News, Insights and Best Practices for Manufacturing in Mexico

Small EMS Expands Business Via Mexico Shelter Plan

07 Jun 2012

Category: Manufacturing in Mexico, Electronics Manufacturing

A business need not be a multinational conglomerate to find success manufacturing in Mexico – and opening a facility in another country can create additional work for personnel at home.

This is what Michael Goeringer has learned. Goeringer is president of Arc-Tronics, a family owned electronics manufacturing services (EMS) business established by his father, Conrad, in 1972. Based in Elk Grove Village, Ill., Arc-Tronics opened a sister plant with The Offshore Group in Empalme Mexico nearly a year ago.

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.”

Goeringer started investigating the possibilities about five years ago, considering China and India. Then oil prices skyrocketed.

“Our OEMs reconsidered and told us that they would prefer if we established manufacturing that would be more local,” he recalls. “So I visited Costa Rica and Mexico.”

Goeringer recalls being “very impressed” with the industrial parks in Mexico that he toured and, after a couple of years spent gathering information, Arc-Tronics set up a sister facility utilizing The Offshore Group’s Mexico Shelter Plan.

Many American businesses are doing the same as they discover the benefits of inexpensive labor, reduced tariffs, reasonable shipping times and similar 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.

Arc-Tronics is a small business, as classified by the U.S. Small Business Administration, and Goeringer admits it has only had “one layoff in 40 years,” so understandably he was concerned about the loss of U.S. jobs that could materialize by opening a facility in Mexico. 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.”

Additionally, a new phone system makes communication between Illinois and Mexico as simple as dialing an extension. “It feels like our Elk Grove facility is across the street,” Goeringer notes. “There is only a one- to two-hour time-zone difference … and it’s a pleasure to see people down here communicating with our U.S. team back and forth, because, as we all know, good interaction between staff is a key to success.”

Though Goeringer is pleased with his company’s expansion, he stresses the importance of due diligence to businesses considering a move to Mexico. “There might be specific businesses that won’t benefit from manufacturing in Mexico,” he points out.

Data that might provide insight is a recent study, “China vs. Mexico: An Objective Comparison for Mid-Market OEMs.” Conducted by EMS-focused strategic consulting firm Charlie Barnhart & Associates, the study asked OEMs to rate their electronics-manufacturing experiences at other locales as compared to the United States or Canada.

The study focuses on the trend of electronics manufacturing services regionalization; changes in labor costs across the globe; and TCO, or total cost of outsourcing. It is available at no cost to individuals in the EMS industry. For more information, visit Charlie Barnhart & Associates' website.

 

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