Welcome to our insightful presentation on "Starting Nearshore Manufacturing in Mexico: Expectations vs. Reality." In today's dynamic business landscape, the decision to initiate nearshore manufacturing comes with a set of expectations and assumptions. However, this endeavor often unveils unique challenges and opportunities. Join us as we explore the intricacies of nearshore manufacturing ventures. We shed light on the expectations that pave the way and the realities that shape the journey. Gain valuable insights, practical tips, and a comprehensive understanding of what lies ahead in nearshore manufacturing in Mexico.

1. Starting Nearshore
Manufacturing in Mexico
Expectations vs. Reality
2024

2. 2
Introduction
Mexico has long been one of the most convenient and popular
destinations for businesses looking to manufacture in a
nearshore, low-cost environment. However, nearshore
manufacturing is not without risk.
We at NovaLink believe that manufacturing in Mexico is the
most strategic and cost-effective choice for outsourcing
manufacturing – if you know what nearshore manufacturing in
Mexico means.

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Locations for Reshoring
Source: Consultancy Eu: European companies increasingly moving to reshore Asia production

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Expectation: I don't have a prototype product, but my
company can make one for me.
Reality: It is common practice for a company considering
outsourcing manufacturing to have a prototype made before
engaging a manufacturing services provider. Mexico does not
typically have the required infrastructure to deliver prototypes
before production fruition unless another company makes a similar
product in the country.
Companies seeking to engage with a Mexican manufacturer for
production should have their prototypes made in the US.

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Expectation: I can run at a low volume or do a short
run production.
Reality: NovaLink's nearshore manufacturing partner requires a consistent
production flow. Companies seeking to engage with Novalink can do a short-run
or limited product run if they have plans to continue to make the same short-run
in the future. The cost of producing the item and sourcing the labor would be too
expensive for Novalink to undertake such an effort as a project. Even if Novalink
accomplished this, the final cost to manufacture the good would be prohibitively
high. In short, self-produced or outsourced manufacturing should have a steady,
consistent volume and require at least 15 or more employees to produce for it to
be cost-effective to engage with Novalink in Mexico.
If your product does not fit these guidelines, it makes more sense to have a
contract manufacturer produce it for you.

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Long Run Production Cost Curves
Source: Brigham Young University: Econ 150.

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Expectation: I don't need a lot of money to get
started.
Reality: If you are a startup, you must have total funding from an
investor for your Mexico project. Novalink is not equipped to work
with startups without funding. In addition, providing manufacturing
space, equipment, and labor will require funding for a project to
start in Mexico with Novalink.

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Jason Wolfe, NovaLink CEO
"There will always be a need for capital when starting up an outsourced
manufacturing project in Mexico or relocating an existing one. However, with
NovaLink, we have the infrastructure in place. We also provide the ability for a
company to start small and grow into a larger footprint to meet its changing
needs. This means that companies with whom we partner absorb the overhead
proportional to the space and employee level required.
Furthermore, NovaLink saves its customers upfront investment in that the client
does not need to incorporate in Mexico or hire legal experts to negotiate union
contracts and acquire permits. We already have this in place. NovaLink is also
positioned to assist manufacturers with capital investment if required."

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Expectation: I have an idea and I want my company
help me get it to reality.
Reality: Manufacturing companies would love to be part of the
next big thing! However, getting a product from concept to reality
will require much effort on the client's part beforehand.
As a standard, before approaching any nearshore manufacturing
partner, a company should have a firm grasp of what the product
will look like. It should also work up a general cost estimate for
production (with engineering specifications). Companies should
also consider how many people it will take to manufacture the item
and what kind of equipment will be needed to do the job.

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Manufacturing Cost Analysis
Source: Research Gate: Manufacturing Cost Analysis

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Expectation: I have no equipment to begin
manufacturing. Can my Partner Provide Equipment?
Reality: Nearshore manufacturing partners such as NovaLink will
help their customers obtain equipment for their production if they
do not have the necessary machinery. However, finding and
sourcing the equipment is very time-consuming (as well as locating
the labor to run the equipment) and will delay production.
Prospective customers may wish to consult with a company like
NovaLink beforehand to understand better the equipment they
may need and its cost. Having the option of finding the equipment
for yourself will shorten the timeline and get production off the
ground faster.

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Expectation: I will need a large labor pool.
Reality: This depends on the product a company seeks to produce. A simple
product may only require five employees to manufacture. While on the other
hand, a larger, more complex product that requires more machinery, or a product
that needs to be assembled, will require more labor.
Cut and sew products, especially ones with multiple pieces to be created and
assembled, like a handbag or complex garment, are very labor-intensive.
However, some products require simple assembly and can be produced in a
single unit may require less labor. The most effective way to determine if a
product will require a large labor pool to produce is to have a specification/demo
made and have NovaLink's engineers examine it. Then, the company's
manufacturing experts can determine if the product needs a large assembly in
Mexico team to make it.

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Expectation: There will be a lot of government red
tape.
Reality: Any large manufacturing project, whether in the United States or
Mexico, will require you to navigate through the regulations associated with that
country – which is an inevitable reality. However, it does not have to be a
bureaucratic nightmare that stops your project in its tracks. There are experts in
nearshore manufacturing companies like NovaLink that can help you navigate
your way through the required regulations, forms, and inspections.
In addition, as mentioned previously, the more legwork committed on the front
end of your project, the easier it will be for you to anticipate what is required
from the bureaucracy of your country of origin, like Mexico, to allow you to
budget time and plan for these contingencies.

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Expectation: Starting manufacturing will take a long
time.
Reality: Here is where you may be welcomed with a pleasant surprise: if you
have done your due diligence and planned for your project thoroughly, your time
to get things done may be much shorter than you anticipate: At NovaLink,
typically set-up under our model is quick; within a month. This depends on many
variables. However, your planning will enable you to be prepared for these
variables to move things as quickly as possible. The belief that a manufacturing
project will take over a year to start is false.

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Conclusion
Knowing where to begin is the most significant hurdle to any large
business project. Understanding the realities of starting a
manufacturing business in Mexico and planning for complications
will make your transition from concept to reality smooth.

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Sources for Graphics
European companies increasingly moving to reshore Asia
production: https://www.consultancy.eu/news/7430/european-
companies-increasingly-moving-to-reshore-asia-production
Long Production Average Cost Curves:
https://courses.byui.edu/econ_150/econ_150_old_site/lesson_06.
htm
Manufacturing Cost Analysis:
https://www.researchgate.net/figure/Manufacturing-cost-
breakdown_fig17_289541363

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NovaLink Nearshore Manufacturing
6665 Padre Island Highway Suite B
Brownsville, TX 78521
(956) 621-7362 contact@novalinkmx.com https://www.linkedin.com/company/novalink
www.novalinkmx.com