According to a New York Times story on May 31, 2014, American trade with Mexico has increased nearly thirty percent just since 2010. Additionally, many companies who have in the past imported from Asian sources have recently turned to Mexico, causing an eleven percent increase in shipments to the US to the tune of $964.7 million in the last year alone, according to Furniture/Today research. In the race to compete for import business, Mexico has become the dark horse in the running, able to compete head to head with China with its competitive labor costs and added bonus of convenient logistics for US manufacturers. Logistically, products from Mexico are just across a land border, making over the road transport times measured in days or even hours rather than months at sea from Asian sources. The same goes for raw materials used in furniture production and upholstery and related sub-assemblies in Mexican plants that specialize in cut and sew, and overall assembly of furniture components.
Of course there is a flipside to all of this. As one supply chain executive for Crate and Barrel has said, “Nearshoring to Mexico can reduce transit time and transportation costs, but those savings can be offset by added costs for customs clearance and security inspections.” While this may be true in some cases, contract manufacturers such as MFI International employ their own (in-house) Corporate Mexican Customs broker who helps alleviate delays and costly glitches at the border.
For example: If a product is classified incorrectly, the client could incur penalties, or lose out on valuable NAFTA or other preferential treatment reductions. That’s why it’s important to choose a seasoned turnkey manufacturer who has extensive experience with U.S. and Mexican Customs authorities, and can ensure that your products receive the proper tariff classification and trade incentives.
If you want the “best of both worlds”, contract manufacturing in Mexico is an excellent option.
In this model, you are contractually dealing with a US company, getting a guaranteed price, the benefits of Mexico labor, lead times and logistics, but without the risks of customs clearance, cross border security and penalties.
MFI not only finesses these, it is also the first manufacturer of textile assemblies in Mexico with its own corporate Mexican Customs broker. Jorge Fierro, who coordinates all cross-border and Customs activities for the company with the Mexican government, explains: “It’s a huge benefit. It speeds up the entire process and makes it far more efficient because we control every aspect and do not need to rely on an outside Mexican broker.”
MFI is also certified partner with the United States Customs and Border Protection (CBP) agency in the Customs- Trade Partnership against Terrorism (C-TPAT) program. There are significant advantages as a C-TPAT certified company, some of the benefits are:
Client goods are completely secured from manufacturing plant to final destination
CBP provides priority inspections for its C-TPAT partners
Fewer CBP inspections mean fewer border delays
Access to the Free and Secure Trade (FAST) process that expedites many cross-border shipments
C-TPAT supply chain security training is available
The bottom line with Mexico contract manufacturing with a US Based company is: your product is manufactured at a fixed cost, delivered in the US with customs cleared, duties paid and securely shipped to the United States.
How many people do you know that have been affected by outsourcing jobs to other countries? The actual number may shock you. Long before “outsourcing” became a buzz word, the US had been doing it since the 1950’s. It started with small things, like electrical parts and manufacturing in the US back then was booming so no one really felt the loss when companies started purchasing small amounts of components made outside the US. No one ever dreamed that one day “Made in the USA” could ever be eradicated. Fast forward to today: manufacturing happens outside the U.S.
When Steve Jobs, founder of CEO of Apple, Inc. was still alive, President Barack Obama asked him what it would take to make iPhones here in the US instead of China. Jobs laughed and said “that would never happen.” To Steve Jobs and countless CEOs just like him, it boiled down to the bottom line. Since manufacturing as an industry has been long dead here, it would take countless hours/weeks/years (read: dollars) to build the plants, forge the materials needed and train workers to produce an iPhone quickly enough to keep up with technological advances. Apple’s profits would be horribly slashed, albeit temporarily, if they were to stop making iPhones in China and start making them here, and corporate greed wins that fight with a TKO.
So a handful of American companies have recently decided to take the risk and have their product made in the USA. In the case of textile assemblies, for example, they are finding of all things a labor shortage! There is not a young workforce being graduated to do cut & sew in the U.S., in fact many American workers that work doing textile assemblies (cutting and sewing), are now retiring. Labor costs in Mexico is an average of $3-$10 an hour, and in China some places are paying up to $12 per hour (though rarely). The US would have to pay similar wages to remain competitive, and we would have no shortage of people wanting to be trained for manufacturing jobs, labor intensive jobs like cut & sew operations.
Already statistics show that six million American jobs rely on trade with Mexico, proof that there is a way to fairly import and export without harming our own economy. Our import/export rate with China is significantly under-balanced, however, and has created a gaping deficit in our economy, an unhealthy dependence on Chinese imports. American companies would be wise to focus on partnering with manufacturers in Mexico who can balance the U.S./Mexico economy. This partnership would be profitable for both sides rather than building stand-alone manufacturing bases in the U.S., which in the textile industry would be very difficult to do.
2014 Could Be Banner Year For MFI and Other Mexican Manufacturers
Experts Forecast Steep Rise In Production In 2014
“For 2014, our model points to a sizable pickup in Mexico’s manufacturing sector; we now forecast growth of 3.9 percent.” Manufacturers Alliance for Productivity and Innovation (MAPI)
The news about Mexico’s manufacturing industry keeps improving -- and the reasons are even better news for MFI International and other companies with manufacturing facilities in Mexico, particularly U.S. manufacturers that have business deals with Mexican contract manufacturers.
The positive outlook for Mexico's manufacturing industry could also spur U.S. manufacturers that don't have business in Mexico to move some of their manufacturing operations to the United States' southern neighbor. Basically, the forecast for Mexican manufacturing in 2014 could prove that moving manufacturing operations to Mexico is a sound business strategy.
The numbers are very encouraging. MAPI forecast 2.7 percent growth in Mexican manufacturing in 2014 in its July, 24, 2013, report but it increased its growth forecast to 3.9 percent in its Dec. 16, 2013 report because of a steep rise in the forecast for motor vehicle production from 5.8 percent to 13.4 percent. Sizable increases in auto manufacturing are more important than sizable increases in manufacturing of most other products because the demand for many products increases when the production -- and sales -- of automobiles increases.
“Motor vehicle manufacturers will lead the growth tables, generating positive spillover effects in numerous intermediate industries, notably nonmetallic minerals, basic metals, and fabricated metals,” is how MAPI’s “Latin America Manufacturing Outlook, December 2013” report describes how automobile production impacts other industries.
The dramatic increase in the forecast for automobile production is the result of several auto investments in Mexico developed in recent months. A Nov. 18, 2013, article in The New York Times reported that Audi, Chrysler, Ford, General Motors, Honda, Mazda, Nissan, and Volkswagen were all expanding their Mexican operations.
MFI manufactures products in numerous industries including specialty seating for motor vehicles and aircraft, consumer goods, safety and technical products, medical devices, furniture, mattress components, and specialty apparel.
"MFI is very optimistic about 2014," said MFI President Lawrence Wollschlager. “We expect that positive news about large companies choosing Mexico will prove how beneficial, and safe the Mexican manufacturing climate is and spur many of our current medium- and large-sized clients to expand their operations in the near future".
The 2014 forecasts for automobile and overall manufacturing are also bolstered by several other factors that could also have a significant impact on long-term manufacturing forecasts.
One factor is the North American Free-Trade Agreement, which is better known as NAFTA. Trade between the 1994 pact’s signatories -- Mexico, the United States, and Canada -- “got off to a flying start” for a few years after 1994 but stalled because a 2001 decision by the World Trade Organization to admit China spurred many companies to move their manufacturing facilities from Mexico to China, according to a Jan. 4, 2014, article in The Economist.
In the last few years, though, China’s cost-of-labor advantage has dissipated and Mexico is now at advantage. This means that there will be more trade between the U.S. and Mexico.
A second related factor is the American economy. MAPI’s July report attributes Mexico’s weak manufacturing output in early, 2013 (down 1.6 percent during the first three months) in large part to weak U.S. demand, attributes the rebound in Mexican manufacturing later in the year (final 2013 forecast was a 1.7 percent increase) to a stronger U.S. economic performance, and forecasts that U.S. manufacturing in 2014 will be significantly better than it was in 2013.
“Leading indicators in the U.S. suggest positive momentum for Mexico’s manufacturers,“ the report says. “MAPI’s U.S. Industrial Outlook—a key input for our forecast for Mexican factories—predicts solid 3.1 percent manufacturing output growth in 2014.”
In short, the NAFTA pact and the anticipated strength of the U.S. economy should have a win-win impact on Mexican manufacturing in 2014. In addition, the MAPI report says that the Mexican government has recently enacted changes that have made the Mexican economy stronger and cited the government’s energy reform as a change that “will open up numerous possibilities for foreign companies, including U.S. manufacturers supplying the oil sector.”
Industry Experts Expect Boom To Continue Until At Least 2020
Detroit is often called “Motor City,” but calling Mexico “Motor Country” is becoming increasingly more accurate.
In 2012, Mexico had 579,000 of North America’s 1.5 million automobile industry jobs while the American Midwest, including Detroit, had roughly 450,000. Since 2004, the number of auto industry manufacturing jobs in Mexico has increased roughly 50 percent while the number of the same kind of jobs in the Midwest has decreased approximately 15 percent, according to a Brookings Institution report.
In 2012, more than 3 million automobiles were manufactured in Mexico, but that number is expected to increase dramatically within the next few years because Audi, BMW, Chrysler, Ford, General Motors, Honda, Mazda, Nissan, Toyota and Volkswagen all intend to build new plants or make substantial investments in their current plants, according to articles in The New York Times and Reuters.
“The Mexican auto industry is about to go on a $10 billion factory building spree, illustrating the nation's rising economic challenge to rivals from the United States to China,” according to the Reuters article.
More importantly, the Mexican auto manufacturing boom is part of an overall production increase that is projected to continue for the next several years. The Boston Consulting Group estimated in a 2013 report that Mexican manufacturing exports will increase up to $60 billion annually by 2018.
The boom should help companies with manufacturing plants in Mexico like MFI that manufacture products designed by other companies. MFI is a contract manufacturer for company in numerous industries, including electronics, medical devices and textiles.
In addition, Ciudad Juarez, the city on the Mexican side of the Mexico-U.S. border where the MFI plant is located, has become a manufacturing hub for the automobile, electronics and medical devices industries. The city’s auto manufacturers include Delphi, Johnson Controls and Lear. Its electronics manufacturers include Electrolux, Flextronics, Foxconn and Lexmark. Its medical device companies include Cardinal Health, GE, and Johnson and Johnson.
The fact that large companies are manufacturing products in Ciudad Juarez should encourage medium-sized companies to move to the city as well, said MFI's President Lawrence Wollschlager, who noted that MFI has been manufacturing products for original equipment manufacturers (OEMs), public companies, and other medium- and large-scale production companies since 1982.
“Ciudad Juarez has the specialized workforce to staff leading-edge companies,” said Wollschlager. “Juarez is known for the high-quality standards in its production facilities, the efficiency and productivity of its workforce, and its easy access to the U.S. MFI’s growth and success is due in large part to Ciudad Juarez’s outstanding workforce.”
The Boston Consulting Group report cited Mexico’s low labor and manufacturing costs in comparison to China and several other nations as a crucial reason for the projected export boom. It also predicted that production in several industries, including the automobile, appliances, computers, electronics, and machinery industries, could increase by up to 19 percent by 2017 and the increased production could create up to 900,000 manufacturing jobs annually.
The manufacturing boom is about way more than low costs, Carlos Ghosn, Nissan’s CEO, told Reuters as the company opened a new $2 billion plant that will increase its annual production from 683,000 automobiles in 2012 to 1 million automobiles in 2016.
"It's not only about cost, it's also about quality and it's about responsiveness -- capacity to respond to variation of the market very quickly," Ghosn said. "Mexico is becoming the export hub for the Americas -- not only North America but also South America."
Mexico’s manufacturing and export boom is also abetted by the nation’s “far greater access to major global auto markets,” according to the Brookings report. Mexico has trade pacts with 44 nations, while the United States only has deals with 20 nations. This means that Mexican exporters often pay none or very low tariffs.
Does your company want to move its manufacturing plant to Mexico?
Are you confident that your company can manufacture its products itself in Mexico rather than outsource the production to an established manufacturer in Mexico?
If the answers to both of these questions is ‘yes,’ you might think that your company doesn’t need the assistance of a Mexican manufacturing company. You might think about it twice, because you also might need the startup and managment services of a Mexican manufacturer. These services are called shelter services.
Mexico has a high-quality, competitive-cost workforce so moving to Mexico is a good decision. In fact, more American manufacturers have been moving to Mexico in recent years because they’re becoming more interested in higher-value products, the wage gap between Mexico and China is shrinking, Mexican manufacturers have faster production turnaround times than Asian manufacturers, and Mexican plants have higher workplace safety and labor standards than Asian plants.
Moving to Mexico, also requires knowing and understanding Mexico so well that your company has to be skilled in managing a Mexican operation. That means being able to navigate the nation’s import, export, tax, regulatory and environmental laws as well as the zoning and administrative laws of the municipality where you want to start your operation.
Fortunately, MFI International is the answer to your Mexico project.
MFI has been a contract manufacturer for American companies since 1982 with operations in Ciudad Juarez, which is adjacent to El Paso, Texas. The company has succeeded in a multitude of industries because its clients include companies in the consumer products, electronics, furniture, mattress, medical, pet products, and specialty seating industries.
While handling the contract manufacturing for companies in all of these industries, MFI has also become an expert and leading provider of shelter services in the region. These include:
* Acquiring start-up permits
* Saving money on customs duties and taxes
* Complying with environmental laws
* Purchasing supplies and consumables
* Handling administrative and legal paperwork
* Handling many fiscal and accounting responsibilities
*Taking care of all cross border logistics
Contacting MFI to find out more about the company’s shelter services is easy.
If you’re a company that is looking to open an operation in Mexico and wants to have full control of the quality and quantity of its own production, hiring a company like MFI to handle your shelter services is a very smart investment.
Hiring an expert in shelter services minimizes the risk that non-Mexican foreign companies take when they set up a facility in Mexico. By taking advantage of the expertise of shelter providers, there is no reason why companies of any size and scope can’t follow the example of global industry leaders and open an operation in Mexico.
Some organizations that have studied the potential impact of the Affordable Care Act have concluded that it will negatively affect the American business community.
Other organizations have concluded the 2010 law that was intended to address the problem of roughly 50 million Americans not having health insurance will spur the creation of small businesses by employees who now fear they will lose their health insurance if they leave their jobs.
The effect of the law, which has become commonly known as Obamacare, or the new health care reform, is uncertain, but one thing is certain, many American business executives are very worried. In fact, most members of the Small Business and Entrepreneurship Council want the law repealed because they think it will increase health insurance costs, according to Forbes magazine.
"For small business owners--and most other Americans--Obamacare is the devil we don't want to know," wrote Jim Blasingame of Forbes.
The new health care reform gives American manufacturers an excellent opportunity to explore the Mexican option.
American manufacturers that utilize Mexican Manufacturing are saving money.
"Our clients typically experience cost savings equivalent to $1 million per year every 50 employees when they move their operation from the U.S. to Mexico," said Fatih Akben, MFI's Director of New Business Development.
The statistic about how much manufacturers with 50 employees save is important because the new health care reform mandates that businesses with at least 50 full-time employees must pay fines if they don't provide health insurance for those employees. Many small business executives have said publicly that they have already reduced their full-time staff in an effort to avoid those fines although the Affordable Care Act won't even go into effect for employers until 2015 (it goes into effect for individuals in 2014).
Reducing the number of employees can negatively affect production, but American companies can maintain their level of production by hiring companies like MFI International MFG., which has been a contract manufacturer for American companies in numerous industries, including the textiles industry, since 1982. "Nearshoring" with MFI has saved American manufacturers a lot of money and doesn't slow down their production schedule because MFI's manufacturing plants in Mexico are located in Ciudad Juarez, which is on the American border and is so close to major transportation routes that the expense of bringing the product to market is very reasonable.
The Affordable Care Act doesn't have provisions that explicitly affect one industry more than another, although industries with a larger share of companies with more than 50 employees will be affected more by the law.
Objective analysis of the impact of the Affordable Care Act are hard to find, but Politico.com gives it a crack in an article entitled "How the new health care reform affects businesses -- large and small." The points the article makes include:
* Beginning in 2015, all employers with "the equivalent of 50 or more full-time workers" who don't offer health insurance must pay a $2,000 per worker fine annually "not counting the first 30" (employers with 100 employees will pay a $140,000 annual fine -- 70 workers times $2,000).
* Very few small businesses are using the tax credits that are supposed to help small business pay for health insurance because the credits are "underwhelming," according to an official from the National Federation of Independent Business.
* Many employers have praised the Obama administration for postponing the requirements for businesses to report the details of their health insurance policies to the U.S. government.
Textiles companies have several major problems, including a shortage of skilled sewers.
MFI International has the solutions, including a highly-skilled workforce.
According to a Sept. 30, 2013, article in The New York Times entitled “A Wave of Sewing Jobs as Orders Pile Up at U.S. Factories,” textiles companies have become dissatisfied with the quality of products made in Asia, the safety record of factories in Asia, and the reliability of the factories’ production schedules.
The article reports that the American textiles industry has a huge opportunity to regain the business it has lost during the past 20 years, but it has had trouble taking advantage of the opportunity because it has a shortage of skilled workers. Since 1990, the American textile industry workforce has declined by 77 percent and the industry is now “scrambling to find workers to fill the specialized jobs that have not been taken over by machines.”
Curiously, the article doesn’t mention the Mexican textile industry at all. It should have because Mexico’s textiles industry is “reclaiming a growing proportion of the US market as it benefits from an increasing focus on higher-value products and greater diversification,” according to BanderasNews.
The Mexican textile industry, including MFI International, has become increasingly successful because its highly-skilled workers are making high-quality products expeditiously and reliably at safe factories. With operations on the Mexican side of the El Paso, Texas-Juarez, Mexico, border, MFI has been a reliable contract manufacturer for American companies for more than 30 years, turning around orders at competitive costs and providing many other benefits for its clients.
MFI’s workmanship is superb because its highly-skilled workers understand that high-quality manufacturing requires detailed attention to a product’s design and relationships with customers. MFIs textile operation in Mexico includes:
* Sewing and assembly
* Inspection and cutting
* Embroidery and quilting
* Engineering and sourcing
* Packaging and fulfillment
* Shipping and distribution
During the early part of the 21st century, the textiles industry in China and other Asian nations boomed as companies sought cheap labor. In the last few years, though, nearshoring -- moving manufacturing and other business operations as close as possible to the huge American market -- has become more prevalent.
"A shift to onshore or nearshore manufacturing operations for producing local demand in nearby low-cost countries, such as Mexico for the United States, appears to be here to stay as manufacturers look for the next level of competitive advantage," John Ferreira of supply chain consulting firm Accenture told Inbound Logistics magazine. "In the case of Mexico and Latin America, these moves serve a dual purpose: the ability to accommodate growing markets near customers there, as well as being nearshore to the large U.S.-based demand."
"Mexico's Superior Safety and Labor Records Drive Productivity and Profits to Higher Levels"
The news about the April, 2013, tragedy in Bangladesh received worldwide attention. And it should have because 1,129 Bangladeshi garment workers died when the building they were working in collapsed.
What’s far less known is that textile plants in several Asian nations have had tragedies as well as safety and labor problems, according to reports by Minnesota Public Radio and The New York Times.
Mexican textile plants, though, have superior safety and labor relations records. They are taking the right approach because there is a correlation between safe workplaces that honor promises to pay workers fairly and long-term financial success, according to Drusilla Brown, who represents the International Labor Organization in its efforts to set labor standards at manufacturing plants around the world.
Brown said that companies trying to cut costs by paying workers low wages and forcing them to work long hours are making a mistake in the long run.
"(The International Labor Organization) has found a lot of evidence that better working conditions actually correlate with higher productivity and higher profits," she said.
According to a U.S. Department of Commerce chart, China, Vietnam, Indonesia, Bangladesh, India, and Cambodia are first, second, third, fourth, sixth and eighth in apparel exports to the U.S. Sandwiched in between those nations in Mexico, which is fifth but was first in 2000 before China became a member of the World Trade Organization in 2001 and then increased its exploitation of cheap labor in the textiles industry. Many Asian nations became more interested in the industry when they saw China’s success.
The Mexican textiles industry, though, is making a comeback because of its superior safety and labor record, according to Lawrence Wollschlager, the President and C.O.O. of contract manufacturer, MFI International.
“We've never had a fire, serious accident, or labor strike during the 30 years that MFI has manufactured textiles products in numerous industries for American companies in northern Mexico,” said Wollschlager. “MFI ensures that our workers are completely safe and adheres to Mexico’s safety and labor laws, which are far stricter than the laws in Asia and Bangladesh.”
Mexico’s safety standards include a long list of requirements for manufacturing plants, including emergency exits and stairs, fire-detection and fire-extinguishing safety equipment, mandatory evacuation routes, and safe places for workers. MFI also requires employees to report malfunctions in electrical equipment that could lead to accidents and frequently practices emergency and fire evacuation procedures.
In contrast, an investigation by The New York Times concluded that safety inspections of textiles plants in China, Indonesia, Pakistan and Vietnam are so flawed that “thousands of factories in those countries will no doubt continue to be reviewed through the perfunctory “check the box” audits.”
MFI has proven since 1982 that the International Labor Organization’s conclusion that better working conditions correlate with higher productivity and profits is correct. The company has achieved these objectives by implementing the most rigorous labor and safety standards in the textiles industry, said Wollschlager. Consequently, he added, production at MFI plants has been 100 percent reliable.
Wollschlager noted that MFI offers its American partners numerous other benefits, including high-quality products, costs that are competitive with the costs of the less reliable Asian textiles plants, a location that is so close to the United States that MFI’s lead-time can range from one to six weeks, in a low-risk and ethical business environment.
"Companies Appreciate Mexico's High-Quality Workforce, Logistics Advantages & Cost Savings"
Marty McFly time-traveled from 1985 to 1955 in the movie “Back to the Future.”
This year, many companies are sort of time-traveling to 2000 -- the year they began leaving their operations in Mexico -- because they’re returning to Mexico. Abandoning Asia, they’re “nearshoring” -- moving some business operations closer to their American market, according to Inbound Logistics magazine’s analysis of nearshoring to Latin America.
The nearshored operations include specialty apparel manufacturers that utilize MFI International as their contract manufacturer in Mexico, as well as other manufacturing in Mexico operations.
Many of these operations moved to China about a decade ago to save money. They’re returning in 2013 to a different Mexico.
This Mexico has a “well-educated bilingual workforce,” according to Inbound Logistics. In this Mexico, more Mexicans -- almost 100,000 -- earn engineering degrees annually than Canadians and Germans. In this Mexico, managers are so skilled that 80 percent of Mexican plant managers are Mexican nationals.
Nearshoring to become closer to the American market has become more popular in recent years as China’s wages and fuel costs have risen. By 2015, manufacturing in China will cost as much as manufacturing in the U.S., according to Entrepreneur magazine.
Nearshoring to Mexico has become so appealing that senior manufacturing executives by a 37 to 5 percent margin prefer Mexico to Central and South America as their most attractive region for businesses that need to be close to the U.S., according to AlixPartners 2013 Nearshoring Survey.
Surveyed executives cited the following expected advantages of nearshoring, which is also sometimes referred to as nearsourcing, according to the survey:
Lower freight costs -- 75 percent
Improved speed to market / lower inventory (in-transit) costs -- 71 percent
Fewer supply disruptions -- 35 percent
Time zone advantages (easier management coordination, etc.) -- 31 percent
Shrinking wage gap – 22 percent
Better quality control – 21 percent
Lower input costs (e.g. natural gas, raw materials) – 17 percent
Improved intellectual property security – 14 percent
Other – 8 percent
Nearshoring Trend Helps MFI
MFI has manufactured goods for American companies for more than 30 years at its plant in Ciudad Juarez, which is on the Mexican side of the El Paso, Texas-Mexico border.
The goods include electronics, furniture, mattress soft goods (mattress covers), medical equipment, pet products, and specialty seats. The nearshoring trend could be particularly beneficial to MFI’s efforts to manufacture specialty apparel.
Sourcing Journal reported that a retailer that manufactured its products in China shifted to Latin America because its factories “have a better preproduction structure and discipline” and are better at joint planning. The products manufactured at recently nearshored Latin American plants include denim, intimate apparel, khakis, t-shirts, work pants, and work shirts.
The industry leaders interviewed by Sourcing Journal said that apparel manufactured in Latin America takes three to five weeks to get to the U.S. market, while it’s “impossible” to bring apparel manufactured in Asia to the same market in less than 90 days. In addition, transportation costs are “becoming prohibitive,” according to Inbound Logistics.
Apparel manufacturers that hire MFI also have the advantage of MFI’s managerial services, including finding talented employees, keeping financial records, completing administrative and legal paperwork, purchasing supplies, and making sure that all local laws are complied with.
Should your company nearshore?
Entrepreneur recommends that prospective nearshorers calculate moving costs, analyze delivery needs, figure out the potential risks of overseas vendors, and study the competition.
IndustryWeek recommends considering labor issues, supply chains, infrastructure, workforce and intellectual property protection.
Did you know that a product that says it is “Made in Mexico” is actually 40 percent manufactured in the United States?
The percentage of an imported product from Mexico that is essentially manufactured in the U.S. has increased in recent years because partnerships by Mexican and American companies are increasing, according to research by The Washington Post. Oftentimes, products are completed in Mexico, but they are manufactured on both sides of the border because American companies are increasingly confident that Mexicans have the skills to manufacture high-quality products.
“Mexico is fundamentally a sophisticated manufacturing economy that is growing at a very acceptable rate when compared to other emerging market economies,” wrote Andres Rozental, a senior fellow at the Brookings Institution, which is ranked as the world’s No. 1 think tank.
Years ago, many American companies were building manufacturing plants in China, but Rozental wrote that many of these companies are relocating to Mexico because of its increasingly skilled labor, its improving infrastructure, its economic and political stability, its proximity to the U.S. and its “ability to provide just-in-time sourcing and a relatively transparent regulatory framework in which to do business.”
Mexican-American partnerships are often very successful. The relationship between Neenah, Wis.-based Dormeo Octaspring and MFI International, which has manufacturing facilities on the Mexican side of the Ciudad Juárez, Mexico-El Paso Texas, border, is an example. Dormeo designs and manufactures high-quality mattresses in the U.S., and contract manufacturer MFI produces Dormeo’s soft goods (mattress covers) in Mexico and ships them to the U.S.
“MFI has been a great partner for us as we have started up production in the U.S.,” said Jon Stowe, Dormeo Octaspring’s senior vice president for North America. “MFI quickly turned around orders and produced a high-quality product for us.”
Mexico Has Many Advantages
Rozental wrote that Mexican maquiladoras are gaining the “upper hand” on Chinese factories because of their proximity to the U.S.
In fact, only 4 percent of a product that says it is “Made in China” is manufactured in the U.S., according toThe Washington Post’s Sept. 9, 2012 article.
Years ago, American companies often used Mexican labor for farm work, but they are now using the labor for “the high-skill manufacturing necessary to make airplanes and satellites,” according to The Washington Post.
In a March 11, 2013, speech, U.S. Ambassador to Mexico Earl Wayne pointed out that Mexico is the fourth-largest exporter of automobiles in the world, the No. 1 producer of flat-screen televisions and refrigerators, and the No. 4 provider of information technology services.
Wayne noted the following at his March 11 speech and his Nov. 13, 2012, presentation at the Mexican Business Summit.
* Almost 100,000 Mexicans earn degrees in Engineering annually. This is more than Canada and Germany.
* American companies, particularly small- and medium-sized manufacturers, can benefit from “just-in-time” manufacturing. The companies’ proximity to Mexico allows them to move the raw materials needed for manufacturing in small quantities, reduces the cost of warehousing these supplies, and allows them to change their production process regularly.
* The manufactured products can be delivered more expeditiously and more inexpensively from Mexico than other nations.
* American and Mexican manufacturing is becoming so “increasingly integrated” that many companies are moving their manufacturing plants from Asia to Mexico.
“U.S. companies are choosing Mexico over other markets for manufacturing and assembly,” said Wayne.
Many Companies Moving To Mexico
MFI International Mfg., which has helped more than 100 companies establish successful manufacturing operations in Mexico, through contract manufacturing programs and shelter services has a list of why manufacturing in Mexico is cost-effective.
The reasons include saving on tariffs because of free trade agreements, no income and value-added taxes for manufacturers, technical training support, Mexico’s skilled and affordable workforce, and how expeditiously products are manufactured.
Non-Mexican companies that outsource some of their manufacturing operations in Mexico include companies in dozens of industries, including appliances, electronics, furniture, medical devices, metal, petrochemical, plastics, pharmaceuticals, software design and textiles. In addition, most of the world’s largest automobile companies have manufacturing facilities in Mexico and, The Washington Post reports that Mexico became “the No. 1 investment destination for the aerospace industry” in 2012.