Final yr, I requested my good good friend Andrew Hupert of North American Strategic Planning to clarify what’s concerned in shifting manufacturing from China to Mexico. I selected Andrew for this as a result of he has spent a lot time in each China and Mexico, navigating their manufacturing programs from the within.
My legislation agency regularly consulted with Andrew once we first began doing China authorized work, and at the moment Andrew was residing in China. Although Andrew had for many years tied his life and profession to China, he — like me — was one of many earliest proponents of a post-China manufacturing world. A lot in order that Andrew moved to Mexico, reinvigorated his Spanish language expertise and started serving to corporations — particularly corporations trying to go away China — navigate Mexico. Who higher, then, to jot down about what it takes to go away China (in complete or partially) for Mexico than Andrew Hupert?
Andrew wrote a sequence of 5 posts on the variations between China and Mexico manufacturing and I urge you to learn all 5 of those:
- The China Supervisor’s Information to Mexican Operations: Evaluating and Contrasting China and Mexico Operations
- Mexico for China Managers, Half 2: China vs. Mexico as Provide Chain Hubs
- Half 3: Evaluating China and Mexico Manufacturing on the Operational Degree
- Mexico for China Managers, Half 4: A Information to Cross-Tradition Negotiation
- Mexico for China Managers, Half 5: The Three Varieties of China-Mexico Provide Chain Transitions
Then on the finish of final yr, we wrote Three Issues Everybody Leaving China for Mexico Ought to Know, as an introduction to what we anticipate will probably be a roughly ten half sequence to be written over the following 7-9 months. This yr we (largely Andrew) have written Three Errors We Made in China and Three Issues We’ll Get Proper in Mexico, Mexican Provide Chain Administration: You’re not in China Anymore, 5 Potential Shocks to your Chinese language Provide Chain in 2023, and Your China Provide Chain is a Guess Towards the Home.
The beneath was written by Andrew (with just a few revisions by me) and it constitutes our fifth piece within the sequence.
Andrew and I will probably be placing on a free online Q & A session on February 23 (THIS THURSDAY) on what it takes to maneuver manufacturing from China to Latin America. You probably have questions you need answered at this occasion, please ship them to advertising and [email protected]. To register CLICK HERE.
On the subject of getting China-based corporations production-ready in Mexico, I’ve in my head what I name my “Guidelines of One.” This guidelines of 1 is the most cost effective, most essential step you’ll ever tackle a enterprise survey:
- Is Mexico best for you? Sure ___ No ____ Want extra information ____
Westerners in China and Asia ask me about Mexico usually. The folks I do know have been in China for a very long time and most need to begin the shifting from China to Mexico dialog with a fast gut-check kind of overview. The query they need answered is, “is Mexico for me or not?” It’s half about their enterprise success, half about their life/household/way of life/sanity/and so forth.
Let’s do MORE INFO on three essential areas:
- Manufacturing facility Operations
- Provide Chain & Product Design
- Work and Life in Mexico
That is the “want I had recognized earlier than…” class. The true feasibility research and enterprise planning comes after. That is extra of a fast cultural compatibility quiz.
1. Manufacturing facility & Operations
You’ll most definitely have your individual manufacturing facility in Mexico. If you happen to don’t need that or don’t understand how that works, you need to speak to somebody certified BEFORE shifting additional into Mexico. If, then again, you LIKE operating your individual manufacturing facility, then you definitely’ll in all probability do tremendous in Mexico. It’s an operations-oriented enterprise tradition, and everyone seems to be fluent in Lean Manufacturing and The Toyota Method. Configuring the precise constructing and infrastructure is fairly easy due to a kind of commercial park that focuses on working with worldwide traders and producers. Filling it with machines, supplies, and other people will probably be your job.
Mexican managers speak about “manufacturing corporations” and “product corporations”. Manufacturing corporations are factories and provide chains that simply so occur to have a gross sales workforce connected someplace. These are the nice corporations (from the Mexican supervisor’s perspective).
Product corporations are manufacturers or profitable merchandise — however the house owners might not be specialists on the fabrication processes. They’re extra more likely to establish as entrepreneurs than as engineers or technicians. They could not have their very own community of suppliers or perhaps a full invoice of supplies.
If you’re a manufacturing firm, you may really feel proper at house in Mexico. There are two dozen or so important manufacturing zones distributed across the nation, competing with each other to make life simpler for brand spanking new manufacturing facility operations. Search on industrial parks to gauge which cities are scorching in the mean time. Spoiler alert: Monterrey is already getting expensive. Get used to listening to about Bajío cities: Leon (Guanajuato), Guadalajara, and Querétaro. There’s a hall that runs roughly from Jalisco and the Port of Manzanillo on the Pacific, throughout and as much as Monterrey/Port Altamira on the Gulf that encompasses the geological low-land – known as a bajío). The commercial parks round these cities have been constructed for YOU – international invested factories arrange for export to the US. Pristine manufacturing facility area on main roads, close to airports or rail hubs, some providing “shelter providers”. The Mexican shelter system is a set of native enterprise registration necessities for effectively accessing US markets. You may register on your personal or use a “shelter service supplier”, which will be your new landlord.
Product corporations must make choices about proudly owning a manufacturing facility. Mexico isn’t essentially a terrific place for reverse-engineering or product design, however all the things right here is ISO-9xxx, so that you received’t have any hassle executing third celebration plans. If you’re contemplating your first manufacturing facility, Mexico might be a terrific choice. If working your individual manufacturing facility shouldn’t be a part of your plan, then you definitely may want to consider options.
2. Provide Chain
That is the massive one. In Mexico, your provide chain is on YOU. You must not solely discover the sources, but additionally handle the maze of regulatory necessities and compliance procedures. Listed here are the principle components:
The Mexican provide chain ecosystem has been constructed by generations of big company procurement groups – particularly within the auto and aerospace industries – for the reason that Nineteen Thirties. Mexican company tradition is by the ebook, and it’s not a really revolutionary ebook. Mexico is nice at shifting containers round. It’s much less nice at filling these containers. There isn’t a lot of an upstream manufacturing base for components and elements. The Mexican provide chain gaps within the center. If it is advisable fill a brand-new area with leading edge tools, a manufacturing workforce with MNC expertise and a Six Sigma blackbelt administration workforce, they’ll do this. If you wish to rent fifty guys with shovels, or a market stuffed with craftsmen carving collectible figurines – no downside. However something in between company provide chains and semi-skilled guide labor is hard to search out in Mexico. Sadly for you, that features the upstream provide of components, elements, and specialty processors which are so plentiful in Asia.
Contract manufacturing is much less developed in Mexico than in China. The issues listed below are twofold.
First, the important mass of suppliers simply isn’t right here. There isn’t the focus of contract producers in Mexico present in China. Additionally remember that the which means of OEM is completely different right here. It seems to be like an entirely owned subsidiary that doesn’t do contract work. Impartial operations aren’t precisely secretive, however they actually aren’t working laborious to draw new English-speaking strangers. And so they’re geographically distributed, so constructing a community of suppliers is much more difficult.
The second challenge is that these operations are typically smaller, household run companies that aren’t essentially prepared to shift strategies or ramp up manufacturing for your small business. These are extra like partnerships than paying for a service, and it’s commonplace for relationships with contract producers to go unhealthy for seemingly no cause.
The post-production provide chain, nonetheless, is environment friendly, built-in and quick. As soon as your merchandise go away the manufacturing facility gate, they are going to be reaching clients inside days. As soon as arrange, operations in Mexico are inclined to run so much smoother than in China as a result of advertising and marketing, manufacturing, and logistics are all in the identical time zone and on the identical org chart. Your IP is safer, and your skill to answer finish customers will be a lot stronger. The regulatory and customs surroundings will stay difficult as new guidelines emerge and enforcement efforts in opposition to tariff-avoiders and label-swappers heats up, however the 2,000-mile land border means logistics and deliveries are extra predictable and clear. As soon as you’re up and operating, Mexico can present clear benefits when it comes to effectivity, price, and buyer satisfaction, offered you’re going after US markets.
Let´s contact base on the design and planning half. The prototypes. The molds. The invoice of supplies. China manufacturing clusters (Shenzhen for electronics, Chengdu for auto) made it attainable to succeed with a looser degree of design. You may’t get new components or specialised processes across the nook right here in Mexico like you might in Shenzhen. Do you could have the design skill to work with no Chinese language security web?
3. Residing and dealing in North America
For some this can be a deal-breaker, for others a dealmaker. You might be getting into Mexico with plenty of way of life selections, as a result of most of you received’t reside on-site. It’s nearer to the US, and lots of — if not most — US managers with Mexico duty fly out and in for a day or two. Which means you possibly can run it out of your US operation (similar org chart, comparable time zones, straightforward language points) you probably have a US operation. For these of you who have been all-in on China, you could have choices to make.
If you wish to base your self in Mexico however not be within the quick proximity of your manufacturing facility, then you could have some nice choices inside straightforward journey distance. CDMX and Monterrey are refined and trendy. There are extra conventional cities and neighborhoods with established expat communities throughout, and they’re incredible if that’s what you’re in search of. Typically talking, you may get extra and spend much less in Mexico, although CDMX is costly. One phrase of warning – there’s not a lot interstate integration right here. The relationships, enterprise facilities, and infrastructure are oriented round commerce with the US. It’s a lot simpler to reside and work in the identical cluster or alongside the identical site visitors movement. Direct flights to Houston are straightforward. Direct flights between Mexican states are generally tough. The extent of infrastructure improvement is way decrease in Mexico than in coastal China.
If you’re operating a world operation, Mexico Metropolis (CDMX) may be good. For some cause, locals regard CDMX as if it have been a part of one other world, however it’s a important enterprise middle in Latin America, and an acceptable place for worldwide operations and transactions, in addition to being a world-class cultural middle. However although Mexico has loads of expat pleasant cities and communities, you received’t have the lively skilled social life that enterprise life in Shanghai and Shenzhen supplied. There are not any AmCham glad hours, Sundowners, Eurocham Wine & Cheeses, or professionally boozy occasions that drove China networking. There are many expats, however you’ll need to chart a course between the sunbird retirees and the digital nomads (who’re universally disliked all through Mexico, however significantly loathed in Mexico Metropolis). A Mexico Metropolis waiter is aware of PRECISELY how lengthy it ought to take to devour an Americano common and a scone, and thus when you have to be exiting his sphere of affect. Spoiler alert – it’s just a little over 18 minutes. Que aproveche.
4. Last Phrase
A few of you could have already decided, others might have additional questions. Issues might change, however for now the important thing points are 1) entry to US markets, 2) manufacturing facility operations, and 3) provide chain administration. If you happen to can arrange in Mexico, you could have a lot of choices about the place to base and reside, however these are a lot simpler to make and implement than in China (for many of you).
The publish In or Out. Thumbs Up or Down on Mexico. appeared first on Harris Bricken Sliwoski LLP.