True Cost of Operating in Mexico
under a Shelter Program
To be sure, a manufacturer will save over
65% in labor costs in Mexico when compared to the USA or Canada.
While the labor costs will go down dramatically, some costs will
go up such as water, electricity (in some cases), freight and
travel. Also, there will be new costs such as customs, brokerage
fees and cross-border shuttle fees. You need to know the full
picture. Unfortunately, many shelter service providers use what
I call a “low ball” or deceptive tactic when presenting the
costs of operating in Mexico. Their purpose is threefold:
To overstate the savings a manufacturer will obtain by
moving to Mexico. Thus, dazzling the eyes of manufacturers eager
to realize fantastic savings.
To understate the high costs of some services required in
international trade such as Mexican Customs fees, customs
brokerage on both sides of the border and cross-border freight.
To falsely distinguish themselves as “low cost” providers
compared to their competitors that do disclose all the costs.
Whether you call it false advertising
or less than full disclosure, the prospective client is
left with a false impression that (1) the operating costs in
Mexico are much lower than they really are and (2) that the “low
ball” shelter provider is more cost effective than his
competitors. To be sure this type of shelter provider covers
himself by stating in his literature that the client is
responsible for all “pass through” costs incurred on behalf of
the client. But these “pass through” costs are not discussed in
detail and the client is left with the thought that the “pass
through” costs are insignificant. Unfortunately, “pass through”
costs are over 35% of the cost of operating in Mexico.
Even if a competitor shelter provider fully
discloses “pass through” costs, why should a prospective client
look at International Assemblers?
- If we feel that you are not going to
significantly save money by moving to Mexico, we will tell
- We have the very important intangible
of great service. All of our customers agree to that.
- For sure, you will have “pass through”
costs with us and they will be fully and clearly disclosed.
- In most cases, the “pass through”
costs will be significantly lower with us. Currently, we
have eight businesses under one roof. They share many “pass
through” costs such as Mexican Customs fees, brokerage fees
on both sides of the border and truck crossing fees. We are
the import and exporter of record which saves the clients a
lot of money when sharing services.
- We have an in-house maintenance
department that is available at all times to assist the
clients. There is no need to hire outside contractors.
- We are hands-on managers and are in
the building at all times. If you need assistance, we are
immediately there to help. Great Service is our goal.
Unfortunately, there is no standard pricing
method among the various shelter providers and this fact leads
to confusion and “apples to oranges” comparisons. While we will
customize our pricing / invoicing in any format that is
compatible with the needs of our clients, we traditionally
present our pricing / costs in two formats. Both formats provide
- Loaded Labor Rate. Here we calculate
an hourly rate for each labor category and include prorated
“pass through” costs and our fee. We bill you weekly for all
hours worked. For smaller manufacturers, this greatly
simplifies budgeting. All labor rates are F.O.B. Nogales,
Arizona. Specific expenses such as MRO purchasing, phone
service, Internet service and special shipments are billed
to the client as individual line items..
- Itemized “Cost-Plus.” Here you see all
costs, including employee benefits, all taxes, expenses,
services and our shelter fee.
We invite you to look at our “Comparison:
International Assemblers versus the Competition.” This spread
sheet shows all the costs of operating in Mexico. It does not
include your costs of logistics to and from the border nor your
travel expenses. Please click on that link to go directly to the
spread sheet. Please note that this is an actual example of an
operation with 51 employees. Operations with more or less
employees may ave different average costs.
We invite all questions and comments and
will quickly reply to you. Great service is our goal.
Dick Crocker, President
International Assemblers, Inc.