Unlocking Opportunities: Navigating the Benefits and Limitations of Shelter Operations in Mexico

Last Updated on February 26, 2024

In the ever-evolving landscape of global business, companies are constantly seeking innovative solutions to optimize their operations. One such strategy gaining prominence is the establishment of a shelter operation in Mexico. But what exactly are the advantages and drawbacks of this approach? Let's delve into the realm of shelter operations and explore how they can shape your business trajectory.

What Is the Shelter Operations in Mexico Model?

According to Jeffrey Cartwright, Shoreview Advisors:

The shelter model is based upon manufacturing space.  Most shelters are in industrial parks.  They primarily are open space buildings that provide floor space for manufacturing, raw material, and finished goods storage with dock doors for receiving and shipping.  Facilities management and physical site security are included in the space leased to the client. 

The shelter company provides administrative and human resource services, as well as labor services. Labor services include workforce and supervisory activities, as well as regulatory and trade-related services.  

Shoreview Advisors

Unveiling the Benefits of Shelter Operations in Mexico

1. Enhanced Cost Efficiency: Embarking on a shelter operation in Mexico can be a game-changer for your company's cost structure. With reduced labor and operational costs, businesses often find themselves in a more competitive position within their industry.
2. Cost Efficiency and Resource Optimization: One of the prominent advantages lies in cost efficiency. Shelter operations allow businesses to leverage shared services, reducing operational costs and enabling resource optimization. This proves instrumental, especially for startups and small enterprises.
3. Expedited Market Entry: Shelter operations provide a streamlined path for companies aiming to enter the Mexican market swiftly. The bureaucratic hurdles are minimized, allowing for a quicker setup and initiation of business activities.
4. Legal and Regulatory Support: Navigating the complex legal and regulatory landscape of a new country can be a daunting task. Shelter operations in Mexico often come with built-in legal support, ensuring compliance with local laws and regulations.
5. Access to Skilled Workforce: Mexico boasts a skilled and cost-effective workforce, making it an attractive destination for companies looking to tap into a diverse talent pool without compromising on quality.
6. Risk Mitigation: Shelter operations offer a degree of risk mitigation by transferring certain responsibilities to the shelter provider. This allows businesses to focus on core competencies while navigating potential risks more effectively.

Shelter Operation in Mexico: Client Responsibilities

It is the US client company that is responsible for the entire manufacturing process inside the shelter. The following are included:  

• Equipment
• Operation Of The Equipment  
• Workforce Training
• Scheduling
• Equipment Maintenance
• Purchasing
• Inventory Control
• Quality Assurance

Although the shelter company assists in sourcing candidates for salaried positions and the workforce, it is the client's responsibility to manage them. The simplest and fastest way to begin operations in Mexico is to use your own manufacturing operation or your current supplier in Asia is willing to set up a new operation there.

Acknowledging the Limitations

• Limited Decision-Making Autonomy: While shelter operations offer a smoother entry into the market, companies may find themselves constrained in terms of decision-making autonomy. Strategic decisions might be subject to collaboration with the shelter service provider.
• Initial Setup Costs: Despite the long-term cost benefits, companies need to be prepared for initial setup costs associated with establishing a shelter operation in Mexico. Budget considerations should account for these upfront investments.
• Flexibility Constraints: Shelter operations are designed for specific business functions. If your company's needs evolve or require a different operational model, adapting within the confines of a shelter operation might pose challenges.

Conclusion: Navigating the Path Forward

In conclusion, shelter operations in Mexico present a compelling opportunity for businesses seeking efficient market entry and cost optimization. However, it's crucial to weigh the benefits against the limitations and consider your company's unique needs and long-term goals.

FAQs about Shelter Operations in Mexico

1. Are shelter operations suitable for all types of businesses? Yes, shelter operations can benefit various industries, but it's essential to evaluate specific business requirements and industry compatibility.

2. How long does it take to set up a shelter operation in Mexico? The setup timeline varies but is generally faster than traditional market entry methods, taking a few weeks to a few months.

3. Can my company retain control over strategic decisions in a shelter operation? While shelter operations offer advantages, some strategic decisions may require collaboration with the service provider, limiting absolute autonomy.

4. Are there ongoing fees associated with shelter operations? Yes, companies typically pay ongoing fees to the service provider for various support services, including HR, legal compliance, and facility management.

5. What factors should be considered when choosing a shelter service provider in Mexico? Critical factors include the provider's reputation, experience, service offerings, and the flexibility of their solutions to align with your business goals.