Before You Expand Your U.S. Manufacturing Operation, Make Sure to Consider Mexico

Thanks to the Infrastructure Investment and Jobs Act (IIJA), Inflation Reduction Act (IRA), and CHIPS and Science Act, construction for U.S. manufacturing is growing. On average, manufacturing companies spent USD 16.2 billion a month building new production facilities in 2023, which more than doubled the spending from the previous year.

This effort has been an important step in the overarching goal of reshoring production to North America. As part of this initiative, and with incentives provided by the USMCA, U.S. manufacturers are considering when and how they’ll expand. For many, the answer is Mexico manufacturing.

Rather than renting a new factory in the U.S. or struggling with recruiting industrial workers (as is an ongoing challenge due to the dip in qualified technical talent), it often makes the most cost-saving sense to expand operations to Mexico.

The Benefit of Manufacturing in Mexico

U.S. and other foreign manufacturing companies can secure more available space, more equipment, and more qualified employees by manufacturing in Mexico. There is also more accessibility in terms of environmental regulations.

For example, an IVEMSA client that makes fiberglass truck covers wanted to open a new plant in California. Yet, they had better success when considering Mexico since environmental regulations there are less strict and the approval process is much easier.

Another example is a company specializing in metalwork and welding that faced difficulty hiring qualified workers in the U.S. They expanded to Mexico to recruit for the roles they needed while at the same time, freeing up space at their U.S. factory to explore other areas of growth.

Regardless of the sector, manufacturers can turn to IVEMSA to explore options that will allow them to save money and get production in Mexico up and running quickly.

Here are other areas highlighting how a shelter company can be of value to U.S. manufacturers that are ready to expand.

Industrial space

The national average for Class A leases in Mexico is $.65 per square foot per month. Though this fluctuates depending on demand and location, a shelter company can help manufacturers secure the location they need for their specific project requirements.

Through their site selection process, IVEMSA narrows down potential sites in different regions and compares costs, features, and capabilities to allow plant managers to make an informed decision.

Labor rates in Mexico

Labor rates for a fully burdened, semi-skilled worker in the U.S. ($23/hour USD) is more than four times the labor rates in Mexico ($5.60/hour USD), which is one of the main reasons why manufacturing in Mexico continues to be a preferred choice.

Therefore, HR is an important part of the full scope of shelter services available. A shelter company helps manufacturers recruit employees and keep them competitive to retain the best talent.

Furthermore, payroll, accounting, and daily trade operations are also part of the administrative responsibilities that are taken care of, which frees up time for manufacturers to focus on production.

Bilingual workforce

In addition to the lower labor rates in Mexico, the industrial workforce availability continues to thrive as well. Moreover, bilingual talent adds a significant benefit.

When partnering with a shelter company, there is less of a cultural barrier between the U.S. and Mexico, thanks to English-speaking project and department managers, compared to the divide between the U.S. and other countries like China.

Permitting and certifications

Working with a shelter company also makes it easier to obtain permits, licenses, and certifications required when manufacturing in Mexico. Since a shelter company already has the main permits in place, it reduces the time and costs it takes to launch production.

Explore Your Options with IVEMSA

U.S. manufacturers have been benefiting from Mexico manufacturing for decades. With an established infrastructure and supply chain, plus the available support of a shelter company, it makes it easier for those considering expansion for the first time to do the same.

To learn more about if this option makes sense for your business, contact IVEMSA today.

Source:
www.atlanticcouncil.org/blogs/econographics/the-ira-and-chips-act-are-supercharging-us-manufacturing-construction/