In or Out. Thumbs Up or Down on Mexico.

Final yr, I requested my good good friend Andrew Hupert of North American Strategic Planning to elucidate what’s concerned in transferring 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 methods from the within.

My legislation agency continuously 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 firms — particularly firms seeking to go away China — navigate Mexico. Who higher, then, to write down about what it takes to depart China (in entire or partly) 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 Forms 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 collection 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 Wager Towards the Home.

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

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

In relation to getting China-based firms 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:

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 transferring 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 many others.

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 actual feasibility research and enterprise planning comes after. That is extra of a fast cultural compatibility quiz.

1.  Manufacturing facility & Operations

You’ll almost definitely have your personal manufacturing facility in Mexico. In case you don’t need that or don’t know the way that works, it’s best to speak to somebody certified BEFORE transferring additional into Mexico. If, alternatively, you LIKE working your personal manufacturing facility, then you definately’ll most likely do fantastic 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 because of a kind of commercial park that makes a speciality of working with worldwide buyers and producers. Filling it with machines, supplies, and other people will probably be your job.

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

Product firms are manufacturers or profitable merchandise — however the house owners might not be specialists 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 would possibly really feel proper at dwelling 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 for the time being. 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 economic parks round these cities have been constructed for YOU – overseas invested factories arrange for export to the US. Pristine manufacturing facility area 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 may register on your personal or use a “shelter service supplier”, which will be your new landlord.

Product firms have to make choices about proudly owning a manufacturing facility. Mexico isn’t essentially a terrific place for reverse-engineering or product design, however every little thing right here is ISO-9xxx, so that you received’t have any hassle executing third get together plans. In case you are contemplating your first manufacturing facility, Mexico might be a terrific possibility. If working your personal manufacturing facility is just not a part of your plan, then you definately would possibly want to consider options.

2.  Provide Chain

That is the massive one. In Mexico, your provide chain is on YOU. It’s a must to not solely discover the sources, but in addition 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 large company procurement groups – particularly within the auto and aerospace industries – for the reason that Thirties. Mexican company tradition is by the e book, and it’s not a really modern e book. Mexico is nice at transferring containers round. It’s much less nice at filling these containers. There isn’t a lot of an upstream manufacturing base for elements and parts. The Mexican provide chain gaps within the center. If you must fill a brand-new area with innovative gear, a manufacturing crew with MNC expertise and a Six Sigma blackbelt administration crew, they will try 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 search out in Mexico. Sadly for you, that features the upstream provide of elements, parts, and specialty processors which can be so plentiful in Asia.

a. 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 that means of OEM is totally different right here. It seems to be like a completely owned subsidiary that doesn’t do contract work. Unbiased operations aren’t precisely secretive, however they definitely 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 situation is that these operations are typically smaller, household run companies that aren’t essentially prepared to shift strategies or ramp up manufacturing for your corporation. 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 go away the manufacturing facility gate, they are going to be reaching prospects inside days. As soon as arrange, operations in Mexico are likely to run quite a bit 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 capacity to answer finish customers will be a lot stronger. The regulatory and customs surroundings will stay difficult as new guidelines emerge and enforcement efforts towards 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 working, Mexico can present clear benefits when it comes to effectivity, value, 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 potential to succeed with a looser stage of design. You may’t get new elements or specialised processes across the nook right here in Mexico like you possibly can in Shenzhen. Do you will have the design capacity to work with out a Chinese language security internet?

3.  Dwelling and dealing in North America

For some it is a deal-breaker, for others a dealmaker. You might be coming into Mexico with a whole lot of way of life decisions, as a result of most of you received’t reside 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. Which means you may 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 had been all-in on China, you will 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 will have some nice choices inside straightforward journey distance. CDMX and Monterrey are subtle and trendy. 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. Typically talking, you will get extra and spend much less in Mexico, although CDMX is expensive.  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 circulate. Direct flights to Houston are straightforward. Direct flights between Mexican states are generally difficult. The extent of infrastructure improvement is way decrease in Mexico than in coastal China.

In case you are working a world operation, Mexico Metropolis (CDMX) could be good. For some purpose, locals regard CDMX as if it had been a part of one other world, however it’s a important enterprise heart in Latin America, and an appropriate place for worldwide operations and transactions, in addition to being a world-class cultural heart. 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 provided. There aren’t any AmCham completely satisfied hours, Sundowners, Eurocham Wine & Cheeses, or professionally boozy occasions that drove China networking.  There are many expats, however you’ll should 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 need to be exiting his sphere of affect. Spoiler alert – it’s a little bit over 18 minutes. Que aproveche.

4. Remaining Phrase

A few of you will 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. In case you can arrange in Mexico, you will 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).

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