Last Updated on August 23, 2023
Manufacturing outsourcing in Mexico has become increasingly popular among companies looking to reduce costs and improve their competitiveness. Mexico's proximity to the US, low labor costs, and skilled workforce make it an attractive destination for outsourcing. However, before embarking on this journey, there are several key things you need to know to ensure a successful manufacturing outsourcing experience.
The CEO of NovaLink, Jason Wolfe, answers some of the most common questions associated with contract manufacturing services and provides a glimpse into the process of setting up your Mexico manufacturing facility.
Why should I consider manufacturing outsourcing in Mexico?
If you're considering manufacturing outsourcing in Mexico, there are several reasons why it can be a smart move for your business. Mexico offers a range of benefits, including lower labor costs, access to skilled workers, a well-developed supply chain infrastructure, favorable trade agreements, and government incentives.
Additionally, Mexico's proximity to the US market can help reduce transportation costs and lead times, making it an attractive location for companies looking to expand their reach. 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.
NovaLink understands how essential it is to reduce manufacturing costs. Mexico is an ideal destination for companies looking to manufacture high-quality products while maintaining cost efficiency. By manufacturing in Mexico, companies can improve their competitiveness, reduce costs, and gain access to new markets, making it an excellent option for businesses of all sizes.
How do I know if my business is a good or bad fit for manufacturing outsourcing in Mexico?
Deciding whether manufacturing outsourcing in Mexico is a good fit for your business requires careful consideration and analysis. Some factors to consider include the type of product you manufacture, the size of your company, your production volume, and your budget. If you produce high-volume products with low complexity, then manufacturing outsourcing in Mexico can offer significant cost savings.
If your products are highly specialized or require a lot of customization, outsourcing might not be the best choice. Outsourcing can also help your company save money and improve efficiency if it's small and doesn't have the resources to manage a complex supply chain. Ultimately, you should weigh the benefits and drawbacks of manufacturing outsourcing in Mexico and decide if it's right for you.
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.
If you have any questions, please contact NovaLink. We will discuss all the items that need to be considered. The primary focus should be on the labor content.
How much does it cost to get started with manufacturing outsourcing in Mexico? 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.
The cost of getting started with manufacturing outsourcing in Mexico will vary depending on several factors, including the size and complexity of your production operation, the location of your facility, and the level of customization required for your product. NovaLink is also positioned to assist our clients with capital investment if so required.
In Mexico, startup costs can be lower because of lower labor costs and favorable trade agreements, but you should carefully evaluate your budget and consider all of the associated costs.
Do small or big companies do better with manufacturing outsourcing in Mexico?
Both have succeeded extremely well and failed just the same. Size does not matter!
Manufacturing outsourcing in Mexico works for both small and large companies, but it takes careful planning and execution. Especially for small companies, outsourcing to Mexico can help reduce costs and increase efficiency without huge investments in infrastructure or labor. However, big companies may benefit from Mexico's skilled workforce and strong supply chain infrastructure, so they can produce high-quality products at lower prices.
Mexico manufacturing is very much about 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!
How long does it take to get my product setup and manufacturing running?
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.
Is there a lot of government red tape when starting manufacturing in Mexico What should I prepare myself for?
Starting manufacturing outsourcing in Mexico involves navigating the country's regulatory environment, which can be complex and bureaucratic at times. Just as dealing with any foreign country, there are intricacies that can become challenges when doing manufacturing outsourcing in Mexico.
Mexico has a lot of regulations and procedures for establishing a manufacturing operation, including registering with local authorities, obtaining permits, and following labor and environmental regulations. Despite that, the Mexican government also offers incentives and benefits to foreign companies, like tax exemptions, subsidies, and other benefits.
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. Additionally, NovaLink does not require clients to incorporate in Mexico, hire lawyers to negotiate union contracts, or acquire permits.
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 manufacturing outsourcing in Mexico?
While manufacturing outsourcing in Mexico can offer many benefits, companies may also encounter challenges and pitfalls along the way. For starters, many assume they know enough about Mexico manufacturing 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 manufacturing?
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.
We are a full service manufacturing company. 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.
Manufacturing outsourcing in Mexico offers companies big advantages when it comes to reducing costs, improving efficiency, and expanding globally. Prior to getting started, it's important to consider key factors such as product type, production volume, budget, and regulatory requirements, as well as evaluating the risks and benefits.
Manufacturing outsourcing in Mexico can be successfully navigated by working with experienced partners like NovaLink, conducting thorough due diligence, and investing in robust supply chain and logistics systems. In today's global economy, Mexico offers a wealth of opportunities for companies, no matter how large or small.
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.
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