Setting Up a Factory in Mexico? Here's How to Choose the Right Warehouse Location

US-Mexico Laredo Warehouse
  • May 9, 2023

Setting up a factory in Mexico can be an attractive option for businesses looking to expand their manufacturing operations and take advantage of the country's strategic location, favorable trade agreements, and cost-effective labor. However, choosing the right warehouse location is essential for successful operations, as it can impact everything from transportation costs and efficiency to regulatory compliance and labor availability.

In this article, we will offer guidance for businesses looking to set up a factory in Mexico by providing insight on how to choose the right warehouse location. We will explore important factors that businesses should take into consideration when evaluating warehouse locations, such as proximity to transportation infrastructure, labor availability, and regulatory compliance. Additionally, we will examine some of the unique challenges and opportunities that come with warehousing in Mexico, including customs clearance, security concerns, and transportation modes.

Factors to Consider When Evaluating Warehouse Location

Proximity to transportation infrastructure is a crucial factor to consider when selecting a warehouse location in Mexico. Businesses should evaluate the accessibility and availability of transportation modes such as highways, railroads, and ports, as well as the distance to major markets and suppliers. This can impact transportation costs and efficiency, as well as the speed and reliability of product delivery. Considering Mexico border towns can also offer transportation solutions for businesses, as they provide access to major highways and ports for easier transportation of goods.

Availability of labor is another critical factor to consider when evaluating warehouses in Mexico. Businesses should assess the local labor market and ensure that there is a sufficient pool of skilled and unskilled workers available to support their operations. This can include evaluating factors such as wage rates, language proficiency, and cultural differences.

Regulatory compliance and legal requirements are also important considerations when selecting warehouses in Mexico. Businesses should be aware of local regulations and requirements related to zoning, building codes, environmental regulations, and labor laws. Failure to comply with these regulations can result in fines, legal issues, and reputational damage.

Real estate costs and availability can also impact the selection of a warehouse location in Mexico. Businesses should evaluate factors such as land costs, rental rates, and availability of suitable properties that meet their specific needs. This can include factors such as size, layout, and accessibility. Before moving manufacturing to Mexico, it is important to determine if the real estate chosen is a good location for a factory in Mexico.

The Power of Nearshoring in Mexico Ebook Download Link

Unique Considerations for Warehousing in Mexico

Warehousing in Mexico provides businesses with unique challenges and opportunities that must be taken into account when selecting a warehouse location. Businesses need to consider the distance from their suppliers and customers, proximity to transportation infrastructure, and availability of labor. They should also be aware of the different regulations and legal requirements in Mexico that can impact the operation of a warehouse.

One of the unique considerations for warehousing in Mexico is the country's natural disasters. Mexico is prone to hurricanes, earthquakes, and floods, which can affect the availability of transportation and the safety of the warehouse. Businesses should consider the risk of natural disasters when choosing a warehouse location and ensure that their products and employees are protected in the event of an emergency.

Another factor to consider is the cultural differences between Mexico and the United States. Businesses that are setting up a factory in Mexico need to understand and navigate cultural differences to establish successful operations. This includes language barriers, differences in business customs, and local labor practices.

Transportation modes and routes can also present unique challenges when warehousing in Mexico. The infrastructure for transportation can be lacking in certain areas, and the cost of transportation can vary depending on the location. Working with a logistics consultant who has knowledge of the transportation landscape can help businesses select the most cost-effective and efficient transportation options.

Finally, businesses should be aware of the different types of warehouse space available in Mexico. This includes raw land, build-to-suit, and existing warehouse space. The availability and cost of each option can vary depending on the location and the specific business needs.

How to Evaluate Warehouse Location

When evaluating warehouse locations for a factory in Mexico, businesses should consider the availability and cost of utilities such as electricity, water, and gas. These factors can vary greatly depending on the location and can impact the cost of operations.

Businesses should also evaluate the local market and potential customer base when selecting a warehouse location. Being located in or near a major city or industrial center can provide access to a larger market and increase sales opportunities.

The availability and quality of infrastructure, such as roads and telecommunications, can also impact warehouse location selection. Being located in an area with modern and reliable infrastructure can improve operations and reduce costs.

Finally, businesses should evaluate the potential for expansion and growth when selecting a warehouse location. Choosing a location with room for growth and expansion can help businesses prepare for future growth and avoid the need to relocate in the future.

Consider using a Mexican 3PL or Mexican shelter company for your fulfillment needs

A Mexican shelter for manufacturers is a legally established structure in Mexico that allows companies to operate as a division. This arrangement provides numerous benefits and advantages for businesses. By utilizing a shelter, companies can focus solely on their core functions while entrusting the shelter company with essential tasks such as tax compliance, import/export procedures, accounting, and HR management.

Operating a fulfillment center through a Mexican shelter enables companies to stay competitive by significantly reducing costs, often by 50% or more. Leveraging Mexico's Maquiladora program, known as IMMEX, companies can swiftly transition to fulfillment operations in Mexico without the need to establish a separate Mexican entity. This allows businesses to enjoy the advantages of both worlds: the cost-saving benefits of operating in Mexico and the convenience of not having to go through the complex process of setting up a new company.

Overall, a Mexican shelter for manufacturers offers companies a streamlined and efficient approach to expanding their operations in Mexico. It provides a range of services and support that allow businesses to focus on their core functions while enjoying cost savings and operational advantages in the competitive manufacturing landscape.

In relation to the average client savings in Mexico's fulfillment centers industry, there is evidence illustrating a significant positive impact. Statistics indicate that on average, clients can expect to achieve a 50% reduction in costs within this particular industry. The data highlights substantial savings that are consistently achieved by businesses utilizing fulfillment centers in Mexico.

But, using a shelter company for Mexico 3PL fulfillment can have drawbacks as the training, systems and processes are the responsibility of the company that sets up the shelter fulfillment center. 

Why do Companies Hesitate to Outsource Order Fulfillment to a Third Party Logistics Provider (3PL)?

Many companies have reservations to outsourcing e-commerce fulfillment or B2B fulfillment to a third-party logistics provider. This hesitation primarily arises from concerns surrounding the relinquishment of process control. When businesses entrust their fulfillment processes to a third party, they might fear a potential loss of control over critical aspects of their operations. This includes having limited oversight and influence over the handling of their products, order processing, inventory management, and customer service. Such concerns can make companies hesitant to outsource their e-commerce fulfillment to an outsourced fulfillment center, as maintaining control over these processes is viewed as vital for ensuring customer satisfaction and maintaining their brand reputation.

Consider Visigistics as Your Logistics Consultant for Warehouse Location Selection in Mexico

Visigistics has extensive experience in supply chain and logistics consulting in Mexico. We offer individualized solutions to help businesses choose the right warehouse location based on factors such as transportation infrastructure, labor availability, and regulatory compliance. 

When it comes to manufacturing moving to Mexico, Visigistics can help businesses identify and evaluate warehouses in US and Mexico border towns that best suit their needs. We can also assist with the legal requirements involved in setting up a factory in Mexico, such as obtaining permits and licenses and navigating labor laws. 

Partnering with Visigistics for your logistics and supply chain needs in Mexico means you can experience the benefits of a reliable and experienced manufacturing and logistics consultants. Whether you are looking for eCommerce fulfillment warehouse companies for business-to-consumer (B2C) or for business-to-business (B2B), by partnering with us, you can focus on your core business operations while we handle the logistics and supply chain aspects of your operations.


The Power of Nearshoring in Mexico Ebook Download Link


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