The 5 Challenges You’ll Face Outsourcing Your Production Needs To Mexico

Outsourcing your production needs to Mexico is a smart business decision. This is especially true if you’re hoping to get your product to market in a short amount of time. Mexico has a fast-paced, skilled workforce that’s both inexpensive and experienced. They can ensure quality at a price that’s affordable, but that doesn’t mean it’s without its challenges. Here are 5 of the challenges you’re likely to face, and what you can do to ensure you’re successful despite them.

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1. Remaining Compliant

Like the U.S., Mexico has labor standards. There are federal, state, and local environmental regulations to consider. There are also permits to gather, safety regulations, and waste disposal regulations to adhere to. It’s impossible for a single person to know every piece of legislation, but missing a single thing could cost you your business.

If you want to remain compliant, consider what many U.S. auto manufacturers in Mexico do; they outsource their administration and compliance to third-party companies that handle their human resource departments, environmental health and safety needs, permits, and more. U.S. automotive companies are thriving in Mexico because of their strict adherence to complying with the country’s labor laws.

2. Import And Export Duty And Taxes

The current political climate doesn’t favor outsourcing to Mexico, but don’t let that sway you from moving your production there. Mexico’s duty rates fluctuate. The average is 13.97 percent, but can be as low as 0 percent or as much as 140.4 percent. If you’re not careful, you could end up overpaying. Due diligence is going to be the thing that saves you from low rates (or no duty rates). Again, this may be an opportunity to consider outsourcing your administration, or hiring an expert in the field of import and export duty and taxes.

The Mexican government offers tax credits, duty-free transport, and cash grants and incentives. These are things you absolutely want to take advantage of. As far as taxes are concerned, the process is difficult in Mexico compared to the U.S. It requires more hours and painstaking detail, and if you’re late you could lose your ability to function as a business in Mexico.

3. Cross-border Trading Costs

It’s expensive to ship goods across borders. Especially for Canadians, that’s two borders (Mexico and the United States) to contend with. It costs more than a thousand dollars to transport a single container, and that’s something to really consider and plan for. Failing to calculate and prepare for these costs could cripple your finances, and will slow down the time it takes to get your product to market.

There’s no getting around trading costs. You may be able to take advantage of some grants to offset these costs, but then again, you may not receive anything. The best way to ensure success is to be prepared by saving your money. Also, consider that transporting goods is cheaper and more environmentally friendly considering the proximity of Mexico to the U.S. and Canada. No, that doesn’t pay any of your fees, but it is a way to view the glass as half-full.

4. Transport Quality Is Paramount

Transportation isn’t cheap; it wouldn’t be cheap if you were manufacturing within the U.S. It would only be cheaper, but still expensive. Knowing that, you may be drawn to cheap trucking services. Mexico’s trucking companies vary between good and terrible. The terrible companies are going to draw you in with lower prices, but don’t be a sucker.

Those companies are too small, and when they become inundated with business (especially around the holidays), they will deny you service. Don’t be left high and dry. Enter contracts that guarantee you service, and avoid anything low-quality because you’ll find yourself paying for broke down vehicles and unable to deliver your products on time.

5. Communication Lines Break Down

Don’t get lost in translation. Communication that’s ineffective or a complete lack of communication can really break a business, especially one that’s operating in two countries. Not only is it important to have fluent translators everywhere and anywhere, it’s also important to routinely inform them with changes and updates. Ideally, you should have daily exchanges with your employees in Mexico and expect regular updates.

Your business should have a communication process, which is to say there should be a method to communicating. Train your employees on best methods; in fact, train up all your employees to understand all of these challenges and you’ll be far more successful in your endeavor to manufacture in Mexico.

Dragan Sutevski

Posted by Dragan Sutevski

Dragan Sutevski is a founder and CEO of Sutevski Consulting, creating business excellence through innovative thinking. Get more from Dragan on Twitter. Contact Dragan