A contract manufacturer can offer many benefits if you are considering expanding your manufacturing capabilities. Many foreign companies are attracted to an expansion in Mexico because of the cost effective labor and the overall manufacturing capabilities that can enhance production and expand the business marketplace.
What Does Contract Manufacturing Do?
Contract manufacturing is essentially a manufacturing agreement with another company to make certain components or products for them for a specific time. It is basically a way to outsource through a business agreement involving the production of parts, components or entire products per a company’s specifications. These manufactured products may then be used by the company in its own manufacturing process.
While the company’s administrative or corporate facility is located in the U.S., manufacturing plants are located elsewhere, such as in Mexico.
In Mexico, contract manufacturing in 1964, as a program to enhance the economy overall and increase industry opportunities in the country. IMMEX, the Maquiladora, Manufacturing and Export Services Industry modernized the system in 2006.
Today, foreign-owned companies can benefit from contract manufacturing in Mexico due to strong benefits in labor, tax, and the importation of both duty and tariff-free raw materials. Once completed, the manufactured products can be exported to the manufacturer’s country of ownership.
How Does Contract Management Work?
Contract management works simply, with the Mexico-based management and facilities conducting a company’s daily manufacturing operations, while the foreign company owner controls the manufacturing expertise and production operation, and the company’s long-term planning.
How does this help companies? Through:
- Flexible production
- Quick and efficient operation start-up
- Cost and tax benefits
- Access to a large and skilled labor pool
Where Can a Contract Manufacturer Be Located?
One excellent choice is Mexico, where Tijuana manufacturing facilities are a popular location due to its geography, as it is situated close to the U.S. border. It’s a successful import/export hub, and has the capability to provide established manufacturing providers.
Contract manufacturers can offer:
- On-site manufacturing process management
- Hiring and human resources
- Administration of payroll and benefits
- Management of exports and imports
- Management of customs
- Management of freight and logistics
- Handling tax issues
- Providing oversight for environmental and occupational health and safety standards
- Handle purchasing negotiations
- Facilitate vendor relationships
- Manage facilities, leases, and equipment
- In some cases, provide building leasing
Some providers can offer a full community for foreign companies, such as an industrial park location. At a location such as that, building leasing is included for companies among other services.
Contract Manufacturing Cost Benefits and Tax Incentives
Using contract manufacturing can offer many additional benefits for companies, such as shipping costs at low rates, duty-free production materials and lower labor costs than in a company’s home country. This type of manufacturing also makes compliance with local regulations easier.
And, of course, there are many tax benefits with contract manufacturing. This includes:
- corporate income tax
- payroll tax
- VAT tax
For all of these reasons and more, working with a contract manufacturer is the best way to take advantage of a wide range of benefits, allowing companies to focus on innovation and new services while maintaining a high standard of production and meeting deadlines. Coastline International can help with your contract manufacturing needs. While the company is based in San Diego, California, all of Coastline’s manufacturing operations are conducted at their Tijuana, Mexico location.
Are You Ready to Learn More About Mexico Contract Manufacturing at Coastline International
If you’d like to find out more about contract manufacturing in Tijuana, or get started with this type of program, then Coastline International can help. We specialize in the nearshore manufacturing of medical devices and electronics and we also have skilled expertise in the aerospace and consumer goods sectors, too.
Call Coastline International at (888) 748-7177 or contact us online, today!