Contract Manufacturing Companies In Mexico – What US And Canadian Companies Need To Know
Did you know that hundreds of Fortune 1000 companies have relocated their manufacturing to Mexico? Mexico is currently in the midst of a manufacturing boom. It has become a prime manufacturing location for U.S. and Canadian auto parts distributors. This is due to its proximity to these countries and many other advantages.
The Advantages Of Manufacturing In Mexico
Over the past few decades, more and more companies have started to notice the benefits of outsourcing to a contract manufacturing company in Mexico. The most common benefits are as follows:
1. Short Supply Chain
Mexico is located in the same continent as the US and Canada, so the supply chain is really short. In fact, it’s quite common for a part manufactured at our facility to be trucked to the US in a matter of only one day.
A short supply chain, which sums up the idea of “nearshoring,” comes with many advantages, including:
- Less shipping time
- Lower shipping costs
- Less opportunity for disruption
- More accountability
2. Easy Factory Visits
The costs of flying to your auto parts manufacturer to do business in person add up over time. Obviously, traveling to Mexico is cheaper than flying to Asia. Cost is not the only issue associated with face-to-face meetings with your vendor. You also have productivity to worry about.
Do you want to meet with your auto parts manufacturer on a regular basis? If they’re located overseas, you’ll have to set aside a huge chunk of your schedule for those meetings. The flights alone take over half a day. There’s also jet lag, which eats up productivity.
Mexico is pretty much in the same time zone as the U.S. and Canada, give or take an hour or two. The flights take only a few hours, so not much productivity is lost when you travel to Mexico.
3. Mexico Has A Highly-Skilled Labor Pool
Mexico produces more engineering, manufacturing, and construction degrees per capita than the United States and most of the other countries in the world. Pair that with Mexico’s stringent labor laws, and you’ve got a well-run Mexican manufacturing plant with highly skilled employees.
4. Low Shipping Costs
Some overseas manufacturers may offer a lower manufacturing rate per part, but shipping alone will kill the savings.
One of the biggest advantages of manufacturing in Mexico is its proximity to the US and Canada. That means much lower shipping costs. It’s also much easier to buy in small volumes, as opposed buying full containers and shipping them halfway around the world. Since Mexico is connected by land, Mexican manufacturers can ship via truck. This makes them immune to the rising ocean shipping costs.
5. Competitive Labor Costs
Mexico has some of the lowest labor costs in the world. You’ll be likely to save some money on your parts if you sign with a Mexican auto parts manufacturer. In the past 20 years, Mexican labor costs have been slowly climbing at a steady rate. This drastically reduces the uncertainty associated with costs in the future. Win-win.
6. Stringent Intellectual Property Laws In Mexico
In Mexico, our intellectual property laws are similar to the laws in the US and Canada. And, these laws are written favorably towards foreign businesses. That means your intellectual property – including your designs, products, and even ideas – will be protected under Mexican law. Also, Mexico’s legal system is designed to offer your company a legal recourse in the event that your intellectual property is stolen.
7. Socially Responsible Manufacturing
Many US and Canadian companies make a point to find a manufacturer in a country that enforces stringent labor laws. Mexico’s labor laws are similar to those of the US and Canada.
Finding a country with good labor laws isn’t enough, sadly, as some countries rarely enforce them. You want to find a country that takes its labor laws seriously. In Mexico, labor exploitation doesn’t exist, thanks to the stringent Mexican Federal Labor Law. The ultimate reasons for this law are to:
- Enforce safe working environments
- Create fair working conditions
- Provide sustainable living for workers
The law was updated in 2012, and the new regulations in place are contributing to the growth of manufacturing jobs in Mexico.
How To Find A Quality Manufacturing Company In Mexico
While Mexico is a great place for manufacturing, you should still do your due diligence when looking for a Mexican contract manufacturer. It’s even recommended to audit your contract manufacturer when it’s time to renew your contract. The last thing you want is to get stuck with a manufacturer that doesn’t offer top-notch service.
Here’s what you need to look for in a contract manufacturer:
- Quality certifications: Look for certifications that indicate that the manufacturer exceeds the quality standards set by the global automotive industry. The ISO/TS 16949 and ISO 9001-2008 certifications are good ones to keep an eye out for.
- Experience: The more experience a manufacturer has, the better. However, experience isn’t everything, as you should also be looking for partnerships with reputable companies.
- Partnerships with reputable companies: When the manufacturer has experience working with major automakers and other well-known companies, then you know that they’re reliable and capable.
- Continuing investment in equipment, facilities, and employees: You want a manufacturer that has the most recent equipment, updated facilities, and employees who are well-versed in the latest technologies.
- Environmental, labor, and intellectual property standards: You want to be sure that the manufacturer will guard your intellectual property and adhere to labor and environmental standards.
Read more about each important feature here.
Cultural Challenges To Consider When Working With A Mexican Manufacturer
After signing with a manufacturer in Mexico, you want to maintain a good relationship with them. A pretty major part of it is taking the time to respect and abide by Mexican customs. Those customs include:
- Dressing formally for all meetings, even casual meetings
- Avoiding constant eye contact
- Saying “maybe” instead of a hard “no”
- Letting women initiate handshakes (if you’re a man)
- Spend quite some time with the executive (you might even be invited to his/her house)
- Not conducting business on weekends
Read more cultural tips and tricks for US and Canadian execs doing business in Mexico here.
If you have any more questions about doing business with contract manufacturing companies in Mexico, you’re more than welcome to contact us. We’ll be happy to talk with you.