Common Mistakes

The most common mistake that companies make with outsourcing is thinking that you can outsource your problems – if you currently have issues with your supply chain, quality problems caused inherent process limitations, or any other reoccurring problems with production that you have not addressed in-house, do not simply assume that they will be fixed by outsourcing. In many cases we do improve existing processes and eliminate waste; however this should not be the primary reason for outsourcing production.

Having unrealistic savings expectations is another common mistake. For example, expecting that you will be able to cut 95% of your total production cost by moving your operation just south of the border is simply unreasonable. You should expect to cut the labor cost of your product in half – the other costs (material, distribution, etc.) will probably remain approximately the same.

Thinking that you can operate in Mexico with less resources / support then you would need in-house. If through years of experience you have found that your particular operation requires 1 supervisor for every 5 direct laborers, there is no reason why that ratio would be any different when manufacturing in Mexico – the only difference would be that each of those positions would cost you less in Mexico.

Overlooking the support functions required to properly run the operation. You need to have a plan to continue all of the support functions of the operation either in-house or outsource them to Mexico as well. For example if your in-house operation requires a dedicated purchasing agent for streamlined material acquisition, the Mexico operation will need the exact same level of support – the only question is wether or not you want to continue performing that function in-house or outsource it as well.

Overlooking the new functions that will need to be performed as a result of manufacturing in a remote location. For example if your main customer has always been located right next door to your manufacturing facility, you probably have not spent much time thinking about the logistics of delivering your product to them. Once you outsource your operation, on-time delivery of your product now becomes slightly more complicated.

The underlying cause of the overwhelming majority of the problems that companies encounter when outsourcing production is a simple lack of preparation. The outsourcing of a manufacturing operation to Mexico (or anywhere in the world for that matter) is a major undertaking that should be planned for accordingly.