When starting manufacturing in Mexico, Stronger manufacturing companies are needed by America and this is why it is essential to make the most reasonable business management decisions, especially when going for off-shoring activities to a low-cost area.
Why is offshoring an alternative to add strength to American Industries?
- Because industries in America require more competitive pricing
- Industries in America need eager and trained workforce
- Because US industries need to focus on new markets from different locations.
As per the United States Manufacturing Outsourcing Cost Index, Mexico is the most reasonable location for US Industries
Here are the major reasons why manufacturing in Mexico offers competitive advantages to US companies:
Labor cost savings: It is the major reason why American companies establish operations in Mexico. It started with assembling operations and now has grown to qualified procedures and more.
Cost efficiency for customers because of tariffs savings: When you manufacture in Mexico, you save on tariffs to 44 countries with which Mexico has a Free Trade Agreement.
So, how to find a good location in Mexico?
1. Choose the location depending on the proximity to the present and future target customers
Depending on the location of consumers, industries first choose an industrial corridor and then closeness to United States border or entry ports. You have two vertical corridors in Mexico: Pan American Corridor and NAFTA Highway Industrial Corridor.
- Industrial Park Juarez, Torreon and Juarez lie in the Pan American Industrial Corridor
- Industrial Park Monterrey, Queretaro, Guadalajara lie in the NAFTA Highway Industrial Corridor
2. Go for a location with good infrastructure, sufficient connectivity and easy accessibility
When manufacturing companies choose a region, they should consider these points:
- Easy accessibility to the manufacturing unit by the executives
- Good transportation by airport, highway and railroad
- Connectivity to markets
- Number and counts of truckloads on a monthly basis
- Easy access to raw materials and freight forwarding services
3. Know the good real estate and utility strategy
Manufacturing companies get top class facilities in Mexico just like US. There are different ways to invest in real estate in Mexico:
- Buy an industrial facility
- Lease an industrial facility
- Choose a facility in an industrial park such as industrial park Monterrey
It is important to know which deal is right for you and then pick the one feasible depending on the cash flow, economies of scale and expansion capabilities of the area:
4. Get the best of government incentives and tax benefits
There are different incentives offered by the government on land, work force training and several tax exemptions. As the ROI on the manufacturing unit investment will come in the long run, make sure you choose a region that offers you support.
5. Focus on local suppliers
A lot of regions offer ease of operation flow because of good transportation, logistics and packaging. So, you can network with the local manufacturing association of the area and benefit from the local suppliers.
6. Get the right workforce
Another concern for manufacturing units is direct availability of labor. Labor skills and costs differ from one region to another. Hence, before choosing an area make sure you know if it can offer you the right workforce or not.