U.S. vs. Mexico: 5 Manufacturing Factors to Consider

by Kathy S. on September 16, 2015

U.S. vs. Mexico--5 Manufacturing Factors to ConsiderRecent studies show manufacturing costs in the U.S. and Mexico are at or below those of China, according to the Boston Consulting Group and Alix Partners. Manufacturers with operations in the U.S. and Mexico have been known to quote both options per project in order to better understand cost differences. Consider the following five factors to help make the best determination for your business:

  1. Labor

In general, manufacturing in Mexico saves money with regard to labor when the labor content is between 20 and 30%. Companies may save an estimated 10 to 15% on assembly costs in Mexico over U.S. costs on medium-volume projects with at least 20% labor content.

  1. Demand

Understanding the variability in demand is crucial as customs and transportation/logistics costs are negligible when border crossings are reduced to one or two per week.

  1. Project

The scale of the project will impact annualized cost savings. For example, clustering a product family with a mix of low- and medium-volume production may provide the needed scale to drive significant savings.

  1. Location

While finished goods may cross the border the same day they are manufactured, some border locations are easier to reach than others. Strong manufacturing clusters are also located farther south, including Guadalajara and Monterrey, but these facilities typically require a greater supply chain pipeline.

  1. End-Market

Consider the end-market when determining the most cost-effective choice. Where will the product ultimately ship? The free trade agreements between the U.S. or Mexico and the end-market country should also play a role in the decision.

Mexico has a high-quality, well-trained labor pool, especially in skilled trades like tooling and metal fabrication. Carefully weigh all the factors when deciding which side of the border your manufacturing operations should take place

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