SHELTER PROGRAMS: An in-depth look
Although shelter programs in Mexico have been around for quite some time, you may not be familiar with some of the finer points of their services. Learn more about some of the value-added benefits of shelter programs.
“Shelter” is defined in the dictionary as protection, or a temporary refuge from the elements. In this respect, shelter programs in Mexico could not be more aptly named. Shelter service providers protect manufacturers from the harsher elements of offshore manufacturing.
Essentially, shelter programs take on the burden of a corporation’s administrative responsibilities in Mexico, and provide a leased facility for the company’s operations. Shelter operators help businesses create subsidiaries in Mexico, customizing their services to fit the business’s requirements.
“I work with a lot of small- and medium-sized companies, and I am a big believe in shelter companies,” said Chicago-based consultant and China Mexico Solutions LLC founder Doreen Michelini. “The shelter companies I have worked with will shape the program to the company’s needs.”
BACK TO BASICS
In essence, shelter companies help manufacturers set up operations in Mexico more easily by providing an umbrella of administrative services. The program allows companies to focus on their core production, instead of getting tangled in the oft-complicated logistics of offshore manufacturing.
“Doing a payroll does not make a company more profitable,” said Steve Colantuoni of Tucson, Az.-based The Offshore Group (www.offshoregroup.com). “Handling the responsibilities an employer has such as paying worker benefits does not as well.”
Customers of The Offshore Group, for instance, receive full shelter services within the confines of a gated industrial park with 24-hour security. Founded in 1986, the ISO registered shelter program takes care of business in areas such as human resources, payroll and accounting, import/export logistics, worker transportation, procurement services, environmental compliance services, and industrial building and maintenance.
According to Colantuoni, The Offshore Group runs Mexican Social Security daycare centres – it is the only private company in Mexico to do so – and has infirmaries with doctors available on all shifts.
“A plant manager makes better use of his time overseeing production, rather than using 40 per cent of his time with employee issues, customs issues and accounting issues,” said Colantuoni. “In short, the ability to concentrate on what makes the company successful is a competitive advantage.”
A SOFTER LANDING
For small- and mid-sized companies, shelter programs are a way to manage the risk of offshore manufacturing. Several shelter providers describe their programs as a good way to learn the ins and outs of operating a facility in Mexico.
“Don’t take on too much, you’re going into a new environment,” said Mitchell Wine, the founder and CEO of North American Industries (www.naig.ca). “Let the American Industries people do what you are not familiar with, and when you are ready you can take over the function.”
North American Industries is the Canadian subsidiary of American Industries, a company with 7.5 million square feet of industrial real estate in Mexico. The North American Industries shelter program offers more than 40 services, ranging from human resources (HR) to accounting to customs.
Wine noted that many shelter clients decide to go it on their own once their contract with the provider ends, but several also prefer to stick with the shelter program.
COST SAVINGS & EFFICIENCIES
Although shelter clients reimburse their service providers in the form of shelter fees, these programs reduce the instances of costly first-timer mistakes. Additionally, shelter programs often provide their clients with comprehensive breakdowns of costs and tools to manage their operational expenditures. For instance, shelter provider Intermex (www.intermexshelter.com) adopts an open-book policy with its clients.
“This means the client manages their own budget and Intermex does not expend any money without the prior written authorization from the client’s representative,” explained Intermex’s director of business development Francisco Treviño. “Our open-book policy even allows the customer to see what our income is from their operation.”
Founded in 1971, and with more than 40 satisfied shelter clients to date, Intermex also has cost-efficient alternatives for smaller projects that don’t merit a standalone operation. Many shelter providers offer shared shelter services, where several conduct their operations in a shared building. Intermex’s shared shelter programs are designed for operations with less than 100 people, and space requirements of approximately 150 square feet per person.
Several clients operate the facility, and share common areas such as a cafeteria, reception area, conference rooms and parking.
AVOIDING BUREAUCRACY
One of the key advantages of shelter programs is that the client company can operate under the legal entity of the shelter service provider. This also means that the client does not have to form an incorporated entity for its Mexican subsidiary.
In addition to the cost savings of this setup – shelter clients are exempt from many of the business taxes – manufacturers face reduced legal liability.
“Mexico is still a developing country, and as a result it’s very bureaucratic,” said Tony Ramirez, executive vice president of Made in Mexico, Inc. (www.madeinmexicoinc.com). “Unless you are familiar with that, you are going to have an impossible task. We act as your administrative partner to alleviate that burden.”
