Contract Manufacturing in Mexico

Dec 2020

8 BIG Advantages of Contract Manufacturing in Mexico

Contract Manufacturing in Mexico
Contract Manufacturing in Mexico

USA Trade with Mexico is Booming

International observers have often predicted Mexico’s trade is just about to take off. Often those predictions fell short.

Yet, in early 2020 Forbes reported a Trade milestone that surprised the world. Their article says Mexico has become the number one U.S. trade partner for the first time. 

So how did Mexico achieve such a breakthrough? 

The Trump Administration used the Chinese trade deficit to gain favor with the American public. As a result of China’s aggressive negotiations, there was a sharp decline in US imports from China.

In contrast, Mexico was able to leverage its past success. The USMCA trade agreement was successfully put into place in 2020.

Mexico is now well-positioned to be the most dominant trading partner with the US. 

USA Trade with Mexico is Booming

International observers have often predicted Mexico’s trade is just about to take off. Often those predictions fell short.

Yet, in early 2020 Forbes reported a Trade milestone that surprised the world. Their article says Mexico has become the number one U.S. trade partner for the first time. 

So how did Mexico achieve such a breakthrough? 

The Trump Administration used the Chinese trade deficit to gain favor with the American public. As a result of China’s aggressive negotiations, there was a sharp decline in US imports from China.

In contrast, Mexico was able to leverage its past success. The USMCA trade agreement was successfully put into place in 2020.

Mexico is now well-positioned to be the most dominant trading partner with the US. 

8 Benefits of Contract Manufacturing in Mexico

Mexico is getting proper recognition that’s long overdue. The top 8 reasons include:

  1. A higher level of profit due to lower labor costs 
  2. Simplified supply chain management
  3. Elevated trust levels due to transparency
  4. Competitive products due to unique design features
  5. Best Manufacturing practices and good trade standards due to long-standing trade agreements
  6. Market share protection due to enforced IP security policies
  7. Improved collaboration with a nearshore solution
  8. Green business partnerships because of better environmental regulations

Keep reading to learn more about each reason supporting producing products in Mexico. 

1. Low operating costs rates reduce your spend by 50%

When deciding where to outsource, labor represents the bulk of cost savings. So for years, Mexico has attracted foreign businesses because of competitive hourly rates. But what’s remarkable is, Mexican wages have stayed low. At the same time, quality standards and complexity have increased.

Another key element to labor is understanding the frequency of wage rates rise. In Mexico, labor costs have been stable for over a decade. 50% cost savings are achievable when compared to American markets. During the same time, China’s labor rates have steadily risen over the past 10 years. Experts expect this trend to continue.

2. Improved Supply Chain Management with Short Delivery Times

Many of the manufacturing centers exist in northern states. These act as transportation hubs. Freight Forwarders offer truck or train options to your destination city in the U.S.

Consider a simple case study. Sending a full load from Chihuahua, Mexico, to Houston, TX, costs only $1,800. Shipping time will be less than one week to ship a 40-foot container. A similar box from Shanghai, China, can cost $4,300 and take up to five weeks.

3. Trust Levels are at an All-Time High with Mexico 

Mexico is embracing a culture of accountability and transparency. Mexican officials have announced this as an ongoing strategy. Hence, they have avoided trade and political tiffs with the US. Many experts see this as a viable method for promoting fair trade.

4. Gain Market Share with Distinctive Products

Competing Amazon sellers that use Chinese suppliers learn how Asian markets are hyper-competitive. This behavior often leads to feature copying during the product development phase. Having a copycat product design style only stops by switching production to alternate locations.

This is another important factor when evaluating Mexico. New design concepts can give a product a distinct competitive advantage. 

5. Increased ROI due to Global Trade Agreements

U.S. and China got into a trade war, and Mexico won. 

Mexico is rich in trade agreements. It participates in 11 such international contracts spanning 43 countries, including the USMCA. As a consequence, tariffs are a nonfactor. Zero duty charges and no tariff taxes result in higher returns on investment. 

6. Enforced Regulations Safeguard Intellectual Property

Mexico participates in 14 international agreements to keep Intellectual Property safe. Meanwhile, 40% of online goods in China are counterfeit.

So if you’re an Amazon, eBay, or Etsy seller and have considered sourcing your goods from China, know the risks. Many top sellers discover ugly consequences. Imagine learning “knockoff” merchandise is overtaking your original product. I.P. theft and patent infringement are other landmines. For this reason alone, businesses switch manufacturing partners based in Mexico. 

7. Nearshore Manufacturing & Its Proven Advantages

Expanding operations or manufacturing to a nearby country is nearshore manufacturing. By definition, this usually means sharing a border. Offshore manufacturing is when a company outsources to a distant foreign land.

Nearshoring, in a connected country like Mexico, is a cost-effective way to manufacture. Closer distribution is an obvious benefit. Other ones are important too, like cultural commonalities and shared time zones. Visiting factories more often is another natural bonus. 

8. Environmental Regulations Spur Green Trade Partnerships

Mexico has a commitment to implementing GDP growth while minimizing climate change. In fact, this has become a core national economic development strategy. 

The government’s conservation laws and sustainability initiatives are also attracting new trade deals. These are modern global trade factors for companies wanting green-minded partners. 

Conclusion: Mexico is the #1 Trade Partner with the USA

The result of all 8 of these facts has made Mexico our critical trade partner. But of course, contract manufacturing in Mexico is different than in the United States. There is a language barrier. Additionally, there are some cultural differences. For such reasons, it’s important to partner with a representative understanding all differences.

WITREK acts as your local eyes and ears to help build better contacts.

When urgent issues arise, you’ll appreciate having strong relationships with factory representatives. We will teach you what to expect during every phase. We ensure your expectations are always met.

Since COVID-19, it has become essential to have feet-on-the-street wherever your producing. As such, we repeat our advice here. Ensure operational success by having experienced agents with a network of local resources. 

Do you agree about our list supporting contract manufacturing in Mexico? Share your opinion about why (or why not!) in the comments!

8 Benefits of Contract Manufacturing in Mexico

Mexico is getting proper recognition that’s long overdue. The top 8 reasons include:

  1. A higher level of profit due to lower labor costs 
  2. Simplified supply chain management
  3. Elevated trust levels due to transparency
  4. Competitive products due to unique design features
  5. Best Manufacturing practices and good trade standards due to long-standing trade agreements
  6. Market share protection due to enforced IP security policies
  7. Improved collaboration with a nearshore solution
  8. Green business partnerships because of better environmental regulations

Keep reading to learn more about each reason supporting producing products in Mexico. 

1. Low operating costs rates reduce your spend by 50%

When deciding where to outsource, labor represents the bulk of cost savings. So for years, Mexico has attracted foreign businesses because of competitive hourly rates. But what’s remarkable is, Mexican wages have stayed low. At the same time, quality standards and complexity have increased.

Another key element to labor is understanding the frequency of wage rates rise. In Mexico, labor costs have been stable for over a decade. 50% cost savings are achievable when compared to American markets. During the same time, China’s labor rates have steadily risen over the past 10 years. Experts expect this trend to continue.

2. Improved Supply Chain Management with Short Delivery Times

Many of the manufacturing centers exist in northern states. These act as transportation hubs. Freight Forwarders offer truck or train options to your destination city in the U.S.

Consider a simple case study. Sending a full load from Chihuahua, Mexico, to Houston, TX, costs only $1,800. Shipping time will be less than one week to ship a 40-foot container. A similar box from Shanghai, China, can cost $4,300 and take up to five weeks.

3. Trust Levels are at an All-Time High with Mexico 

Mexico is embracing a culture of accountability and transparency. Mexican officials have announced this as an ongoing strategy. Hence, they have avoided trade and political tiffs with the US. Many experts see this as a viable method for promoting fair trade.

4. Gain Market Share with Distinctive Products

Competing Amazon sellers that use Chinese suppliers learn how Asian markets are hyper-competitive. This behavior often leads to feature copying during the product development phase. Having a copycat product design style only stops by switching production to alternate locations.

This is another important factor when evaluating Mexico. New design concepts can give a product a distinct competitive advantage. 

5. Increased ROI due to Global Trade Agreements

U.S. and China got into a trade war, and Mexico won. 

Mexico is rich in trade agreements. It participates in 11 such international contracts spanning 43 countries, including the USMCA. As a consequence, tariffs are a nonfactor. Zero duty charges and no tariff taxes result in higher returns on investment. 

6. Enforced Regulations Safeguard Intellectual Property

Mexico participates in 14 international agreements to keep Intellectual Property safe. Meanwhile, 40% of online goods in China are counterfeit.

So if you’re an Amazon, eBay, or Etsy seller and have considered sourcing your goods from China, know the risks. Many top sellers discover ugly consequences. Imagine learning “knockoff” merchandise is overtaking your original product. I.P. theft and patent infringement are other landmines. For this reason alone, businesses switch manufacturing partners based in Mexico. 

7. Nearshore Manufacturing & Its Proven Advantages

Expanding operations or manufacturing to a nearby country is nearshore manufacturing. By definition, this usually means sharing a border. Offshore manufacturing is when a company outsources to a distant foreign land.

Nearshoring, in a connected country like Mexico, is a cost-effective way to manufacture. Closer distribution is an obvious benefit. Other ones are important too, like cultural commonalities and shared time zones. Visiting factories more often is another natural bonus. 

8. Environmental Regulations Spur Green Trade Partnerships

Mexico has a commitment to implementing GDP growth while minimizing climate change. In fact, this has become a core national economic development strategy. 

The government’s conservation laws and sustainability initiatives are also attracting new trade deals. These are modern global trade factors for companies wanting green-minded partners. 

Conclusion: Mexico is the #1 Trade Partner with the USA

The result of all 8 of these facts has made Mexico our critical trade partner. But of course, contract manufacturing in Mexico is different than in the United States. There is a language barrier. Additionally, there are some cultural differences. For such reasons, it’s important to partner with a representative understanding all differences.

WITREK acts as your local eyes and ears to help build better contacts.

When urgent issues arise, you’ll appreciate having strong relationships with factory representatives. We will teach you what to expect during every phase. We ensure your expectations are always met.

Since COVID-19, it has become essential to have feet-on-the-street wherever your producing. As such, we repeat our advice here. Ensure operational success by having experienced agents with a network of local resources. 

Do you agree about our list supporting contract manufacturing in Mexico? Share your opinion about why (or why not!) in the comments!

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