If you want to manufacture your product in a low-cost labor environment, and the target market is North, Central, or South America, or Western Europe, in most cases you only have two viable options that each have their own respective pro’s and con’s:
One of the main reasons that thousands of companies have already moved their manufacturing to Mexico is quality! A higher level of quality is achievable in Mexico compared to manufacturing in China /Asia mainly due to Mexico’s physical proximity to the United States:
Easy oversight of the operation – it is infinitely easier to oversee your operation in Mexico compared to manufacturing in China / Asia or other low-cost locations due to Mexico’s physical proximity to the United States.
Low lead times – if your product is manufactured in China / Asia and there is a quality issue – first off you are probably not even going to know about it for at least a month and then once you do find out that you have a problem, you are going to have about a months worth of rejected inventory to deal with.
There are many additional reasons why Mexico outperforms China / Asia in the quality department that we don’t have room to elaborate on here. But don’t simply take our word for it, do your own research about some of China / Asia’s recent quality problems and decide for yourself.
The days of companies lining up to send their manufacturing to China are over. Manufacturing in China is costing more with every passing day and as a result, many top companies are reevaluating their global manufacturing strategies. We cannot change what is happening over there in China, however what we can do is offer an economically viable alternative right next door to the US market.
Reduced shipping costs – being that we are located right next to the US-Mexico border, shipping is essentially the same as if you were shipping from a US location (i.e. negligible extra cost).
Reduced inventory carrying costs – there is a substantial inventory carrying cost associated with manufacturing in China as there is at least a three-week lead time in which your products are just sitting on a boat in the middle of the ocean.
There is no other place in the entire world that you can simultaneously access low- cost labor and still take advantage of the benefits of manufacturing your product right next door to the intended market. Not convinced – just look at a map!
Economic & Political Stability
When outsourcing your manufacturing operation to an offshore location, you should pay very close attention to the stability of the relationship between the country you are outsourcing to and the country you are importing to.
If the country you are outsourcing your manufacturing to shows signs of economic or political instability, you are putting your operation at risk as changes to tax / duty laws, employment laws, or exchange rates can have enormous effects on the viability of your offshore operation. For example, take a look at how China’s rapidly evolving economy has been negatively impacting the many foreign manufacturing operations that have been outsourced there – higher prices, falling quality standards, increasing tariffs, etc.
Mexico on the other hand has a very long history of doing business with the United States and the economies of the two countries are so dependent on one-another that it would be virtually impossible for either country to operate without a good relationship with the other one. Add the security that NAFTA brings and Mexico is as safe of a bet as you are going to find in this world!
In fact – Mexico has made incredible strides over the past few decades to improve their reputation as stable economy. The World Bank ranks Mexico with the 12th largest Gross Domestic Product in the world, and with a population of over 100 million people, it has the 4th largest per capita income in Latin America.
In summary, China becomes viable when volumes are extremely high, proprietary right infringement is not an issue, design changes are very infrequent, quality control is not a high priority, the products are easily shipped (small / light), long lead-times and correspondingly high inventory carrying costs are not a problem, and cost is the main driver. If all of these criteria are not met, manufacturing in Mexico is quite possibly a feasible solution.
Making the determination of where to manufacture your product is a complex process that is dependent on many different variables. We have seen countless companies waste a lot of precious time and money chasing the world's lowest labor rate without taking into consideration all of the costs associated with manufacturing offshore. Don’t make the same mistake – simply give us a call and we will help you determine where makes the most sense for you.