good fit for manufacturing with NovaLink, we have provided a short list of items and practices that unfortunately we cannot accommodate.
- If you are a startup, your company needs to have full-funding from an investor for your project. We do not work with startups without funding.
- Your manufacturing, whether your are doing your own production or outsourcing, has a steady, consistent volume.
- Your product requires at least 5 or more employees to produce.
- Your product requires complex labor or assembly in Mexico.
Not a Good Fit
- We do not work with companies that are interested in doing “short runs”.
- Simple, machine based production.
- We prefer to work with companies that have their own equipment for manufacturing and are seeking to relocate it to Mexico. We are able to source equipment for you if this is an issue, and the additional costs will be included in your quote.
- We do not produce Spec products. We encourage our clients to have spec products already produced before engaging with us.
- We do not produce the following:
- Chemical Products or any products that contain hazardous materials
- Food or Beverage products
- Weapons or Para-Military products
To learn more about products and service we do provide, please see the Industries We Serve page.
Advantages of Contract Manufacturing in Mexico
In addition to the lower labor costs associated with the Maquiladora program, the primary business benefit for Contract Manufacturing in Mexico is the proximity of Mexico to the U.S.: this is a distinct advantage over other low cost manufacturing regions of the world.
The production of company goods are closer to the U.S. border; because transit time for components going in and products coming out is significantly shorter, it enables faster time to the consumer market than shipping across the Pacific Ocean, which can take weeks.
The Mexican government is very friendly to foreign business and investment, as demonstrated by their 44 trade agreements with countries around the globe.
U.S.-made parts and products are used by Mexico Manufacturers up to four times more than China; this is a tremendous benefit to suppliers in the United States.
The U.S. and Mexico share similar cultures, have a minimal language barrier, and comparable time zones. In addition, English-speaking middle management in the Mexican workforce is plentiful (as opposed to China where speaking English is actually discouraged) alleviating the need for language translators. Mexico enjoys lower medical costs for its workforce as compared to the U.S., allowing companies to hire additional employees with minimal expense for medical benefits. Mexico also operates on a 48 hour work week.
Contract Manufacturing in Mexico, is the Smarter, Better Choice
There are many reasons why manufacturing in Mexico is simply the better solution: Mexico Manufacturing represents the best of both worlds for manufacturing companies who seek to increase quality and production while reducing costs.