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The Advantages of Shelter Manufacturing Over Contract Manufacturing in Mexico

Updated: Nov 8, 2023


Factory worker operating a machine on the production line.

Manufacturing is the process of transforming raw materials into finished goods. It can be done in a variety of ways, including contract manufacturing, shelter manufacturing, and in-house manufacturing.

  • Contract manufacturing is when a company hires another company to manufacture its products. The contract manufacturer owns the manufacturing facilities and equipment, and the hiring company simply provides the designs and specifications for the products.

  • In-house manufacturing is when a company manufactures its own products in its own facilities. This option comes with more risk and challenges and can typically be a more expensive option.

  • Shelter manufacturing is a hybrid of contract manufacturing and in-house manufacturing in that you hire a shelter company, which is already a legal entity in Mexico. The shelter company then owns/rents the manufacturing facilities, the client company sends all the equipment and raw material, then the shelter will hire the workers to manufacture the products. The client company provides the leadership, know-how, designs, and specifications for the products, as well as quality control and other oversight activities.

So, what are the benefits of shelter manufacturing in Mexico?

There are many benefits to shelter manufacturing in Mexico, including:

  • Cost savings: The cost of manufacturing in Mexico is significantly lower than in the United States. This is due to a number of factors, including lower labor costs, lower energy costs, lower taxes, and the ability the shelter has in economies of scales with their experienced staff working for the shelter.

  • Access to a skilled workforce: Mexico has a large and skilled workforce that is available at a lower cost than in the United States.

  • Nearshoring: Mexico is located just across the border from the United States, which makes it a convenient option for nearshoring. Nearshoring is the practice of moving manufacturing operations closer to the final market. This can help reduce transportation costs and lead times.

  • Flexibility: Shelter manufacturing offers a high degree of flexibility. Shelter companies can help their clients quickly ramp production up or down to meet the needs of the client.

  • Risk mitigation: Shelter manufacturing can help mitigate risks for companies that are manufacturing in Mexico. The shelter company can handle all of the legal and regulatory requirements.

  • Access to free trade agreements: Mexico is a member of several free trade agreements, including the United States-Mexico-Canada Agreement (USMCA). This means your products can be exported to the United States and Canada with preferential treatment on tariffs.

  • Favorable tax environment: Mexico has a favorable tax environment for maquiladoras. Maquiladoras (Manufacturing operations) that have an IMMEX are able to recoup all the valued added tax spent on their operation. This also goes for all shipments going into and out of Mexico.

Javid LLC is a leading provider of shelter manufacturing services in Mexico. We have over 40 years of experience in the industry and have helped hundreds of companies succeed in Mexico. We offer a wide range of services, including:

  • Facility leasing/site selection: We can help you lease a manufacturing facility in Mexico that meets your specific needs.

  • Equipment procurement: We can help you procure the equipment you need for your manufacturing operations.

  • Staffing: We can help you hire and train the workers you need for your manufacturing operations.

  • Logistics: We can help you manage the cross-border logistics of shipping your products to the United States.

  • Legal Compliance: We will ensure that your entire operation is in compliance with Mexican law, i.e., Labor Law, Fiscal, Law, Customs Law, etc.

If you are looking for a cost-effective, flexible, and reliable way to manufacture your products in Mexico, Javid LLC is the perfect partner for you. We have the experience, the expertise, and the resources to help you succeed. Contact us today to learn more about how we can help you.

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