Reduce Manufacturing Costs

Reduce Manufacturing Costs

NovaLink understands how essential it is to lower manufacturing costs. With NovaLink’s Mexico contract manufacturing services, companies can greatly reduce manufacturing costs. Take advantage of our decades of experience and become more profitable. Brownsville, Texas and Matamoros, Tamaulipas, Mexico are both home to NovaLink’s manufacturing facilities. Manufacturers of all sizes are reshoring manufacturing to back North America, from big names to small and medium-sized ones.

We offer NovaLink clients a unique way to reduce manufacturing costs by allowing them to pay only for occupied space, labor, and G&A for shipping. For your manufacturing operation to grow, you will need large facility space: NovaLink provides you with this space.  Located in the manufacturing border city of Matamoros, Mexico, NovaLink operates two 200,000 square foot manufacturing facilities and another 60,000 square foot distribution facility in Brownsville, Texas. In these Mexico manufacturing facilities, space is allotted to customer operations as needed. A typical full-service manufacturing line requires 30,000 square feet. Manufacturing in Mexico facilities are usually offered for rent at 50,000 square feet. Our distribution facility in Brownsville offers full warehouse services. A daily amount of $2 million worth of product is shipped to 200 locations across the U.S. and abroad from this location.

What Are the Various Components of Manufacturing Production Cost?

Producing a finished product involves procuring raw materials and converting them into finished products. Therefore, all factory costs are included in the cost of production. Here’s how it works: Production cost = Direct material cost + Direct labor cost + Factory/Manufacturing overheads

How to Reduce Manufacturing Costs

Increasing revenue and profits can be achieved by reducing manufacturing costs such as materials, direct and indirect labor, energy, and inventory. The following are examples of how manufacturing in Mexico can reduce costs.

When manufacturing in Mexico, the number of materials you import may affect the amount of import/export duties that you will have to pay. Finding local sources for raw materials can help reduce the amount of duties that you have to pay later on your finished product.

The USMCA is significant for many reasons, but the most important one is that you will experience financial savings. A reduction in tariffs between the nations, the encouragement of investments in industrial buildings in North America, and the opening of international markets are a few examples.

Manufacturing firms that use the IMMEX program save money on operations that firms that use manufacturing options in other nations, such as China, do not. The IMMEX program enables manufacturers to cut costs by exporting supplies and equipment to Mexico on a temporary duty-free basis, having them manufactured or assembled, and then re-sent to the United States for sale or distribution. Furthermore, the IMMEX program provides American manufacturers access to a big, skilled, and economical labor pool for their operations. Most importantly, IMMEX provides exemptions from the Value-Added Tax, or "VAT”. All temporary imported equipment, tools, and materials used in production while in a manufacturing plant in Mexico are excluded from the entire 16 percent VAT tax under the IMMEX program.

It's critical to consider where your manufacturing operations are located. If you want to ship frequently into the United States, you'll want to be near the US/Mexico border or near a port of entry. This will help reduce costs with transportation and supply chains which are problematic in China.

NovaLink offers a variety of pricing models to accommodate unique client needs. These range from fully loaded hourly rates to a full package model where NovaLink provides the raw materials and equipment.

Advantages of Mexico Shelter Manufacturing Services
The main Mexico Shelter Manufacturing Services advantage is that production is closer to the U.S. border; faster time to the consumer market than shipping across the Pacific Ocean, which can take weeks. The lower transportation costs, trucks and trains as opposed to ships, as well as the abundance of warehousing, make Mexico a perfect solution to reduce manufacturing costs. 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.  Do you have more questions about manufacturing in Mexico?  Read our Frequently Asked Questions and get answers.
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Amerex, like many companies performing large-scale manufacturing that required sub-assembly of their products, began to face mounting pressure from their competitors that were having products produced in Asia. In order to remain competitive, Amerex needed a manufacturing partner that helped reduce manufacturing costs & meet the price pressures from the Asian market.
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How Mexico Manufacturing Helps Reduce Manufacturing Costs

Mexico, not China, is the most favored manufacturing base for companies in the United States.  There are many reasons for this, but the most important is the ability for companies to reduce their expenses while increasing their revenue by manufacturing in Mexico.

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It is literally right across the border from Texas, and NovaLink has well-developed supply chains.

Mexican laborers, whose wages are 30 % lower than China, are skilled in auto-making and equipment industries, as well as other labor-intensive industries, such as clothing and textiles.

Following the signing of the North American Free Trade Agreement in 1994, Mexico saw a surge in manufacturing investments and, after a significant share of factory work went to China when they entered the World Trade Organization in 2001, the pendulum is now swinging back in Mexico’s favor.

Mexico has free-trade agreements with 44 countries. The North American Free Trade Agreement (NAFTA) provides access manufacturers in Mexico from the USA and Canada. The Mexican government encourages foreign investments.

Do You Have a Minimum Order Quantity (MOQ)?
It is common practice in manufacturing to set a minimum order quantity (MOQ), which is the fewest amount of units that need to be purchased at once. Manufacturers or suppliers usually use MOQs for production runs, but a manufacturer can set them for different types of orders. At NovaLink, we do not establish relationships with our manufacturing partners based on MOQs, but rather through sustained production. NovaLink believes that having a consistent volume that engages full-time manufacturing teams year-round is the key to a successful, financially-viable manufacturing project. Partnering with NovaLink is not for “short runs” or products that require simple, machine-based production.

 

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The NovaLink Advantage

NovaLink is committed to the philosophy that transitioning shelter manufacturing to Mexico should be an easy, rapid and cost-effective process. We offer the following advantages to enable our customers to succeed.

Ability to Scale

NovaLink can initiate a manufacturing relationship with a floor plan as small as 5,000 square feet. Once the relationship has been established, and proven successful, customers can scale up to 100,000 square feet or more. It also permits larger customers to scale down if the customers’ business experiences a need to reduce overall capacity.

Attractive Labor Pool

Mexico has made large strides in developing a world class labor market. NovaLink has positioned itself and helped develop a geographical market of labor that is pro-business resulting in lower than normal turnover rates.

No Significant Upfront Capital Commitment

NovaLink client’s are not required to enter into any long-term lease obligations or purchase new equipment (if currently owned). Furthermore, the client’s equipment can be shipped to NovaLink’s facilities in stages as production ramps to ensure quality control.

Quick Turnaround

With our proximity to market, short lead times are met with turns from order placement as short as five days.

Simple Pricing

NovaLink offers a variety of pricing models to accommodate unique client needs. These range from fully loaded hourly rates to a full package model where NovaLink provides the raw materials and equipment.

Site Selection & Raw Materials Procurement

NovaLink can accommodate your operations within our current facilities, or if you prefer your own facility, assist in site selection, secure all permitting requirements and coordinate this effort with a builder or landlord.  Many of our customers have dedicated suppliers in place, but for those that do not, NovaLink will source materials and provide cost estimates.

Explore Other Resources

Please explore these other useful resources to better understand how your company can reduce manufacturing costs: