Miniscule production costs, high output, and an abundance of workers: The benefits of manufacturing in China once seemed to be endless. Now, that’s no longer the case.
Prior to COVID-19, companies had already been steadily moving their manufacturing out of China in favor of the benefits of manufacturing in Mexico. Today, we’re seeing manufacturers relocate at much faster rates for a number of reasons, some of the most notable include the rising labor rates, ongoing trade war, lingering COVID-19 supply chain disruptions, and fears of being associated with companies using forced labor.
So, why are so many manufacturers choosing to relocate to Mexico? In addition to having a more stable political outlook and trade relationship with the United States, Mexico has key advantages over China that help manufacturers start ramping up and improving their production almost immediately.
The Instant Advantages of Moving to Mexico
Labor costs: While cheap labor was once the biggest draw of China manufacturing, average wages have been increasing rapidly and pushing companies to look elsewhere for low labor costs. Mexico has emerged as a favorite location among international companies as manufacturing wages remain highly competitive, beating out those of other Latin American manufacturing hotspots, like Brazil.
Shipping costs: Manufacturers in Mexico can also import raw materials and export products faster, and at lower costs. Under the IMMEX program, foreign manufacturers are exempt from the 16% value-added tax that is usually placed on imported materials, goods, and equipment.
Plus, reaching consumer markets in North America doesn’t require overseas shipping. The proximity between Mexico and the U.S. is already enough to significantly lower shipping costs, but Mexico has the added advantage of a robust ground transportation system, with many of the modern freeway systems stretching deep into the United States.
SHIPPING & SUPPLY CHAIN LOGISTICS
While generally more expensive than Mexico, China does offer low-cost opportunities for manufacturing. However, supply chains in China are not nearly as well developed. Mexico’s IMMEX (maquiladora) program, which was established in 1964 and, as a result of decades of foreign investment, the country is now home to mature, well-connected supply chains.
Manufacturers in Mexico don’t just get immediate access to stronger supply chains, they get greater supply chain visibility thanks to the USMCA, which includes key regulations on the origins of specific products and encourages transparency within supply networks.
PROXIMITY & TIME ZONES
One of the most apparent differences you’re likely to see after moving your manufacturing to Mexico is the competitive advantages of the country’s location and timezones. Able to ship products to North American consumers within a matter of days, manufacturers can immediately meet the rising demand for lightning-speed delivery and improve customer satisfaction.
The production of those goods benefits, too. Rather than needing to adjust to timezones on the other side of the globe, executives can oversee operations within usual business hours, easily make on-site visits, and stay more directly involved in the actual manufacturing process.
Moving your manufacturing operations from China to Mexico doesn’t mean sacrificing product quality. In fact, it often means the opposite. Labor in Mexico isn’t just highly available but also highly skilled. Since the mid-1900s, the country has produced a wide range of sophisticated products, and its production capabilities have only improved since then.
In addition to the workforce’s depth of experience, Mexico’s government also invests heavily in education, with hundreds of thousands of engineers graduating from universities and trade schools each year.
How to Make the Move
From planning your relocation strategy to actually getting your operations up and running, moving your manufacturing from China to Mexico can feel daunting. We’re here to make it easy. Our shelter services help you find manufacturing success in Mexico fast, at a low cost, and without any risk involved in making the move alone.
Contact NAPS today to learn more about how you can experience the full value of manufacturing in Mexico with NAPS.