The Benefits of Manufacturing in Mexico vs. China
The advantages of reshoring manufacturing in Mexico vs. China are vast. NovaLink believes that for the best in cost, quality, productivity and delivery, full service manufacturing in Mexico is the obvious, and best, choice. If you are currently manufacturing your products in China, but find the tariffs imposed by the United States are hurting your bottom line, you may consider moving your production out of China to another country like the US or even possibly Mexico. Moving production from one location to another is always challenging, even more so when moving from across the Pacific.
There are many details that need to be adhered to when moving your manufacturing out of China and not following or paying attention to these details could be costly down the road. There are some factors you may need to consider when moving out of China, and some of the best Mexico manufacturing options for your company.
For more information on the benefits of manufacturing in Mexico vs. China, click the graphic.
Made in China Myths
Select any of the facts below to learn the truth about manufacturing in China.
Facilities in China have become so expensive that in 2015 a Chinese Business Group opened an industrial park in Mexico rather than their own country.
In 2000, workers in Mexico’s manufacturing sector earned nearly 60% more than their Chinese counterparts, according to the Boston Consulting Group. Now they earn 11% less.
Mexico has continued to stay more productive than China per worker,” Justin Rose, a partner at Boston Consulting Group in Chicago, told Quartz. “Sometime in 2011 or 2012, from a labor-cost perspective, it became cheaper to put manufacturing capacity in Mexico than in China.”
Manufacturing in Mexico vs. China: Tariffs Eating Your Profits?
Manufacturing in Mexico vs. China is an easy choice when faced with the prospect of having to pay tariffs. Since July of 2019, the United States has imposed a 25 percent border tax on goods made from factories in China when they’re imported into the US. The goal of this tax, and the other China tariffs, is to make Chinese products more expensive for American consumers and businesses to buy. If your company is currently manufacturing goods in China, your goods will be subject to a 25 percent border tax, which will mean you will either have to raise the price of your goods and pass the expense to your customers or accept a cut into your profit margins.
However, there is viable solution for companies who may be facing the China tariffs crisis: Move your company’s manufacturing to Mexico. With the new trade agreements between Mexico, Canada and the United States now in place, manufacturing goods and services between these nations is now easier and more cost effective than ever:
- There are no tariffs for products made in Mexico and imported into the United States that meet NAFTA rules of origin requirements.
- Lower shipping time for goods to get into the United States
- Lower average cost of shipping
- Lower number of days to start manufacturing operations
- Cost-effective ad more productive labor pool
Why U.S. Companies Are Moving Their Supply Chains From China to Mexico
NovaLink is committed to the philosophy that transitioning manufacturing to Mexico, with Mexico Supply Chain Services, should be an easy, rapid and cost-effective process. Supply Chain Brain listed reasons why companies are moving their supply chains from China to Mexico.
Ground Transport
Goods can be imported from Mexico via ground transport in a matter of days or even hours. This is never an option for goods manufactured in China, from which everything must come by ocean or air. The former is very time consuming (it can often take weeks), and the latter is very expensive.
“Trusted Partner” Status for Customs
The U.S. offers two programs that help facilitate faster and easier Customs processing for U.S.-Mexico trade: FAST and C-TPAT. Initiated after 9/11, FAST is a trusted traveler/trusted shipper program that allows expedited processing for commercial carriers who have completed background checks and fulfill certain eligibility requirements (much like TSA Precheck for air travelers). FAST certification is for drivers; C-TPAT is a broader program that shippers must apply for. Once a company is certified for C-TPAT, its drivers can then apply for FAST. There are no such programs for U.S.-China trade.
A Transparent Landscape
There are also new modern options for transport that make Mexico attractive. Companies can coordinate door-to-door transportation between the U.S. and Mexico, including procurement of trucks on both sides of the border, customs clearance, insurance, financing, and reporting. This allows manufacturers to focus on their core competency, rather than logistics, and can also reduce the need for big in-house shipping and logistics teams.
Smaller Language Barrier
Spanish is the second-most common language spoken in the U.S., making it relatively easy to communicate with partners in Mexico (and find bilingual staff and vendors).
Time-zone Parity
Mexico operates on the same time zones found in the U.S. — Eastern, Central, Mountain and Pacific.