Updated: Nov 3
Are you looking at setting up your manufacturing facility in Mexico? Choosing Mexico as a manufacturing destination allows your organization to benefit from lower labor costs, looser labor restrictions, and qualified, skilled workers.
With proximity to the United States and open trade agreements between the two countries, Mexico and the US expect a more inclusive immigration and economic policy under the new administration, producing a favorable climate for Mexican manufacturing.
From automotive manufacturing to producing electronics, thousands of companies enjoy the benefits of moving their manufacturing base to Mexico. You can tap Mexico manufacturing, making use of its resources to benefit your business.
There are dozens of reasons why manufacturers might want to consider offshoring or nearshore manufacturing. However, undoubtedly, Mexico's greatest asset is its workforce, and you can take advantage of this using a shelter company or "Maquiladora" to help you navigate the local labor market.
This post examines the Mexican manufacturing sector and how it can benefit your business to move your production facilities to the country.
Technically Skilled Labor Market
Most manufacturers start looking into the Mexican manufacturing market due to the country's low cost of labor. While Mexico does have one of the cheapest labor costs in the Americas, it also has a technically skilled and specialized workforce that provides plenty of value to manufacturers.
The Mexican labor market benefits from skilled labor in various sectors, from automobiles and medical devices to aerospace parts. Manufacturing continues to be a growing source of employment in Mexico.
As a result of the continued expansion in the sector, state and federal governments, along with industry associations and large employers, made considerable investments into training programs designed to connect manufacturing employers with skilled labor in the country.
The Mexican government spends more on educating and training its workforce than any other member country of the International Organization for Economic Cooperation and Development (OECD). The OECD notes that those countries investing in training programs to improve their workforce do so to create social cohesion and economic prosperity for their people.
The Mexican government further supports these investments through the public funding of support programs for employers and employees in the manufacturing sector.
The OECD also states that Mexico is increasing its output of higher education alumni, with graduates driving better labor market outcomes. According to research, Mexico will be in the top 20 global countries for educated graduates by 2035.
Unlike other developed countries, such as the United States, graduates in the Mexican education system prefer to gravitate towards degrees in the STEM fields rather than psychology and other less-useful degrees.
Mexican higher education outcomes mean that the manufacturing industry has better-qualified managers and executives than many other leading manufacturing nations. Therefore, we can expect manufacturing quality to continue in the Mexican market going forward.
Mexican manufacturing companies also spend millions educating and training unskilled workers to help them progress in their careers. Many manufacturing employers pull together resources, offering employee technical training customized to specific industry requirements and needs. If you want to learn more about Mexico's skilled workforce read this post.
Across the globe, the decline in manufacturing demographics is hurting companies, with a skills gap widening each year. Many countries and manufacturers face a serious problem with an aging workforce and unskilled labor markets, with fewer young people looking for training and education in manufacturing positions.
However, Mexico isn't having problems with this issue. In fact, Mexico continues to build a robust workforce, with more candidates entering manufacturing jobs and traditional production centers. According to data from the World Bank, Mexico's general population is increasing at a pace of 1.13% annually.
Additionally, research from Statista shows that the Mexican population will swell by 19% to 145-million between 2015 and 2050. While the median age slowly creeps upward in recent years, to 29.2% in 2020. This data means that Mexico will enjoy a steady flow of new participants to the labor market, offsetting those that retire.
Compared to many developed countries, the Mexican labor market demographics offer manufacturers and investors a sense of stability. It appeals to a long-term investment strategy in the country.
Effective Management Structures
Manufacturing employers locating operations to Mexico find that planning is essential in building a loyal workforce in the country. Employee turnover ranges widely across the Mexican manufacturing market.
From 2.5% in Hermosillo to 3.59% in Saltillo, it's still excellent retention rates compared to the US and European manufacturing markets. The United States currently deals with an 18% turnover rate in its workforce, far above Mexican stats.
Local culture and employee expectations play a significant role in the low turnover rates experienced by Mexican manufacturers.
Tips for Companies Setting Up Operations in Mexico
If you're setting up a manufacturing base in Mexico, make sure you consider these tips.
Understand Mexican Business Culture
Adapting your organization to Mexican culture will be the most challenging but most rewarding part of doing business in Mexico. When your company has a strong understanding of local culture, you'll find that employees are loyal to your vision.
Managers that take the time to build personal relationships with employees create a sense of trust in the workplace. Preparation for business discussions and meetings is critical to keep the entire staff informed of its operations. To better understand how United States business culture differs from Mexican business culture read this post.
Focus on Team-building
Changing manufacturing destinations creates some bottlenecks and roadblocks in implementing processes. However, by fostering an ethos of teamwork in your workforce, employers create a collaborative environment suited to finding solutions rather than exacerbating the problem.
Start with defining the key business outcome, aligning the workforce to the company vision. However, your company vision mustn't get hazy in translation. Remember to keep your company culture focused on a local presence, not an international one.
Understand Local Benefits
Mexican federal labor laws mandate specific benefits for the workforce. Most manufacturing companies offer employees benefits boosting their employee experience and satisfaction levels, increasing employee engagement and productivity.
Overcome Language Barriers by Working with Shelter Companies
Understanding the Mexican labor market helps new manufacturing companies build loyal, hardworking workforces. However, many companies need assistance with navigating the complexities of setting up operations in Mexico.
A shelter company can help you navigate these issues, ensuring you get the best start in your new Mexican manufacturing destination.