News, Insights and Best Practices for Manufacturing in Mexico

Offshoring investment highlights a need for shelter companie

08 Oct 2013

Category: Manufacturing in Mexico

Some U.S. businesses offshore their production processes to Mexico independently. Yet this model is rife with challenges for manufacturers, despite many companies conducting risk assessments beforehand. By expanding to Mexico without shelter company assistance, manufacturers can inadvertently put their businesses at risk of financial losses. Before offshoring to Mexico, manufacturers may want to conduct an internal assessment to examine if doing so will benefit the company. After the assessment, businesses may notice offshoring with the help of a shelter company provides the best value and investment security.

Conduct internal assessment before offshoring
Manufacturers can determine if they should offshore to Mexico by first ensuring they have the resources available to do so, and conducting an assessment is a great way to make the decision. According to an article for Industry Week by Jamie Flinchbaugh, co-founder and partner of the Lean Learning Center, manufacturers need to conduct internal assessments to understand which areas of the company need improvement. Flinchbaugh said it can be an uncomfortable and tedious process for executives to assess their businesses, but it is an important part of ensuring an investment provides top value.

Flinchbaugh suggested manufacturers define the purpose of their assessments before beginning. For manufacturers thinking about expanding to Mexico, establishing what the company wants to accomplish by doing so can help executives understand the types of resources the business needs in order to offshore its production process. According to the PricewaterhouseCoopers "A practice guide to risk assessment" report, finding the real value of conducting an assessment lies in identifying risks and understanding objectives and goals. This is never more important than analyzing whether to offshore the production process to Mexico. Manufacturers place a huge investment in offshoring, and it can suck resources if businesses don't clearly define the purpose of doing so beforehand.

Receiving the most offshoring benefits through shelter companies
The assessment may show the manufacturer that offshoring to Mexico is financially feasible, but businesses need to get it right to ensure their investments aren't wasted. Offshoring independently is costly for businesses. From locating the right factory location and employing experienced workers to providing those employees with benefits that comply with Mexican employment legislation, there are many aspects of offshoring that require a manufacturer's attention. Companies can chose a industrial cluster that is optimal for its specific industry, but be unable to partner with quality suppliers. Manufacturers can also find themselves with a specialized workforce but no knowledge about Mexican employment law. 

Shelter companies have experience assisting U.S. businesses in these aspects. From helping the manufacturer pick the right location for the factory to providing human resources for the company, shelter services provide the optimal offshoring value for manufacturers. There are many risks of not partnering with a shelter company, and it can be beneficial for manufacturers to analyze these challenges during their internal assessments.

Keeping a close eye on what aspects of the business needs to be improved and what is going well through an assessment can help manufacturers understand the value of offshoring through a shelter company. 

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