COVID-19 Response

Sourcing Solutions for Global Manufacturers

When planning your sourcing strategy, what are the top factors you consider?

For most companies interested in manufacturing cost reduction the No. 1 answer is: total landed cost.

Total landed cost includes the purchase price of raw materials, freight, insurance, and other costs up to the port of destination. In some instances, it may also include customs duties and other taxes. Manufacturing expenses like wages and overhead also come into play.

In the past, China has excelled at providing low manufacturing and material costs, but fallen short when it comes to speed to market (freight and delivery) and taxes and customs duties. China’s VAT (value-added tax) rebates and reductions can fluctuate from as much as 5% to 17%, depending on which trade sectors it wants to promote (tires one year, others the next).

But Mexico affordably solves most foreign manufacturers’ total landed cost concerns. Here’s how:

  • Under the maquiladora permit, raw components can be imported tax-free from the U.S. or provided at reasonable cost by nearby suppliers
  • Mexico’s workforce is competitive with China’s labor (around 64.76 pesos per day or approximately $5.20 USD/day)
  • Near-shore North America delivery is fast and convenient
  • Export taxes and duties with the U.S., Canada and more than 40 other countries are waived or significantly reduced thanks to Mexico’s numerous free-trade agreements

Auto parts and medical device manufacturers are well-supported in Mexico.  The textile industry [sewn products] may also have the most to gain from a move to Mexico.

Find out how manufacturing in Mexico can benefit your sourcing strategy. MFI International has more than 30 years experience in contract manufacturing and shelter services in Mexico, and can efficiently implement your operation. For more information, call 866-918-2260.

Download Mexico Manufacturing Benefits