Tips for a Successful Transition from Multitenant to Dedicated Shelter

PRODENSA INSIGHTS

The Shelter Series

As part of the series, read the first blogs, "Is your Multitenant Shelter Holding you Back?",  "5 FAQs about Transitioning from a Multitenant to a Dedicated Shelter" , "Unveiling the True Cost: Multitenant v. Dedicated Shelter in Mexico" and "Embarking on your Dedicated Shelter Journey: Transition Success".

The allure of a dedicated shelter in undeniable. Greater control, increased efficiency, and reduced risk are all tempting propositions for companies frustrated with the limitations of multitenant setups. These have been the primary motivators for clients that reach out to Prodensa for support in transitioning their manufacturing operational model in Mexico. We are sharing our tips for a successful transition. 

Tips for a Successful Transition to a Dedicated Shelter

A dedicated shelter operation in Mexico can have great benefits for manufacturers seeking local support while also mitigating the risks of operating in a shared environment. However, the transition itself can be a complex undertaking. Here, we address key areas of concern and offer actionable tips to ensure a smooth move to your dedicated shelter:

Maintain an Effective Communication Strategy

Proactive communication is key. Many stakeholders will have a role in the shelter transition, including corporate leaders, local leaders, employees, project managers, current shelter operator, suppliers and local authorities.

A project management plan should cover timelines, potential disruptions and a clear communication process for addressing concerns and managing documentation in an effective manner. There are simultaneous activities that span different parts of the company including Human Resources, Finances, Legal, Environmental, and Trade Compliance. Sharing information is crucial, and a clear leader must have daily control over the necessary activities. The timeline is tight and every day counts.

“In our experience, the transition is motivated by financial results and risk mitigation. Our advisory during the decision-making process and strategy definition is fundamental to the success of the overall project. We have to be able to answer all of the doubts that the corporate lawyers and leaders may have, considering they may or may not have a lot of experience in the process. The transition is seeking to achieve certain efficiencies in the operation, and the difference between success or failure depends on both the strategy definition as well as the expert execution.”

Maria Elena SierraVP Trade Compliance

“From my perspective, the trade compliance is such a crucial area to manage in the transition. From strategy about asset transition that aims to minimize impacts to cash flow, to the simultaneous pilot production line needed to get IMMEX approval. These milestones are so crucial and as operational partners, we live that burden with our clients until we get the good news. We build very strong relationships because working together in the transition is the only way we can be successful.”

Alberto LoyolaProject Manager

The realistic goal is to transition the production operation and the employees smoothly, minimize production downtime to the extent possible, and ensure the new operation is ready to go in order to minimize financial or compliance issues. Time is money and mistakes could cause major setbacks.

Take Special Care of Employees

Its important to consider that some employee benefits may be affected during the transition, such as the reclassification of governmental benefits tied to the employer, as an example. An effective and transparent communication strategy will be crucial so employees understand the process, any impacts, and any compensation adjustments or new perks that may be introduced to offset these adjustments. Since the benefits package can be reestablished in the new entity, there can be a number of possibilities to navigate. A benchmarking analysis would improve the competitiveness of the new benefits and perks package.

“From my experience leading the HR strategy for multiple operations transitions, there are many things we have to take very seriously. All within a short time span we must make sure: all employees understand the process and feel relatively comfortable; the new entity is optimized and all systems are functioning; the ongoing transition of groups of employees in a way that minimally disrupts the production processes. Its a delicate order and we look to make the transition a positive experience for all involved. Its crucial to maintain and even increase the engagement. If that can't be successful, its going to be a big impact to your business.”

Osamu UeharaHR Manager

“Its so important to make a great team with local HR leaders of the facility. They are always the ones most concerned about employee engagement and labor law compliance. They need to make some crucial decisions and we work to give the context and advice to do it soundly. From any union relations and collective bargaining agreements to new compensation structure, our goals is to give them the tools to improve the situation for their employees. We are all on the same page about that. ”

Alvaro GarciaVP Human Resources

Where certain restrictions over corporate identity may have restrained you in the multitenant shelter, a dedicated operation provides the freedom to fully transfer your corporate culture. Consider activities where HR can engage employees for the upcoming transition.

Reevaluate and Optimize Policies & Procedures

Some services included in the multitenant shelter will need to be sourced and hired, if required, such as cleaning, medical, vigilance, etc. By bringing these services in-house, though, a certain level of cost control can be verified.

“There are many systems that must be transferred, and its easiest to implement improvements during this transfer. But its also not a situation where there is a lot of time to analyze options. Our expertise is bringing forth a plan that can be adjusted and customized, and then implemented quickly. We are aiming for somewhere between cloning your current day-to-day operation to avoid disruption and strategically implementing improvements to systems, policies and flow.”

Sergio VindiolaOperations Manager

“Clients are often seeking increased financial control with a transition of operational model. These systems haven't been working for them, and its not always clear what the new strategy should be. We need to work with clients in a short period of time to build and optimize this new system. That strategy must reflect possible incentives or programs that could create a competitive edge, and aboveall provide transparency, connectivity and organization in financial data and results. We truly have a moment to optimize and implement best practices, and since that is a big motivator for the transition, we have to get it right.”

Arturo QuinteroFinance Director

Depending on the new entity, certain services and KPIs are going to change. The financial reports will need to be constructed, and corporate bylaws will need to be written. Taking a step in the direction of independence opens up your operation to an endless world of growth possibilities.

Conclusion

By staying vigilant about potential pitfalls and prioritizing clear communication with your dedicated shelter partner, you can navigate the transition with confidence. Remember, a dedicated shelter can be a powerful tool for growth and efficiency, but a smooth transition is essential for maximizing its benefits. Don't underestimate the importance of careful planning, thorough research, and open communication throughout the process.

Prodensa: Dedicated Shelter Experts

Over the past decade, PRODENSA has been a leading force in guiding manufacturing companies through the intricate process of transitioning from shared shelter operations to fully independent entities. With an extensive and successful track record across key Mexican industrial regions such as Baja California, Querétaro, Hermosillo, Monterrey, and beyond, we have supported clients across a diverse range of industries and business models.

Our approach is highly customized, designed to meet the specific objectives and needs of each client. Whether the goal is transitioning to a dedicated shelter under our management or establishing a wholly-owned subsidiary, PRODENSA provides comprehensive support in critical areas such as regulatory compliance, operational efficiency, and risk mitigation.

As an authority in this field, PRODENSA offers unmatched expertise in navigating the complexities (and sometimes ambiguousness) of Mexican law, with a particular focus on international trade and compliance regulations. Our deep understanding of Mexico’s regulatory landscape, coupled with decades of practical experience, has earned us the trust of both private sector companies and government agencies alike.

Our unwavering commitment to ensuring a seamless transition sets us apart. We proactively identify and address potential challenges, ensuring that client operations continue without disruption. By leveraging our proven methodologies and in-depth industry knowledge, we help our clients optimize their operations, minimize risk, and position themselves for sustained success in the dynamic Mexican market.

I invite you to sit down with one of our expert advisors to explore the possibilities and discover how PRODENSA can support your business in achieving success and growth in the Mexican market.