The new generation of Mexico Shelter Programs
By Adina Moloman
Source: BCG (The Boston Consulting Group analysis)
At the beginning of 1970 when the Shelter model was conceived the Shelter operator was the one who was responsible for compliance with all Mexican regulations and answered to the Mexican authorities. So at the beginning the North American Manufacturers had the opportunity to benefit from a single cost advantage — reduced labor in Mexico.
New emerged countries in Asia and Eastern Europe started developing domestic supply chains which actually reduced the total delivered cost. Because of the competition pressure, shelter operators and the government began working with domestic suppliers to develop needed supply chains within Mexico. It was added new services to their offerings: they began helping their clients find and develop local suppliers; they helped the first and second tier suppliers to OEMs, move their manufacturing operations close to their customers.
The next step was the importance to leverage economies of scale by working with multiple companies operating at the same industrial park. So the Shelter clients share the costs of common needs such as freight, security, administration and maintenance.
So this new generation of Mexico Shelter offers competitive cost advantages at every level labor, supply chain, capital investment and administration.
This new trend also involves different operation systems within Mexico Shelter companies. Some of them help a manufacturer operate in Mexico without establishing an immediate legal presence, other shelter companies offers services that can range from simple consulting to a service provider that completely integrates every aspect involved in setting up and operating a manufacturing facility in Mexico. There are a few Shelters model such as: start up Services Shelter model[1], off-site Management Services Shelter model[2], on-site Shared Services Shelter model[3].
[1] The start-up model is addressed to manufacturers which are seeking a simple type of services that involves operating under a short to medium-term contract, they assist in site selection, logistics, facilities licensing, can help in the initial selection of key Mexican personnel, legal requirements ,etc.
[2] Off-site management services shelter model– is the case when shelter companies provide services that continuously support their clients’ operations, usually is a long-term lease. After the set-up, the client can choose from a menu of management services involving administration and management of services such as human resources, payroll, accounting services, facilities management, logistics, procurement, worker transportation, medical services, import/export etc.
The services this model is leveraging typically include: human resources, payroll, accounting services, facilities management, logistics, procurement, worker transportation, medical services, delivery services including software. Other important services may also be included such as: compliance with labor and safety laws as well as government, labor and community relations.
[3] On-site shared services-There are shelter operators that combine start-up and management services with centralization that maximize economies of scale to provide added cost savings and efficiency to their clients. Operators of shared-services facilities handle every support aspect while their clients completely control the manufacturing process. Service providers focused on this model, create an environment that allows each client to develop its own corporate identity and control its own production process. This environment utilizes a centralized administrative center that provides the service provider with the leverage and economies of scale to actively reduce overall administrative cost.
These providers bring several services to their clients together to operate in a single industrial park. Start-up in this situation can be extremely fast and affordable since the operational environment already exists.
