Last Updated on June 26, 2023
Note: This post was originally published in November 2018 and has been completely revamped and updated for accuracy and comprehensiveness.
Mexico has long been one of the most convenient and popular destinations for businesses looking to begin manufacturing in a nearshore, low-cost environment. However, nearshore manufacturing is not without risk.
This article will explain the differences between expectations and reality in many scenarios of full service manufacturing offerings in Mexico. Here are several factors to consider that may be connected to expectations that you might currently have:
Expectation: I don't have a prototype product, but my company can make one for me.
Reality: It is common practice for a company considering outsourcing their manufacturing to have a prototype made before engaging a manufacturing services provider. Mexico does not typically have the required infrastructure to deliver prototypes before bringing production to fruition unless another company makes a similar product in the country.
Companies seeking to engage with a Mexican manufacturer for production should have their prototype made in the US.
NovaLink does not produce spec products. However, aside from the obvious legal and related trade issues, our company believes that having the functional product specifications and a product our staff can reverse engineer helps rapidly advance the product's time to enter production.
If a company needs a specification product completed, there are numerous resources available.
Expectation: I can run at a low volume or do a short run production.
Reality: The very nature of having a nearshore manufacturing partner such as Novalink requires a consistent production flow. Companies seeking to engage with Novalink can do a short-run or limited product run as long as they have plans to continue to make the same short-run in the future. The cost of producing the item and sourcing the labor would be too expensive for Novalink to undertake such an effort as a project. Even if Novalink accomplished this, the final cost to produce the good would be cost ineffective. In short, self-produced or outsourced manufacturing should have a steady, consistent volume and require at least 15 or more employees to produce for it to be cost-effective to engage with Novalink in Mexico.
If your product does not fit these guidelines, it makes more sense to have a contract manufacturer produce it for you.
Expectation: I don't need a lot of money to get started.
Reality: If you are a company is a startup operation, it must have total funding from an investor for your Mexico project. Novalink is not equipped to work with startups without the requisite funding. In addition, providing manufacturing space, equipment, and labor will require funding for a project to start in Mexico with Novalink.
Jason Wolfe, NovaLink CEO, asserts, "There will always be a need for capital when starting up an outsourced manufacturing project in Mexico or relocating an existing 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 to meet its changing needs. This means that companies with whom we partner absorb the overhead proportional to the space and employee level required.
Furthermore, NovaLink saves its customers upfront investment in that the client does not need to incorporate in Mexico or hire legal experts to negotiate union contracts and acquire permits. We already have this in place. NovaLink is also positioned to assist manufacturers with capital investment if required."
Expectation: I have an idea and I want my company help me get it to reality.
Reality: All manufacturing companies would love to be a part of the next big thing! However, getting a product from concept to reality will require much footwork on the client's part beforehand.
As a standard, before approaching any nearshore manufacturing partner, a company should have a firm grasp of what the product will look like and work up a general cost estimate for production (with engineering specifications). Companies should also consider how many people it will take to manufacture the item and what kind of equipment will be needed to do the job.
After this, companies should have a prototype of their product made so that engineers, like the ones employed by NovaLink, can examine it and understand it completely. This may be a somewhat daunting exercise, but it is a necessary one. Sufficient forethought and work done during the conceptualization stage will help ensure that the product's manufacturing is done correctly and that the project, as a whole, is a success.
Expectation: I have no equipment to begin manufacturing.
Reality: Nearshore manufacturing partners such as NovaLink will assist their customers in obtaining equipment for their production if they do not have the necessary machinery. However, finding and sourcing the equipment is very time-consuming (as well as finding the labor to run the equipment and will delay the beginning of production. Prospective customers may wish to consult with a company like NovaLink beforehand to understand better the equipment they may need and its cost. The options option of finding the equipment for itself will help to shorten the timeline and get production off the ground more rapidly.
Expectation: I will need a large labor pool.
Reality: This depends on the product that a company seeks to produce. A simple product may only require five employees to manufacture. While on the other hand, a larger, more complex product that requires more machinery, or a product that needs to be assembled, will require more labor.
Cut and sew products, especially ones with multiple pieces that need to be created and assembled, like a handbag or a complex garment, tend to be very labor-intensive. However, some products require simple assembly and can be produced in a single unit may require less labor. The best way to determine if a product will need a large labor pool to produce is to have a specification/demo made and have Novalink’s engineers examine it. Then, the company's manufacturing experts can determine if the product will need a large assembly in Mexico team to make it.
Expectation: There will be a lot of government red tape.
Reality: Any large manufacturing project, whether in the United States or Mexico, will require you to navigate through the regulations associated with that country – that is an inevitable reality. However, it does not have to be a bureaucratic nightmare that will stop your project in its tracks. There are experts in nearshore manufacturing companies like NovaLink that can help you pilot your way through the required regulations, forms, and inspections.
In addition, as mentioned previously, the more legwork committed on the front end of your project, the easier it will be for you to anticipate what is required from the bureaucracy of your country of origin, like Mexico, to allow you to budget time and plan for these contingencies.
Expectation: It will take a long time.
Expectation: It will take a long time.
Reality: Here is where you may be welcomed with a pleasant surprise: if you have done your due diligence and planning for your project thoroughly, your time to getting started may be much shorter than you anticipate: At NovaLink, typically set up under our model is quick; within a month. This is dependent on many variables, however, your planning will aid in being prepared for these variables in order to move things rapidly along. The belief that a manufacturing project will take over a year to get started is simply false.
Knowing where to begin is the most important hurdle of any large business project; understanding the realities of starting a manufacturing business in Mexico and planning for complications will make your transition from concept to reality a smooth one.
FAQs about Starting Nearshore Manufacturing
Q1: What should I expect when starting nearshore manufacturing?
A1: When starting nearshore manufacturing, you can expect benefits such as reduced costs, shorter supply chains, improved communication, and easier logistics management. Additionally, nearshore manufacturing can provide access to a skilled labor force, regulatory alignment, and proximity for quality control and coordination.
Q2: Is it realistic to expect a seamless transition when starting nearshore manufacturing?
A2: While nearshore manufacturing offers numerous advantages, it is important to recognize that a seamless transition may not always be immediate. Factors such as cultural differences, language barriers, supply chain adjustments, and learning curves can impact the initial transition. However, with proper planning, effective communication, and collaboration with experienced partners, the transition can be smooth over time.
Q3: What are the common challenges businesses face when starting nearshore manufacturing?
A3: Some common challenges include adjusting to a different business culture, understanding local regulations and labor laws, establishing reliable supplier networks, managing logistics, and aligning production processes. Cultural differences and language barriers can also pose communication and collaboration challenges. However, working closely with experienced partners can help navigate these challenges effectively.
Q4: Can I expect cost savings when starting nearshore manufacturing?
A4: Yes, nearshore manufacturing often offers cost savings compared to domestic manufacturing or offshoring. Factors such as lower labor costs, reduced shipping expenses, and improved supply chain efficiencies contribute to cost savings. However, it is crucial to consider other factors like initial setup costs, taxes, tariffs, and ongoing operational expenses when evaluating the overall cost-effectiveness.
Q5: How long does it typically take to see the benefits of nearshore manufacturing?
A5: The timeline for experiencing the benefits of nearshore manufacturing can vary depending on factors such as project complexity, the maturity of your manufacturing processes, and the level of preparation and collaboration. While some benefits may be noticeable in the early stages, it generally takes time to optimize operations, establish efficient supply chains, and build strong relationships with local partners.
As a manufacturer in Mexico, NovaLink employs a unique approach that transcends the traditional model of shelter production. More than just the location of your manufacturing, we would like to become a partner in your manufacturing in Mexico. You will be able to relocate or initiate manufacturing for your company in Mexico in a low-cost labor environment with very little delay or up-front costs. Find out how we can help you by handling the manufacturing process.