News, Insights and Best Practices for Manufacturing in Mexico

Mexico Shelter Plans Provide Invaluable Expertise

06 Oct 2012

Category: Manufacturing in Mexico

Competitively priced labor and quick shipping make manufacturing in Mexico attractive, but a skilled Mexico shelter service provider navigating the details makes to process a seamless one.

“If you’re going into Mexico, unless you’re a very large operation, it makes a lot of sense to partner with a full-shelter organization,” notes Dave McQueen, managing partner of McQueen and Associates Management Consulting Firm in Ontario, Canada. “This should be a Mexico shelter company that can handle the administration for you, as well as deal with the complexity of setting up in a Mexican manufacturing location. You get to focus on your operation and manufacturing.”

Michael Goeringer, president of Arc-Tronics, agrees. Based in Illinois, Arc-Tronics specializes in electronics manufacturing services. Just last year, the company expanded into Mexico utilizing The Offshore Group's Mexico Shelter Plan.

The decision to open a facility in Mexico was “customer driven,” Goeringer says. “We have a lot of large OEMs (original equipment manufacturers) that we manufacture for, and they were looking for a low-cost manufacturing option. They liked the way we work, and were looking to open a production facility somewhere.”

Because Arc-Tronics is a small business, with only “one layoff in 40 years,” Goeringer was concerned about a possible loss of U.S. jobs. Actually, the opposite occurred.

“With the setup of our Mexican facility, we’ve had doors to new business opportunities open up for both plants,” he says. “Because we now have a manufacturing facility in Mexico, we’ve been awarded additional opportunities that wouldn’t have otherwise come about. This reflects more work in our Elk Grove Village facility as well.”

Sonny Newman, president and CEO of Electronics Evolution Technologies (EET), also has seen his company benefit via its shelter experience. In October 2005, the Nevada-based manufacturer opened a second manufacturing location in Guaymas Sonora, Mexico. Starting with 20 workers in a 17,000-square-foot building, the Mexico facility grew in late 2010 to a 38,000-square-foot plant now housing more than 110 employees.

Newman says the expansion has helped his American operation as well.

“Originally we had our employees here in the Reno facility thinking that we were going to transfer all the jobs down to Mexico,” he explains. “In reality, establishing Mexican operations has created jobs here in Reno, at a professional level. We do all of our buying, all of our planning, our finance, our customer service, through our Reno facility. It’s actually saved the company to a degree.

“I would imagine, had we not done this – because of the way the world has changed over the last three years – that Reno would be a very, very small operation without our presence in Mexico,” the CEO concludes.

Many American businesses have discovered the benefits of inexpensive labor, reduced tariffs, reasonable shipping times and compatible time zones available by doing business in Mexico. In fact, Mexico’s electronics industry grew 20 percent between 2010 and 2011 alone. The country is the sixth-largest electronics industry supplier in the world behind China, the United States, Japan, South Korea and Taiwan and is the second-largest exporter of electronics to the United States, where it sent $71.4 billion worth of electronics last year.

McQueen and Associates aids small- and medium-sized companies in improving and expanding their businesses, particularly in the area of offshoring and manufacturing in low-cost countries. The consulting firm has so far helped establish two of its clients’ presences in Mexico utilizing The Offshore Group shelter services.

Before considering a shelter situation, McQueen “did the math and examined whether it would be more cost-effective for us to go in and hire our own staff to do the same things” as the Mexico shelter organization would, such as legal services and management. “However, in both cases we found that – for the size of operation we were planning – it was actually more economical to go with the Mexico shelter company,” he affirms. “We found that not only cost is lowered, but also the risk of making mistakes is reduced as well.”

 

Next week: A closer look at cost analysis and other factors involved in a shelter setup.

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