In or Out. Thumbs Up or Down on Mexico.

Final 12 months, I requested my good pal Andrew Hupert of North American Strategic Planning to elucidate 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 techniques from the within.

My legislation agency often consulted with Andrew after we first began doing China authorized work, and at the moment Andrew was dwelling 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 commenced serving to corporations — particularly corporations seeking to depart China — navigate Mexico. Who higher, then, to write down about what it takes to go away China (in entire or partially) for Mexico than Andrew Hupert?

Andrew wrote a collection 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 Kinds of China-Mexico Provide Chain Transitions

Then on the finish of final 12 months, we wrote Three Issues Everybody Leaving China for Mexico Ought to Know, as an introduction to what we anticipate shall be a roughly ten half collection to be written over the following 7-9 months. This 12 months 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 Wager Towards the Home.

The beneath was written by Andrew (with a couple of revisions by me) and it constitutes our fifth piece within the collection.

Andrew and I shall 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. When you have questions you need answered at this occasion, please ship them to [email protected]. To register CLICK HERE.

 

In the case 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 affordable, most necessary step you’ll ever tackle a enterprise survey:

1. Is Mexico best for you?             Sure ___       No ____       Want extra data ____

Westerners in China and Asia ask me about Mexico usually. The individuals 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 sort 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 probably have your individual manufacturing facility in Mexico. If you happen to don’t need that or don’t understand how that works, you must discuss to somebody certified BEFORE shifting additional into Mexico. If, alternatively, 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 Means. Configuring the precise constructing and infrastructure is fairly easy because of a sort of commercial park that focuses on working with worldwide buyers and producers. Filling it with machines, supplies, and other people shall be your job.

Mexican managers discuss “manufacturing corporations” and “product corporations”. Manufacturing corporations are factories and provide chains that simply so occur to have a gross sales staff hooked up someplace. These are the nice corporations (from the Mexican supervisor’s perspective).

Product corporations are manufacturers or profitable merchandise — however the house owners will not be consultants on the fabrication processes. They’re extra more likely to determine as entrepreneurs than as engineers or technicians. They might not have their very own community of suppliers or perhaps a full invoice of supplies.

In case you are a manufacturing firm, you may really feel proper at residence 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 new manufacturing facility operations. Search on industrial parks to gauge which cities are sizzling in the intervening time. Spoiler alert: Monterrey is already getting dear. 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 – referred to as a bajío). The economic parks round these cities have been constructed for YOU – overseas invested factories arrange for export to the US. Pristine manufacturing facility house on main roads, close to airports or rail hubs, some providing “shelter companies”. The Mexican shelter system is a set of native enterprise registration necessities for effectively accessing US markets. You possibly can register on your personal or use a “shelter service supplier”, which might be your new landlord.

Product corporations have to make choices about proudly owning a manufacturing facility. Mexico isn’t essentially an incredible place for reverse-engineering or product design, however the whole lot right here is ISO-9xxx, so that you received’t have any bother executing third social gathering plans. In case you are contemplating your first manufacturing facility, Mexico could possibly be an incredible possibility. 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 below are the principle components:

The Mexican provide chain ecosystem has been constructed by generations of large company procurement groups – particularly within the auto and aerospace industries – because the Thirties. Mexican company tradition is by the e-book, and it’s not a really progressive e-book. 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 house with innovative gear, a manufacturing staff with MNC expertise and a Six Sigma blackbelt administration staff, they will 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 handbook labor is hard to seek 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 essential 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 appears to be like like a completely owned subsidiary that doesn’t do contract work. Unbiased operations aren’t precisely secretive, however they definitely aren’t working arduous to draw new English-speaking strangers. They usually’re geographically distributed, so constructing a community of suppliers is much more difficult.

The second challenge is that these operations are usually 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 common for relationships with contract producers to go unhealthy for seemingly no purpose.

The post-production provide chain, nonetheless, is environment friendly, built-in and quick. As soon as your merchandise depart the manufacturing facility gate, they are going to be reaching clients inside days. As soon as arrange, operations in Mexico are likely to run rather a lot smoother than in China as a result of advertising, manufacturing, and logistics are all in the identical time zone and on the identical org chart. Your IP is safer, and your means to reply to finish customers might 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 possibly can’t get new components or specialised processes across the nook right here in Mexico like you would in Shenzhen. Do you’ve gotten the design means to work and not using a Chinese language security web?

3.  Residing and dealing in North America

For some it is a deal-breaker, for others a dealmaker. You’re coming into Mexico with a number of way of life decisions, as a result of most of you received’t dwell on-site. It’s nearer to the US, and plenty of — if not most — US managers with Mexico accountability fly out and in for a day or two. Meaning you possibly can run it out of your US operation (similar org chart, comparable time zones, straightforward language points) when you’ve got a US operation. For these of you who have been all-in on China, you’ve gotten choices to make.

If you wish to base your self in Mexico however not be within the fast proximity of your manufacturing facility, then you’ve gotten some nice choices inside straightforward journey distance. CDMX and Monterrey are refined and fashionable. There are extra conventional cities and neighborhoods with established expat communities throughout, and they’re improbable if that’s what you’re in search of. Usually talking, you may get extra and spend much less in Mexico, although CDMX is costly.  One phrase of warning – there may be 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 dwell and work in the identical cluster or alongside the identical site visitors stream. Direct flights to Houston are straightforward. Direct flights between Mexican states are generally tough. The extent of infrastructure growth is way decrease in Mexico than in coastal China.

In case you are operating a global operation, Mexico Metropolis (CDMX) is likely to be good. For some purpose, 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 appropriate 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 energetic skilled social life that enterprise life in Shanghai and Shenzhen supplied. There aren’t any AmCham blissful 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 notably 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. Closing Phrase

A few of you’ve gotten 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’ve gotten quite a lot of choices about the place to base and dwell, however these are a lot simpler to make and implement than in China (for many of you).

 

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