What is inshoring?
Inshoring is a turnkey operations model for contracting manufacturing services in the United States, with the benefits of manufacturing in Mexico. It is a proprietary model of Prodensa, aimed at virtually eliminating the operational liabilities of manufacturing outside of the United States. A turnkey model, in this case, refers to the pre-existing launchpad from which to customize your manufacturing operation via your operations partner in Mexico, Prodensa.
The inshoring model aims to simplify binational manufacturing operations, and take advantage of the opportunities manufacturing in Mexico bring, without the risk.
How does it work?
In the inshoring model, Prodensa provides manufacturing services from our Houston, Texas entity. This entity has a pre-existing Mexican maquila program and tax benefits certification. Utilizing Prodensa's binational operations structure reduces your exposure to an international regulatory environment.
Prodensa acts as the Importer of Record as well as Mexican business owner in front of all authorities. You choose the location and building, and we process the paperwork. Prodensa imports the raw materials through the IMMEX program. You oversee production and quality via a technical services agreement. Prodensa then acts as Exporter of Record of the finished product.
What are the benefits?
Inshoring was designed to truly eliminate the exposure of doing business in a foreign country, while leveraging the cost-effective manufacturing solution that Mexico provides. The turnkey operations model provides many benefits for manufacturing in Mexico, including:
- No services contract with an any foreign entity
- Organization does not have a Permanent Establishment in Mexico
- Pre-existing IMMEX manufacturing or service operations, ready for occupancy
- All international commerce and local compliance handled by Prodensa experts
- Maintain 100% ownership of assets, including intellectual property
- Full control over site selection, workforce, and finished goods
- Access to preferential rates and best practices, earned by Prodensa over 35+ years
- No strings attached: open-ended transferal to other operational model
Speed-to-market can be crucial for suppliers considering nearshoring operations with their clients. A manufacturing company with a straight-forward production process and materials could be up-and-running in as little as 4 months.
What are the limitations?
The value in inshoring lies in a pre-existing entity in which to launch your own manufacturing operation. This implies that the entity is shared by other companies as well. This limits the ability to take ownership over the entity at a future date; the Mexican entity will always belong to Prodensa.
Additionally, the inshoring model requires certain ownership over machinery and equipment to be transferred to Mexico under consignment, in order to comply with program requirements. In compliance with the IMMEX Program, the finished goods must be exported, physically or virtually. No goods can be sold to the Mexican market.
A turnkey solution
Nearshoring will most likely continue over the long-term, despite challenges to certain supply chains and the local business environment. Operational partners exist to help navigate the rule changes while facilitating the best practices of world class manufacturing organizations.
Inshoring is one of the operations models-specifically for turnkey manufacturing-that Prodensa offers for doing business in Mexico. To explore the value of inshoring, check out this case study.
