Defining the Value of Site Selection Services for Foreign Manufacturers
01.16.20
Companies that are considering Mexico manufacturing as a way to expand their business often aren’t too familiar with the country beyond its border towns or more popular regions of central Mexico. It can be overwhelming to know where to begin and what the best location is for their particular industry and manufacturing goals. Sourcing the right site for a new industrial project takes time and resources that most manufacturers simply can’t spare.
Many manufacturers rely on the comprehensive services of a shelter company to get them up-and-running from start to finish. Others prefer to work with a shelter for site selection only as an independent service. There’s great value in going this route, especially if a company is unsure if they’ll require a full scope of shelter involvement.
Either way, locking in a building is the most important step in setting up a plant in Mexico. Having a physical address is required under the maquiladora IMMEX program. Without this, you cannot move forward, which is why the site selection process is so important.
IVEMSA’s site selection service includes gathering information about which other relevant manufacturing companies already have a presence in the targeted locations, where there will be ample opportunity for hiring labor and securing well-equipped facilities or on the flip side, sharing which areas may be oversaturated and more costly. Mapping out the city as part of the site selection service also includes sourcing available buildings, utilities, and vendors.
Each customized analysis goes in-depth regarding the geography, labor pool, and costs, in addition to listing if resources are available. Among the site selection service documents IVEMSA provides for each city that’s being considered are:
- City Comparison Matrix – A thorough analysis of over 30 statistics, including miles to the border, recent investments by foreign companies, and number of manufacturing companies in the region.
- Labor Cost Analysis – A breakdown of required individual industrial positions by salary, benefits (including bonuses, vacation days, insurance, etc.), and taxes.
- Operation Cost Analysis – A financial report that identifies leasing base rate for properties, estimated costs for tenant improvements and property taxes, and other operational fees required for setup.
As part of the site selection services, IVEMSA uses a point system to “grade” on individual categories. The more points there are, the better the fit. This helps narrow down the choices to the two or three most viable areas.
In addition to the areas a manufacturer already has in mind, IVEMSA includes site suggestions based on predetermined parameters. Generally, every border town will have the same established infrastructure and buildings available. Traveling further south, there are approximately ten cities that have similar advantages and a labor pool that can fulfill manufacturing needs. Smaller cities may also have availability, but not as modern as the main areas.
Starting the Site Selection Process
When a company begins the site selection process, it’s best for them to sign a letter that IVEMSA is their representative. This helps to open doors with local government agencies and organizations involved with the IMMEX program and manufacturing in Mexico. For example, if a U.S. or other foreign manufacturer is hiring 100 people and investing $10 million into a factory, an agency is more willing to share the information needed in a timely manner to make the decision. There’s also the possibility of an incentive to the company for job generation, depending on how pro-business a specific area is.
Working with IVEMSA starts with an initial call to answer qualifying questions of what a manufacturer is looking for in terms of space, costs, and other specifications. From there, the approximate time is 30 days to receive updates about each city and analyze the information. Every month, there are changes to space availability and labor turnover, which requires the need for current research. Additionally, a visit from an IVEMSA executive to each city is important to take accurate notes and include recent numbers and information regarding costs and activity in the area.
Companies that are considering Mexico manufacturing will benefit from working with IVEMSA when it comes to site selection. Either as part of a full range of shelter services or as an independent service, the site selection process provides an overall analysis of what to expect prior to an in-person site visit of the final options. This saves on time, costs, and hassle prior to a project launch.
If the company then decides to work with IVEMSA in other departments or for a complete operational setup, the cost of the analysis is then credited as part of the full shelter services. Regardless, the company maintains the site selection analysis even if they don’t choose IVEMSA as the shelter.