Understanding the Difference

When companies plan to establish production in Mexico, they often compare two options: contract manufacturing and the shelter model. While both can lower costs and simplify entry, the shelter model offers a unique advantage — full operational control without the burden of legal or administrative risk.

Under a contract manufacturing agreement, a third party owns the facility, manages labor, and handles production for the client. In contrast, a shelter program allows the foreign company to run its own production, equipment, and quality standards — but under the legal and administrative “shelter” of a local service provider.

1. Faster Market Entry

Setting up a legal entity in Mexico can take months and involves numerous registrations with tax, labor, and social security authorities. A shelter program eliminates that step.
Through an existing legal framework, manufacturers can begin operating in a matter of weeks — using the shelter provider’s established permits, systems, and compliance infrastructure.

2. Retaining Full Control of Production

Unlike contract manufacturing, where production is outsourced, shelter companies let foreign clients own and manage their operations directly. You hire the workforce, set production goals, and manage quality — while the shelter handles the paperwork, payroll, and compliance.
This ensures consistent output without losing control of intellectual property or process standards.

3. Lower Risk and Legal Exposure

Operating independently in Mexico requires compliance with complex local laws. A shelter provider absorbs most of that legal responsibility.
From import/export regulations to HR compliance and tax administration, the provider’s framework keeps the foreign company protected from liability — allowing executives to focus on core manufacturing goals.

4. Cost Transparency

Contract manufacturing often includes markup on materials, labor, and overhead. Under the shelter model, companies pay only for the actual cost of services — HR, accounting, logistics, etc.
This makes operating expenses predictable and fully transparent, helping global companies plan budgets with precision.

5. Easier Expansion and Exit

The shelter model is inherently flexible. Whether you’re scaling production or winding down, the legal and administrative structure is already in place.
This agility is especially valuable for manufacturers exploring multiple sites or testing production volumes before a long-term commitment.

Conclusion

For global manufacturers, Mexico’s shelter model combines the control of direct investment with the simplicity of outsourcing. It reduces risk, shortens setup times, and enables long-term operational success — making it the preferred path for companies looking to build a sustainable presence in Mexico’s fast-growing industrial sector.