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:
(1) To overstate the savings a manufacturer will obtain by moving to Mexico. Thus, dazzling the eyes of manufacturers eager to realize fantastic savings.
(2) 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.
(3) 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?
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 maximum disclosure:
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.
Here you see all costs, including employee benefits, all taxes, expenses, services and our shelter fee.