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North America, continent
Robin ConklenNov 28, 2024 7:00:00 AM10 min read

Shelter Services: Boosting North American Manufacturing Expansion

North America’s Manufacturing Surge

North American manufacturing is on the rise, driven by the need for resilient supply chains and the strategic advantages of nearshoring. Recent data shows substantial growth in sectors like automotive, electronics, and consumer goods production across the U.S., Canada, and Mexico.

usmca-ignites-intraregional-export-growth (2)

According to industry studies, North American manufacturing output has steadily increased, supported by high productivity rates and a skilled workforce. These trends align with the broader nearshoring movement, as companies look to relocate production closer to key markets to reduce lead times, improve quality control, and increase flexibility.

 

Regional Industrial Strength

The United States, Canada and Mexico share a population of 500 million people, a GDP of nearly $30 trillion dollars, and each alone are important global economies.

  • Trilateral Trade Powerhouse: The USMCA region accounts for over $1.5 trillion in annual trade, with manufacturing playing a key role in connecting supply chains across the United States, Mexico, and Canada.
  • Workforce Strength: North America benefits from a combined workforce of over 30 million skilled manufacturing workers, spread across varios industries like automotive, electronics, aerospace, and medical devices (BLS, INEGI, StatCan).
  • Highly Integrated Supply Chains: Approximately 40% of the value of finished goods imported from Mexico to the U.S. originates from American inputs, highlighting the strong integration of regional supply chains.
  • Comparative Advantage: The countries are natural partners, evidenced by the  U.S. and Canada as global leaders in advanced manufacturing technologies, while Mexico offers the ideal conditions for labor-intensive operations and increasing technological integration.

In face, 1 of every 17 U.S. jobs is supported by trade with Canada and Mexico. These jobs are commonly associated with manufacturing, but in reality the vast majority are in the service sectors, including everything from finance to healthcare and retail. When competitively priced goods are brought into the marketplace, the buying power for local consumers increases.

 

Top Trading Partners in the USMCA

 

Mexico-Top-Trading-Partner

 

Recent Manufacturing Investments

Recent manufacturing investments across Canada, Mexico, and the United States highlight the region's dynamic industrial growth. 

Investments in Canada

Manufacturing-Investments-in-Canada

Volkswagen's Battery Plant

Volkswagen aims to establish a North American battery production facility to support its electric vehicle (EV) expansion, leveraging Canada's resources and skilled workforce.

  • Industry: Automotive (Electric Vehicle Batteries)
  • Investment Size: €4.8 billion (approximately $5.2 billion USD)
  • Location: St. Thomas, Ontario

Nutrien's Fertilizer Expansion

The motive of Nutrien's expansion is to increase potash production capacity in response to global demand for fertilizers, enhancing food security in the face of uncertain supply in Eastern Europe.
  • Industry: Agriculture (Fertilizer Production)
  • Investment Size: $2 billion USD
  • Location: Saskatchewan

Stellantis and LG Energy Solution's Battery Plant

To establish Canada's first large-scale EV battery manufacturing facility, supporting Stellantis's North American EV strategy and aligning with Canada's focus on clean energy and sustainability.

  • Industry: Automotive (Electric Vehicle Batteries)
  • Investment Size: $5 billion CAD (approximately $3.7 billion USD)
  • Location: Windsor, Ontario

 

U.S. Investments

Manufacturing-Investments-in-USA

Intel’s Semiconductor Manufacturing Plant

To boost domestic semiconductor manufacturing, reduce reliance on overseas chip production, and meet the growing demand for advanced computing technologies. This investment aligns with the CHIPS Act, designed to strengthen U.S. semiconductor supply chains.

  • Industry: Semiconductors
  • Investment Size: $20 billion USD
  • Location: New Albany, Ohio

Nestlé Purina PetCare Expansion

Nestlé Purina's investment in a new manufacturing facility reflects the growing demand for premium pet food products in the U.S. market. This expansion aims to meet increasing consumer needs while leveraging the region's skilled workforce and strategic logistics infrastructure.

  • Industry: Food and Beverage (Pet Food Production)
  • Investment Size: $550 million USD
  • Location: Williamsburg Township, Ohio

Hyundai Motor Group's EV and Battery Manufacturing Plant

To expand Hyundai's EV production capabilities and support its commitment to sustainability and electrification goals. This investment will establish a state-of-the-art facility to produce EVs and batteries for the North American market.
  • Industry: Automotive (Electric Vehicles and Batteries)
  • Investment Size: $5.54 billion USD
  • Location: Bryan County, Georgia

 

Investments in Mexico

Manufacturing-Investments-in-Mexico

Volvo's Truck Plant

Volvo's motive is to expand production capacity for Volvo and Mack Trucks in North America, capitalizing on Monterrey's logistical advantages. 

  • Industry: Automotive (Heavy-Duty Trucks)
  • Investment Size: $700 million USD
  • Location: Monterrey, Nuevo León

Taiwanese Electronics Manufacturer Inventec's Facility Expansion

To expand production capacity for laptops, servers, and other electronic components, capitalizing on nearshoring opportunities and Mexico's proximity to the U.S. market. This investment is motivated by the growing demand for electronics in North America and the shift away from reliance on Asian supply chains due to trade and logistical challenges.

  • Industry: Electronics (Computing and Communication Devices)
  • Investment Size: $300 million USD
  • Location: Ciudad Juárez, Chihuahua

Toyota's Production Expansion

To produce the new generation of the Tacoma pickup, including hybrid models, and create 1,600 new jobs.

  • Industry: Automotive
  • Investment Size: $1.45 billion USD
  • Location: Tijuana, Baja California, and Guanajuato

 

Key Advantages of Expanding Across North America

 

Proximity to Major Markets

One of the key reasons manufacturers are choosing to expand within North America is the proximity to major markets, particularly the U.S. By producing goods closer to their end markets, companies can reduce lead times and lower logistics costs. This proximity not only speeds up delivery but also enables manufacturers to respond quickly to changing demand, a critical advantage in today’s fast-paced economy.

North-America-Transportation-Logistics-Times

In particular, Mexico’s location provides an ideal base for nearshoring, allowing companies to take advantage of its shared border with the United States. Goods manufactured in Mexico can reach the U.S. in hours rather than weeks, making it possible to optimize inventory management and avoid costly delays.

Skilled Workforce & Specialized Expertise

North America is home to a highly skilled and adaptable workforce. In Mexico, the labor market has evolved to meet the demands of industries such as automotive, electronics, and aerospace, which increasingly require expertise in advanced manufacturing techniques. As the electric vehicle (EV) sector grows, for instance, Mexico’s workforce is rapidly adapting to new technologies and production processes in electromobility.

North-America-Engineering-Strength

This established talent pool allows manufacturers to ramp up production without the extensive training and onboarding periods often required in other regions. Mexico’s technical universities and vocational training programs also provide a steady pipeline of qualified workers, reducing recruitment challenges and supporting companies’ long-term growth.

Trade Advantages & Economic Incentives

The United States-Mexico-Canada Agreement (USMCA) has further boosted North America’s attractiveness for manufacturers by reducing trade barriers and fostering regulatory alignment across the three countries. This agreement provides tariff benefits and streamlines cross-border commerce, making it easier for companies to operate across the region.

Free-Trade-Agreements-in-Mexico

Additionally, various states in Mexico offer economic incentives to attract foreign investment, including tax breaks, simplified permitting processes, and free trade zones. These incentives, combined with Mexico’s competitive labor costs, create an advantageous environment for manufacturers looking to expand their operations affordably and efficiently.

 

The Role of Manufacturing Outsourcing and Shelter Service Providers

In the context of expansion, manufacturers may consider outsourcing their production to a contract manufacturer or shelter service provider. From cost or risk reduction to regulatory or market compliance in a new market, there are many reasons why manufacturers seek a partner.

Understanding Manufacturing Outsourcing and Shelter Services

For manufacturers unfamiliar with the regulatory and operational landscape in North America, manufacturing outsourcing and shelter services offer a practical solution. These services, particularly shelter providers in Mexico, allow companies to focus on production while the shelter provider manages administrative tasks, regulatory compliance, and other essential functions.

Shelter services in Mexico are designed to simplify market entry, providing a fully supported operational framework that allows manufacturers to sidestep the complexities of establishing a standalone entity. By handling HR, legal compliance, payroll, and other non-core functions, shelter providers offer a streamlined approach that reduces risk and accelerates time to market.

How Shelter Services Support a Smooth Expansion in Mexico

  • Legal and Regulatory Compliance: Shelter providers have in-depth knowledge of Mexico’s legal and regulatory landscape, from labor laws to environmental standards. This expertise is invaluable for manufacturers, ensuring compliance and avoiding legal complications.
  • Administrative Support: By outsourcing HR, payroll, and other administrative tasks, companies can focus on production while the shelter provider manages day-to-day operations.
  • Supply Chain and Logistics Optimization: Shelter providers offer access to local networks and suppliers, which can reduce costs and improve supply chain efficiency. Many providers also help navigate customs and logistics, making cross-border trade smoother.

Agility and Flexibility in Expansion with Shelter Services

In the new era of trade fueled by nearshoring, advanced technologies, and shifting geopolitical dynamics, manufacturers are rethinking their strategies to capitalize on regional strengths and sustainability.

Why Agility Matters in the Current Manufacturing Landscape

In today’s unpredictable market, agility is key. Manufacturers must be able to respond swiftly to changes in demand, supply chain disruptions, and evolving customer preferences. Shelter and outsourcing services may provide the flexibility to scale operations as needed, as well as provide integral support to key suppliers with small-scale operations.

Quick Market Entry and Scalability

One of the main advantages of shelter services is the ability to enter the market quickly. Setting up a standalone entity in a new country can take months, if not years, due to regulatory requirements and setup costs. Shelter providers, however, offer turnkey solutions with ready-to-operate facilities, trained personnel, and established local networks, enabling manufacturers to start production in weeks.

Risk Mitigation and Cost Control

By outsourcing administrative and compliance functions to a shelter provider, manufacturers can reduce financial risks and control costs. Shelter services offer predictable cost structures, which can be advantageous for budgeting and financial planning. This setup allows companies to allocate resources more effectively, focusing on production and growth rather than administrative overhead.

 

Case Examples of Shelter Services in Action

As a company offering shelter services in Mexico for nearly 40 years, Prodensa has adapted the turnkey operating models that provide value for foreign manufacturers seeking to expand in Mexico.

Dedicated Shelter in Mexico

Partners-in-Growth-Dedicated-Shelter-ServicesA dedicated shelter model involves partnering with a local shelter service provider in Mexico, and together establishing a local entity. The shelter service provider administers the business operations alongside the foreign manufacturer overseeing all manufacturing-related operations. A standalone entity minimizes risks and streamlines compliance while offering more flexibility in the partnership.

 

U.S. Inshoring Services

Inshoring-Model-for-Increased-ProtectionManufacturing services are delivered from the United States, with Prodensa leveraging operational advantages from Mexico. A binational solution with dual benefits. The ease of doing business in the U.S. combined with full control over the manufacturing process of products made in Mexico. The inshoring model is pre-built by Prodensa, providing the fastest way to expand into the booming Mexico market.

 

 

Strategic Considerations for Manufacturers Looking to Expand in North America

 

Evaluating the Right Location for Expansion

Selecting the right location for expansion is critical. Factors like proximity to customers, availability of skilled labor, and local incentives can significantly impact operational efficiency and cost-effectiveness. Manufacturers should consider regional benefits within North America, particularly in Mexico, where specific states offer unique advantages for various industries.

Read how one company compared site options in Mexico and the United States for their planned expansion. 

 

Long-term Planning with Nearshoring and Shelter Services

While shelter services offer immediate support for market entry, long-term planning is essential for sustainable growth. Manufacturers should approach nearshoring with a strategic vision, focusing on building resilient supply chains and investing in workforce development.

Shelter providers can support this long-term approach by offering scalable solutions and assisting with eventual transitions to standalone operations if desired. This continuity allows manufacturers to develop a strong presence in North America, positioning them for continued success as market dynamics evolve.

 

 

 

Embracing Nearshoring and Shelter Services for North American Growth

For manufacturers aiming to strengthen their position in the North American market, nearshoring and shelter services present compelling advantages. By leveraging these strategies, companies can achieve agility, cost-effectiveness, and risk mitigation, while tapping into the benefits of the USMCA and a skilled regional workforce.

The demand for resilient and responsive supply chains has never been greater, and North America is emerging as a prime location for manufacturing expansion. With the support of shelter service providers, manufacturers can navigate the complexities of entering new markets, maintain operational flexibility, and set the stage for sustainable growth.

Now is the time for manufacturers to embrace the opportunities presented by nearshoring. By partnering with a trusted shelter service provider, companies can unlock the full potential of the North American market, ensuring they remain competitive, adaptable, and positioned for long-term success.

 

Signature-Robin-Conklen-North-American-Manufacturing

 

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