Get Answers for Your Nearshore Manufacturing Frequently Asked Questions
Thank you for inquiring with NovaLink. Please refer to the answers below for all your Nearshore Manufacturing Frequently Asked Questions. Once you are to a point where you are manufacturing your own products and would like to discuss Manufacturing in Mexico, we should talk.
How Do You Get a Factory in Mexico?
If you are interested in getting a factory in Mexico, the best way to start is to contact a nearshore manufacturing partner like NovaLink. Our 30 years of experience can help get your manufacturing project off to the best possible start: analysis, site visits, classifications, permits, factory setup, and training are all part of our workflow before your company begins to make things.
How Much Does It Cost to Manufacture in Mexico?
How Much Does It Cost to Manufacture in Mexico depends on several factors.
- What type of product do you want to manufacture? Your costs might be low if you have a small, easy-to-create product that does not require much labor or factory space. You may have higher costs if you create a large, complex product that requires specialized labor or machinery.
- Where do you want your manufacturing to be located? The location of your manufacturing operations is crucial. You’ll need to be near the US/Mexico border or a port of entry if you want to ship frequently into the United States.
- Do you wish to start on your own or do you want to use a shelter model? Manufacturers can establish maquiladoras in Mexico without going through the bureaucratic process of establishing a Mexican company using the shelter manufacturing model. While doing everything yourself will be cheaper, it will also take considerably more time and effort to get your manufacturing up and running in Mexico.
How Much Does It Cost to Start a Company in Mexico?
Before you can determine how much does it cost to start a company in Mexico, you will need to address a number of issues associated with starting a manufacturing operation. There will be different issues depending on the type of goods you want to make and how you intend to import them back into the United States. It will be less expensive to procure materials and create a simple product, like a garment, while it will be more difficult to make a complex product, like an electronic device. The location of your manufacturing operations is crucial determining the cost to start a company in Mexico. You’ll want to be near the border between the United States and Mexico or near an entry point if you frequently ship into the United States. Most importantly, you must answer the question: Are you interested in starting your own business or using a shelter model? Foreign manufacturers can open maquiladoras in Mexico through the shelter manufacturing model without going through the paperwork required to establish a Mexican company. Your manufacturing will run cheaper if you do everything yourself in Mexico, but it will also take a lot longer and be more challenging.
How Easy Is It to Start a Business in Mexico?
It is easier to start a business in Mexico than in any other country in Latin America, because it is fast and less complicated. However, establishing manufacturing in a foreign country such as Mexico is not without its challenges. If you are knowledgeable about Mexican laws and regulations, as well as the US laws and customs that apply to them, you will be able to avoid frustration and save time. A manufacturing consulting company that specializes in setting up manufacturing in Mexico may be able to help you. Taking advantage of the services of a shelter manufacturing partner may be more expensive, but you can rest assured they can assist you in getting your production going more quickly by reducing red tape. Learn more about starting a manufacturing operation in Mexico.
Why Are Companies Moving Manufacturing out of China?
Manufacturing is a major industry in China, as we know. A third of supply chain leaders plan to move manufacturing out of China by 2023, according to Gartner research. Here’s why so many companies are moving out:
Companies learned from the recent Covid-19 pandemic that they cannot rely on just one supplier. Meanwhile, governments across the globe are trying to get companies out of China. Many companies are considering Mexico as a potential location.
In 2018, the United States imposed tariffs of 25% on Chinese goods. Importing goods from China into the US was therefore very expensive.
Three or four decades ago, Chinese labor was one of the cheapest in the world. In recent years, it has greatly increased to $14000/year, which is a huge increase. Manufacturing in China has become more expensive.
What is the USMCA?
USMCA stands for United States-Mexico-Canada Agreement, which was signed on November 30, 2018. Essentially, it replaces the North American Free Trade Agreement (NAFTA) which was in place since January 1994. NAFTA slowly phased out tariffs on most goods between North America’s three main economic powers. All agricultural and textile products, cars, and other goods had their tariffs reduced or eliminated by 2008.
What Are The Immex Program Requirements?
The companies eligible to benefit from the IMMEX program must export finished products worth at least US $500,000. Their export revenues must also account for at least 10% of their annual sales.
How Does a Maquiladora Differ From a Regular Factory?
Maquiladoras in Mexico are factories that operate under preferential tariff programs set up and administered by the American and Mexican governments. Material, components, and production equipment used in maquiladoras are allowed to enter Mexico duty-free. Maquiladoras are also often referred to as “Shelter manufacturing services“.
Why Do US Companies Manufacture in Mexico?
There are many reasons why Manufacturing in Mexico vs China is simply the better solution: Mexico shelter manufacturing represents the best of both worlds for manufacturing companies who seek to increase quality and production while reducing costs. Some other reasons include:
- Affordable Labor
- Easier Sourcing
- Friendly Government
- Proximity to the US
What Are Some Products Made in Mexico?
The Mexico shelter manufacturing advantage you get with NovaLink means our skilled workers are proficient in producing a wide variety of products for a vast array of industries. Please look at some of the industries Mexico contract manufacturing serves.
The Mexico manufacturing advantage is no more evident than in the textile industry. The textile industry benefits greatly from Maquiladoras, utilized by NovaLink for their textile manufacturing labor, simply because most textile products encompass the traits of a high demand, low automation model. Most products in this category have significant labor content. Materials are purchased at a cost-effective price in Mexico when possible or sourced abroad and the labor provided by the Mexican workforce. NovaLink is able to skillfully and quickly manufacture the product for startup manufacturing in Mexico, in large volumes, or small custom driven quantities for such companies as Patagonia and Balfour.
The Mexico manufacturing advantage is ideal for Manufacturing electronics, which is why many companies manufacturing electronics are choosing to move manufacturing out of China in favor of Mexico. This industry typically requires a skilled, trainable workforce. When paired with a motivated, consistent workforce, Maquiladoras produce tangible, consistent and positive results for the electrical industry. Large operations such as Powell Electrical trust NovaLink to manufacture their products.
Mexico has success in the automotive and aviation industries. Automotive and aviation industries deal in large volumes in an ever increasing competitive market. Because the automotive and aviation industries deal in large volumes, the cost advantages coupled with a productive and trainable labor pool make the Maquilador ideal for these industries. NovaLink serves automotive and aviation companies such as Franklin, IMMI and Porter Engineered.
Mexico Industrial Manufacturing is an ideal fit for the furniture industry as many manufacturers require a short lead time and short supply chains. This is precisely why many furniture companies, such as NovaLink customer Easy Way, have moved their manufacturing operations south of the border instead of across the Pacific.
What is a Mexico Shelter?
Mexico Shelter Manufacturing services allow foreign manufacturers to set up manufacturing facilities in Mexico without actually starting a company there.
Is Made in Mexico Better Than China?
With the new trade USMCA agreement between Mexico, Canada and the United States now in place, Mexico manufacturing as well as 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 USMCA 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
Is It Cheaper to Manufacture in Mexico?
Yes. 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 manufacturing vs. China is an easy choice when faced with the prospect of having to pay tariffs. 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.
What Are the Disadvantages of Mexico Manufacturing?
Complaints about Mexico manufacturing and potential disadvantages include:
- Negligence towards the environment
- Risks to one’s health
- Differences in culture
- Labor that is underpaid
- Working situations that are hazardous
- Labor laws are ineffective
It is encouraging to see that the Mexican government has addressed many of these concerns or is in the process of doing so.
Why Is Manufacturing Moving to Mexico?
Among other factors, global commerce, market competition, and reduced costs have contributed to U.S. companies starting Mexico manufacturing operations.
Why Do US Companies Manufacture in Mexico?
The advantages of Mexico manufacturing are unique: lower labor costs, next-door proximity to North American markets, free trade agreements with virtually every country, a plentiful and highly skilled workforce, and production quality comparable with standards in the U.S. and abroad.
How Do I Find a Manufacturer in Mexico?
Google is the best tool for finding manufacturers in Mexico by entering search terms related to manufacturing in Mexico. Here are a few terms to consider:
What Are Manufacturing Areas in Mexico?
Mexico’s main manufacturing areas are broken down into tiers. Top-tier cities and regions are those located near the US/Mexico border and other ports of entry. The secondary tier cities are those that are located further away from the border, but still have access to the US/Mexico border.
What Are The Pros And Cons Of Contract Manufacturing
When it comes to unique items, contract manufacturing is an ideal approach to keep costs low while maintaining high quality. Whatever you’re producing, there’s a good chance you’ll be able to find a dependable contract manufacturing partner to relieve some of your production burdens.
While contract manufacturing has some drawbacks, in most circumstances the benefits exceed the drawbacks. It can assist organizations in lowering costs, accelerating the manufacturing process, and expanding their operations.
Reduce Overhead and Increase Profits
Higher Long-Term Costs
What Is A Contract Manufacturer And How Does It Work
Hiring a third-party company to design, manufacture, and/or assemble your product is known as contract manufacturing. Some contract manufacturers become involved early in the process, assisting you with product design and constructing prototypes to test before the first production run. This is known as full service manufacturing.
What Is The Difference Between Operations And Manufacturing
Manufacturing management is the administration of operations relating to the manufacture of goods. Operations management, on the other hand, is one step ahead of production management, or it could be said that production management is a subset of operations management. As the name implies, operations management is the administration of business operations by the organization’s managers.
What Is The Difference Between Service Industry And Manufacturing
Manufacturing industries are involved in the creation of items (finished products) that have a market value. Industries that do not manufacture commodities and instead provide services are classified as service industries. Many industries classify service operations, including banking, insurance, hospitality, advertising, logistics, and consulting.
What is Contract Manufacturing?
Contract manufacturing refers to the agreement between a company that is making a product and a company or firm (“contract manufacturer”) that contracts with a firm for components or products. In short, contract manufacturing is a form of outsourcing or full service manufacturing. At NovaLink, when a potential client approaches us with the intention of finding a contracting partner, and it is determined the client is a good fit for Contract Manufacturing in Mexico, the client is carefully put through a 9-step process to ensure the relationship and transition of business is conducted smoothly. This includes:
Classifications / Permitting
Relocation / Installation
Distribution / Warehousing
What is the IMMEX Program?
The IMMEX program is a manufacturing solution created in the 1960’s to utilize preferential tariff agreements between the U.S. and Mexico & to encourage foreign investment in that country. The IMMEX program is an acronym in Spanish for “Manufacturing, Maquila and Export Services Industries Program” (Industría Manufacturera Maquiladora y de Servicio de Exportación).
More commonly, the IMMEX program is known by their traditional name “Maquiladora”.
How long does it take to get my product setup and manufacturing running?
Typically set up under our model is quick; within a month. This is dependent on many variables. Lead time on equipment and raw materials to be used, etc. 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.
How much do I need to understand about manufacturing?
It is preferential that you understand 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. Mexico and Mexican labor? This is an area that is covered by NovaLink. 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.
What are some common mistakes companies are making in Manufacturing in Mexico?
For starters, assuming they know enough about Mexico 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.
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.
Do I need to understand Spanish or have someone in my organization that does to Manufacture in Mexico?
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.
Is there a lot of government red tape in Mexico? What should I prepare myself for?
Just as dealing with any foreign country, there are intricacies that can become challenges. 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
Do small or big companies do better in Mexico?
Both have succeeded extremely well and failed just the same. Size does not matter! It is how you do it. 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!
Why should I manufacture my product in Mexico?
There are multiple reasons. Available labor pool that is trainable and ready to make a career out of manufacturing. Like the US of the 80’s and 90’s. Proximity to the market. You save time and money by using Nearshore Manufacturing Services. 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. You also are more able to customize your product to your customer requests. Build closer to the sales cycle and orders while nearshore versus offshore. Labor savings. Mexico is less costly than US labor and is in most cases comparable to other offshore countries as their costs continue to rise disproportionately to Mexico.
How Many Days Does it Take to Begin Operations in China?
If you are lucky and are able to quickly get through the red tape associated with starting operations in Communist China, the average amount of time is 33 days. In Mexico, with the aid of NovaLink’s services, you may be up and running in as little as 6 days. source
What is the Average Cost for Shipping from China?
The average cost of shipping a container across the Pacific to the U.S. is $4300. The average cost of delivering a container from Mexico is $200.
How Long Do Shipments Take From China to the U.S.?
The average time for delivery of products from China, shipping across the Pacific is 4 weeks. The average time for a shipment of products from Mexico, from just across the Texas border, is one.
Are Chinese Facilities and Labor Cheaper than Mexico?
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.
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.
What is the quality of Mexican-manufactured goods?
The Maquiladora, a young and talented worker population with a mean age of 26 years, has demonstrated the capacity to construct sophisticated products. As stated by the Organization for Economic Cooperation and Development (OECD), Mexico’s 3.5 rate in the “technological sophistication level of exported goods” is above the average of OECD exports, higher than Brazil and similar to Asian countries. Every year, 115,000 Mexican engineers are graduated in science and technology careers.
Does Manufacturing in Mexico hurt U.S. workers?
This is one of the most common manufacturing in Mexico myths. While conceding that many U.S. high-wage manufacturing jobs were relocated to Mexico, China and other foreign locations as a result of NAFTA, Morris Cohen, Wharton professor of operations and information management, argues that NAFTA has, on balance, been a good thing for the U.S. economy and U.S. corporations. “The sucking sound that Ross Perot predicted did not occur; many jobs were created in Canada and Mexico, and [the resulting] economic activity created a somewhat seamless supply chain — a North American supply chain that allowed North American auto companies to be more profitable and more competitive.”
What is NAFTA?
The North American Free Trade Agreement (NAFTA; Spanish: Tratado de Libre Comercio de América del Norte, TLCAN; French: Accord de libre-échange nord-américain, ALÉNA) is an agreement signed by Canada, Mexico, and the United States, creating a trilateral trade bloc in North America. The agreement came into force on January 1, 1994.
What are the benefits of the Maquiladoras in Mexico?
The benefits to a U.S.-based business relate primarily to the cost, quality and availability of labor, and the proximity to market. Other benefits of operating through a Maquiladora include:
- Unlimited duty-free imports
- Unlimited foreign capital investment
- Limitless options for type or amount of product that can be manufactured
- Reduced manufacturing costs
- High-quality product
- Reduced transport time and cost (specifically in comparison to manufacturing in eastern countries)
Mexico has remained consistent with costs and taxing, which allows companies to plan budgetary needs in advance and avoid any surprises that may set them back. It has also permitted U.S. companies to rely on Mexico as a manufacturing partner. As of 2015, 90% of Fortune 500 companies have investments in Mexico, making the maquiladora industry vital to the U.S. economy.
Who are The Maquiladoras in Mexico?
The Maquiladoras in Mexico are the labor pool for the NovaLink facilities and operations. Our relationship with them makes the service and quality we offer to our partners possible.
What are Some Advantages of Manufacturing in Mexico?
Production is closer to the U.S. border; faster time to the consumer market than shipping across the Pacific Ocean, which can take weeks. Lower transportation, trucks and trains as opposed to ships and the abundance of warehousing make Mexico a cost-effective solution. 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.
What industries do you serve?
We serve many varied and unique industries. Here are just a few of the industries that have been NovaLink clients:
Can you help with HR? Accounting? Inventory?
Every new operation requires administrative support: NovaLink’s Mexico manufacturing consulting services provides accounting, information systems, recruiting, training and managing employees. NovaLink will staff an operation according to your needs. For projects with a design component or those that require greater technical expertise, we can recruit additional engineering talent to help oversee the operation.
NovaLink will integrate your information systems to provide timely information in a familiar and convenient format. Our goal is to learn to speak your language so that the transition and ongoing operations appear seamless to you.
Where are your facilities located?
NovaLink operates two 200,000 square foot Manufacturing Facilities in Mexico in the town of Matamoros, and another 60,000 square foot distribution facility in Brownsville, Texas.
What distribution warehouses do you use?
To help manage inventory, NovaLink also provides warehousing and storage for its customers. We can drop-ship products directly to your customer and manage a quick turnaround time from the time the order is received at our facility to the time it arrives at your customers door. NovaLink also provides direct to retail distribution or bulk shipment back to your operations.
Do You Help with Customs?
NovaLink has decades of experience managing Mexico supply chain services, getting the shipment of equipment, raw materials and finished goods across the U.S. / Mexican border. If mishandled, the shipment of raw materials and finished goods across the border can result in a costly outcome. Our objective is to make this process seamless and the border invisible.
What is Your Pricing Model?
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.
How Fast Can I Begin Manufacturing?
With our proximity to market, short lead times are met with turns from order placement as short as five days.
Do I Need A Lot of Money To Start Manufacturing?
Depends on the project. 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. NovaLink is also positioned to assist our clients with capital investment if so required.
Can I Scale Up My Manufacturing?
Yes. NovaLink can initiate a manufacturing relationship with a floorplan 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.
What Services do We Offer?
Refined by 30 years of serving clients NovaLink has a host of manufacturing services that makes production in Mexico an easy and seamless solution. NovaLink currently provides full service manufacturing for everything from aircraft seating, activewear, fire extinguishers, wire harnesses, patio furniture and water meters and other products.
We offer Full Service Manufacturing for the following industries:
What’s your Manufacturing Process?
NovaLink’s manufacturing process has setting up your business in Mexico down to a precise science. We use the following step-by-step process.
CLASSIFICATIONS / PERMITTING
RELOCATION / INSTALLATION
DISTRIBUTION / WAREHOUSING
See the Process page for more information.
What does Full Service Manufacturing mean?
NovaLink’s Full Service Manufacturing is a comprehensive, complete turn-key manufacturing solution for our customers all “under one roof.” Our services include:
Equipment and Raw Material Sourcing
Machining & Manufacturing
Supply Chain and Logistics
NovaLink keeps costs low while manufacturing high quality products: It doesn’t matter if you are a startup or a large multinational company, NovaLink’s infrastructure allows our customers to explore made in Mexico manufacturing and decide if it is a fit for their company without significant risk.
NovaLink is competitive in full service manufacturing a wide array of products. Whether it is a product that requires precision and high tolerance, or a product that has been commoditized, NovaLink operates at an advantage. NovaLink currently provides full service manufacturing for everything from aircraft seating, activewear, fire extinguishers, wire harnesses, patio furniture and water meters and other products.