Doug Donahue 2017-11-07 04:54:32
Wire Harness Production in Mexico and Nicaragua – Which Operational Location Makes Most Sense for Your Business As margins in the wire harness sector continue to tighten, more and more producers are being pressured by customers to keep lowering prices. To stay ahead of the competition, many wire harness manufacturers have looked to low-cost countries as alternative production locations – both to stay ahead of rising labor costs and to expand their business. Two countries that make a lot of sense for wire harness production are Mexico and Nicaragua. Both have specific strengths and usage cases for wire harness producers looking to lower costs and gain new topline growth in the process. With this piece, we hope to help guide you on which location, Mexico or Nicaragua, might better fit your needs. Wire Harness Production in Mexico The features and benefits of Mexico to wire harness producers are well known by now. Sectoral production has a long, four-decade-plus history and tradition in Mexico, which has led to robust services and capabilities that manufacturers can rely on. For example, companies can be close to their end customers, because Mexico is logistically well connected to U.S. and Canada markets by road and rail. Other strengths tailored to wire harness production include shelter services, 3PL companies and other services providers that customized their offerings to fit in-country needs. These strengths bring new wire harness entrants scalability, as they piggyback onto existing structures. Additionally, suppliers of components and consumables have also established a welldeveloped supply network in Mexico, further enhancing scale. That same scalability isn’t yet found in Nicaragua, a country with other advantages that make it worth a look. Where Nicaragua Shines When your wire harness operation climbs above 200-250 directs, Nicaragua makes a little more economic sense. Delivery time from Nicaragua into the U.S. is 6-8 days, with overall operating costs lower than prevailing costs in Mexico. Depending on the region of Mexico you are comparing with, cost savings might be as high as 100%. Because you won't find the same scalability in wire harness that Mexico offers, you would need to have a larger workforce in Nicaragua for production to be economically viable. For transport, you would fill a 20-foot container on your own, with freight being transferred by sea to final customer destination. Some wire harness makers currently producing in Mexico are looking at Nicaragua for future diversification, to stay a step ahead of Mexico’s labor crunch. As Mexico’s economy deepens, direct workers are looking elsewhere for opportunities and some fundamental assembly processes like wire harness making may be less viable in Mexico. What makes us credible? Entrada Group has more than two decades of experience in helping foreign manufacturers establish and run their own Mexico production footprint. Our central Mexico manufacturing campus in Fresnillo, Mexico has been home to many U.S. and Canadian wire harness producers over this time. All have come to our Mexico location to lower costs, but they have also grown their overall business by virtue of their footprint in Mexico. Entrada Group also recently announced a new presence in Nicaragua, because labor rates in Mexico continue to rise. We took the step toward Nicaragua to give wire harness producers more options, enabling them to future-proof their business and diversify. If you are looking to make your wire harness operation a bit more future-proof, looking for a cost-effective alternative, or seeking ways to diversify your existing Mexico operation, we can help. We have seen our wire harness clients grow their headcount and footprint over the years and can help you prepare for a promising future in Mexico or Nicaragua. Not sure where to start with your next facility? We can help in Mexico or Nicaragua MEXICO ■ Strong tradition of wire harness production in Mexico, which led to big advantages in services, consumables and components ■ If working with an experienced shelter services operator like Entrada Group, an operation with 50 employees can be cost-competitive in Mexico ■ Direct labor rates: $5-7 per hour NICARAGUA ■ Low turnover rates (and lower training and retention costs) ■ Tax-free operating environment ■ Predictable and stable currency ■ Direct labor rates between 0-100% lower than in Mexico, dependent on region Want to learn whether Mexico or Nicaragua is the right location to support your future growth in the wire harness sector? Contact me: Doug Donahue, Entrada Group 210-828-8300
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