Mexico manufacturing, US inventories and safety stock

Manufacturers are returning to Mexico after “experimenting” in the Asia Pacific region. Some of the big reasons for this return are ; to reduce time to market, eliminate the financial costs of inventories in transit, lower the logistics costs, and to strengthen the supply chain by moving closer to just-in-time deliveries.

But moving to Mexico isn’t going to solve all the problems.

A September 2006 article in CFO magazine points out how US businesses are increasing safety stocks “just in case”. Delayed in the USA The article points out how supply chain disruptions are being provoked by an increasingly saturated US highway system and bottlenecks in deepwater ports and railyards.

The good news is that Mexico is close to the USA, a truckload of goods can leave any point in Mexico and arrive at the US destination in as little as 4-5 days. The railyards and new multimodal Interior Port in Guanajuato, Mexico allow manufacturers to establish production facilities in the interior of the country. Exporters can now clear customs and load the sealed container onto the rail-car at the new (2006) high capacity Customs port located in the geographic center of Mexico.

The bad news is that unless the US begins to upgrade their highway, port and rail facilities, supply chain managers in the US will be buying and storing higher levels of inventory to assure continuity of operations, “just in case”.

Related Links

Delayed in the USA – Supply Chain

Industrial and Business Parks in Mexico

AMPIP Mexican Association of Industrial and Business Parks

Maquiladoras in Mexico

An Internet search for the definition of the terms maquila and maquiladora will turn up quite a variety of ideas and interpretations.

The maquiladoras have created quite an emotional and political reaction on both sides of the US and Mexico border. They have been accused of stealing jobs from the US, promoting sub-standard working conditions, lowering wages, exploiting workers, and not contributing to the Mexican economy.

Despite the controversy, the maquiladoras are growing and thriving in Mexico. They offer attractive benefits to organizations that are seeking competitive production and assembly costs, skilled labor and Mexico’s proximity to the US market. Recently many transnational organizations that moved manufacturing operations to China in the 1990’s have moved back to Mexico due to cost and logistic advantages.

Maquila and Maquiladoras – definitions and activities

• The term maquila comes from the Spanish term that refers to the portion paid (in grain, flour or oil) to a miller for milling a farmer’s grain.

• Maquiladoras are legal entities under Mexican law, with special tax privileges, they provide service, assembly or manufacturing operations.

• Maquiladoras are able to import raw materials or semi-processed materials from foreign countries, in order to service, process or assemble them in Mexico, and then export the finished product back to that country. These activities take place without the collection or payment of import, export or V.A.T. (value added tax) taxes.

• The maquiladora program was created by Mexico in order for foreign organizations to take advantage of low labor costs in Mexico (primarily the USA), and to provide employment to Mexican workers in Mexico. Initially the maquila operations were located close to the US border. Currently maquila operations can be found throughout Mexico.

• Maquiladoras can be 100% foreign owned, 100% Mexican owned, or a joint venture between Mexican nationals and foreign investors.

• Maquiladoras are also known as twin plants, in-bond industries, export assembly plants and offshoring.

• The maquiladoras in Mexico suffered from a crisis of plant closings in the 1990’s and early 2000’s as many companies moved operations to China. Since 2004, Mexico has seen a resurgence of the maquiladoras.

• Check with your attorneys and accountants in Mexico about the specific benefits of the maquila program. As of September 2006, there were important legal changes (simplification and consolidation of government compliance and monitoring programs) that will affect current and future maquiladoras.

Related Links

Why you should pay attention to free trade treaties

Industrial and business parks in Mexico

Official government websites of the 32 Mexican states

Maquila and Maquiladoras in Mexico

Industrial and Business Parks in Mexico

Looking for a “plug and play” solution for your business or factory in Mexico? Take a hard look at the advantages that Mexican industrial parks offer.

AMPIP (Mexican Association of Business and Industrial Parks) can partner with you and provide contacts and information about Mexico’s industrial and business parks. They work closely with private industry, state and local governments and real estate organizations in order to provide solutions for companies seeking to quickly and easily establish a physical presence in Mexico.

“Investment Promotion
AMPIP has become one of Mexico’s leading agencies for the promotion of foreign investment projects, thanks to its participation in national and international shows, the advertising in specialized media, the alliance with other business associations and the permanent contact with a wide network of corporations and real estate players, as well as with government officials.

Part of the promotion activities include the registration of industrial assets owned by AMPIP members in our Industrial Real Estate Promotion System, available on-line at our Internet site, apart from the printed material, such as location maps edited in conjunction with the Mexican Bank for Foreign Trade (Bancomext), which are distributed worldwide.”

There are specific and unique advantages of industrial and business parks. Saving time and money are among the biggest factors. Access to transportation, power and communication infrastructure is another. The definition of “Industrial Park” will provide some idea of the other advantages.

“What is an Industrial Park?

An industrial park is a delimited extension of land, characterized by four main aspects:

1. It is located close to transport facilities, such as hightways, airports, sea ports and railways.

2. It concentrates essential dedicated infrastructure in one location for industrial operations, such as water (including sewer lines, drainage systems), electricity (including high power supply lines), telecommunications and roads.

3. It fulfills all the prerequisites to obtain the permission from local authorities for the set up of new operations (construction, environment, etc.)

4. It has a central administration that coordinates the internal safety of assets, the maintenance of public infrastructure, the promotion of new operations and the affairs with local authorities”

For more detailed information, contact: Associacion Mexicana de Parques Industriales, Monte Camerùn 54 – 1, Colonia Lomas de Barrilaco, C.P. 11010, Delegacion Miguel Hidalgo, Mèxico D.F., Mexico Tel. +52 (55) 2623-2216 Fax +52 (55) 2623-2218 Email ampip@ampip.org.mx

Related Links

AMPIP Mexican Association of Business and Industrial Parks

Official Government websites of the 32 Mexican states

How to do business in Mexico

How to negotiate with Mexican business people

Mexican official (and unofficial) holidays

Tip: How to call Mexico from the US

What to dial in order to reach a cellular phone in Mexico

Advice on what to expect when doing business with Mexico

Meeting people in Mexico – kiss, shake hands or hug?

Before you go on your business trip to Mexico

Tipping Guidelines for Mexico