There are many advantages to use offshore manufacturing and it is a tactic that more and more businesses are using to dramatically reduce their costs. Often, when businesses are small and just starting out, they don’t have access to the necessary funds to justify moving their production off-shore. Therefore, small businesses, who are initially limited in their scope, are able to achieve huge growth in a short space of time by outsourcing once they are able to.
There are many countries around the world which now host manufacturing facilities for some of the largest global corporations in existence. Being a neighbor of the United States definitely doesn’t hurt Mexico’s image as a prime manufacturing hub. There are a number of excellent reasons to consider moving your manufacturing operations to Mexico, here are five of them.
The Cost Advantage
Perhaps the most important consideration for businesses when selecting a manufacturing base is the cost. Some areas are much cheaper to do business in than others. A business looking to move its manufacturing is usually a business that is also looking to grow. The money you save on manufacturing can be significant enough to open up new possibilities in this regard. It could end up funding new physical locations or an upgrade of the rest of your distribution network.
Manufacturing Economies
The economics of manufacturing work in a way that favors bigger businesses who can afford to place large orders. As an almost infallible rule, the more of something you have manufactured, the cheaper your cost per unit will be. This means that small businesses end up paying comparatively high costs for every unit they have manufactured. Therefore, although moving manufacturing operations overseas can be a lengthy and expensive process, it is often a worthwhile investment.
Workers Rights
There are a variety of factors that all contribute to what makes Mexico an excellent manufacturing base. Many people incorrectly assume that countries that are used as overseas manufacturing bases are being exploited by big businesses. Clearly, there are cases where this very sadly does occur in the world, but in the case of Mexico, a country which has historically been more left wing than the United States in its politics, workers have excellent protections under the law.
Workforce Demographics
Another attractive aspect of the Mexican workforce is its diverse makeup. The median age in Mexico is considerably lower than the United States – 26 being the median in Mexico against the US’s 37 – and Mexico’s young and vibrant workforce is cheap, but also good quality. Mexico is a country that has experienced rapid growth in recent decades. It is also a country with an increasingly well-educated workforce. The Mexican government has instituted the Immex program, which gives Mexican companies tax breaks for carrying out “temporary” imports of foreign products for part of the production process. They, therefore, have even more incentive to work with you on a short and long-term basis.
A Diversified Economy
The North American Free Trade Agreement (NAFTA) has been controversial, Donald Trump has made “renegotiating” the deal a priority, although little has happened. Regardless of where you stand of NAFTA, politically and economically, the Mexican economy has undeniably grown and diversified since it was implemented.
For businesses who are looking to the future, moving manufacturing operations to Mexico could leave you with more money to invest in other areas, while also giving you access to a growing marketplace.
