Manufacturers facing tough challenges are taking a second look at their operations strategy. If the pandemic taught companies one thing, it’s that you can’t be too prepared for the unexpected. Long-time manufacturers know that skilled and reliable workers, as well as a consistent supply chain top the list of challenges that can derail operations. There are a number of forward-thinking manufacturing strategies that can address or plan for skilled worker shortages and supply chain disruptors. A maquiladora is one such method you might not have known about. Here’s a look at what a maquiladora is, and the benefits that make it a strong move.
What is a Maquiladora Manufacturing Strategy?
A maquiladora is a method or strategy for manufacturing that incorporates a production facility in Mexico and an administration facility in the company’s location of incorporation or origin. Many American and Canadian companies employ this maquiladora program for manufacturing. Raw goods and materials are imported for processing or manufacturing, and the finished products are exported mostly to the U.S. or Canada. The production facility is often strategically located close to the U.S. – Mexico border to help facilitate importing and exporting of materials and products. Approval from Mexico’s Secretary of the Economy is required to establish a maquiladora.
A Maquiladora is Beneficial To All
This strategic method of manufacturing is beneficial for foreign companies, and for Mexico. The maquiladora was established in response to rising unemployment in Mexico as a way to capture manufacturing revenue while strengthening Mexico’s workforce with manufacturing-related skill sets. Foreign companies establishing a maquiladora method can lower the costs of importing raw materials, manufacturing equipment, and machinery duty-free while enjoying certain tax breaks.
The Bottom Line for Mexico and Foreign Manufacturers
Mexico bolsters its economy and provides more employment opportunities for workers by allowing foreign companies to set up manufacturing facilities in the country. Foreign manufacturers can address supply chain and workforce challenges while lowering the cost of raw materials and equipment. The duty-free import of manufacturing-related goods lowers operation expenses, which in turn provides some flexibility during supply chain disruptions, as the company can budget for expedited import delivery or the exporting of finished products. Companies that don’t have the budget for expediting delivery often choose to delay fulfillment, increase turnaround times and face potential lost revenue. This beneficial arrangement expands access to a skilled workforce, reducing time and budget spent on employee resources.
Today’s manufacturing ecosystem is more complex, with staffing uncertainties, inconsistent supply chains, and fluctuating operation costs. Establishing a maquiladora as a method of operations strategically places your production in Mexico with access to essential workers and beneficial cost reductions. This strategy is a proactive approach to production, with the importing of raw materials, equipment, and machinery, as well as the exporting of the finished products. Contact us to learn more about manufacturing in Mexico.
