Contract Manufacturing: What Is It? Benefits & Challenges?

Contract Manufacturing: What Is It? Benefits & Challenges?

Contract manufacturing is an outsourcing of certain production activities that the manufacturer and assembly once performed to a third party. Did you know that thousands of contract manufacturing companies relocated to Mexico?. It is currently a manufacturing facilities boom and has become a prime manufacturing location for Us and Canadian auto parts distributors. Contract manufacturing in Mexico is always a good solution for all those companies who are seeking to cut costs in order to sell competitively in the world’s largest consumer market. It is the most cost-effective way for establishing your contract manufacturing operation in Mexico.

If you are in search of contract manufacturing companies in Mexico or raw materials, then look no further. Mexico has Tier I, Tier II, and Tier III suppliers that can help connect you with.

What Is Mexico Contract Manufacturing?

Mexico contract manufacturing is different from self-sustaining work: a Mexican contract manufacturer controls all the production, charges the foreign manufacturer, and carries all its production assets.

Benefits of Contract Manufacturing In Mexico

More than years ago, the US companies started relying on contract manufacturing solutions for oem procurement consulting to full fill their production needs. It consumes a low labor cost and is closer proximity while maintaining excellent quality than other countries The most highlighted benefits are as follows:

1. Supply Chain Too Short

Mexico came across the same continent as the US and Canada, so the supply chain is short. A short supply chain, which sums up the idea of “near sharing,” comes with many benefits, including:

  • It takes less shipping time.
  • Minimize the costs of shipping.
  • Less opportunity for disruption.
  • More accountability.

2. Factory Visits Become Easy

Traveling to Mexico is less costly than flying to other Asian countries. Not only the cost is a major issue that comes with a face-to-face meeting with your vendor, but you also need to worry about productivity. What if it is necessary to meet with your auto parts manufacturer on a daily basis?. Mexico is the best choice in the same time zone as the U.S. and Canada, give or take an hour or two. Industries that are producing goods in Mexico benefit from:

  • Faster and Cheaper Flights.
  • Time Zone Compatibility.
  • More Productivity.

3. Experienced Workforce

As compared to the US and other countries, Mexico give rise to more engineering, manufacturing, and construction degrees per capita. They have stringent labor laws, and you’ve got a Mexican manufacturing plant with a highly skilled team of employees.

To Connect With Reliable Contract Manufacturing Companies In Mexico Talk To Our Team

4. Low Shipping Costs

One of the largest benefits of manufacturing in Mexico is its proximity to the US and Canada. It sounds like the shipping cost is much lower than in other countries. Since Mexico is linked by land, Mexican manufacturers can ship via bus or truck. This makes them immune to the rising ocean shipping costs.

  • Enforce safe working environments.
  • Give sustainable living for workers.
  • Create fair working conditions.

The law was updated in 2012, and the new regulations in place are contributing to the growth of manufacturing jobs in Mexico.

How To Find A Quality Contract Manufacturing Company In Mexico

While Mexico is one of the best places for manufacturing consulting services, you should still do your due diligence when looking for a Mexican contract manufacturer. Audit your contract manufacturer when it's time to renew your contract.


Here’s what you need to look for in a contract manufacturer:


  • certifications: Certifications that show that the manufacturer crosses the quality standards set by the global automotive industry. The ISO/TS 16949 and ISO 9001-2008 certifications are good ones to keep an eye out for.
  • Partnerships with reputable companies: As you know an experienced contract manufacturer is reliable and capable to work. So do partnerships with the manufacturer who has experience working with major automakers and other well-known companies.
  • Experience: The more experience a contract manufacturer has, the better the results are. However, experience isn’t everything, as you should also be looking for partnerships with reputable companies..
  • Environmental, labor, and intellectual property standards: Make sure that the contract manufacturer will look after your intellectual property and attach it to labor and environmental standards.
  • Continuing investment in equipment, facilities, and employees: You deserve a contract manufacturer that has the most recent equipment, new facilities, and employees who are experienced in the latest technologies.

How To Find Reliable Contract Manufacturers In Mexico

Are you looking for a contract manufacturer in Mexico?. You can look for many consulting companies that specialize in matching contract manufacturers with clients in the US or Canada. Meanwhile, if you want to find a reliable contract manufacturer in Mexico, you need to go a step further by following this simple process.

1. Do Research

Research is most important when it comes to contracting a manufacturer. By conducting research, you’ll be able to find out the questionable contract manufacturers and finish up with a precise list of reputable contract manufacturers. Do your research by covering the following attributes:

  • Experience
  • Technology
  • Employees
  • Partnerships
  • Quality Certifications
  • Labor and Environmental Standards
  • Assets

2. Ask Questions

Once you get a precise list of reputable contract manufacturers, it’s time to ask them questions to find out which fits your company best. Here are some repeated questions to ask::

  • How’s your financial health?
  • What often do you invest in new equipment?
  • What are your practices for managing intellectual properties?
  • Do you have experience making the parts we need?

3.Carefully Review The Supply Agreements

When a contract manufacturer sends you a supply agreement, take the time to carefully review it. A good supply agreement covers the following:

  • Detailed requirements of your business.
  • The business requirements of manufacturers.
  • A detailed bill of materials.
  • Any legal recourse you may have against the manufacturer in case of a breach.
  • A vendor list that is approved.
  • Quality requirements.
  • Warranty of products.
  • Contingency plans for delivery delays.

Cultural Challenges To Consider When Working With A Mexican Contract Manufacturer

Once you sign with a contract manufacturer in Mexico, you need to maintain an effective relationship with them. A pretty major part of it is taking the time to respect and abide by Mexican customs. Those customs include:

  • Dressing formally for all meetings, even casual meetings .
  • Saying “maybe” instead of a hard “no”.
  • Letting women initiate handshakes (if you’re a man).
  • Any legal recourse you may have against the manufacturer in case of a breach.
  • Avoiding constant eye contact.
  • Spend quite some time with the executive (you might even be invited to his/her house).
  • Not conducting meetings on weekends.

If you have any more questions about doing business with contract manufacturing companies in Mexico, you’re more than welcome to contact us.

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