Nearshoring in Mexico: the risks, challenges and benefits for medtech developers
29 Mar 2023
Mexico nearshoring is one way medtech manufacturers are addressing supply chain challenges that surfaced in the COVID-19 pandemic.
Nearshoring is similar to offshoring, where a device developer moves some operations out of its home country to cut costs or access new markets. Nearshoring is just offshoring closer to home.
Jorge Gonzalez Henrichsen, co-CEO of Brownsville, Texas-based The Nearshore Co., helps medtech developers and manufacturers move operations to Mexico from the U.S. or elsewhere. Most recently, he’s been encouraging companies to bring their Chinese offshoring operations back to North America.
Medical Design & Outsourcing asked Henrichsen a few questions to help medtech companies understand whether and how to make the move to Mexico.
MDO: Which medical device developers and manufacturers are already doing business in Mexico, and what kind of work are they doing there?
Henrichsen: Among the manufacturers that are already in Mexico are Medline, Medtronic, Johnson & Johnson, Philips, GE Medical Systems, Siemens, Smiths Medical, Cardinal Health, Becton Dickinson, Abbott Laboratories, and Stryker Corp. They are active in the fields of surgical, dental, veterinary instruments and devices, orthopedic articles, mechano-therapy applications, and surgical furniture, among others.
MDO: What are the different medtech hubs within Mexico?
Henrichsen: Manufacturing companies in Mexico take great care to be located in close proximity to some of the largest medical device markets in the United States so that they can easily ship and exchange products. San Diego, California, which is the fourth-largest life sciences hub in the U.S., has a high concentration of medical device manufacturers located in nearby areas. Directly across the border lies the city of Tijuana, which is a short half-hour drive to the country’s booming Baja California region. Chihuahua, Coahuila, Nuevo León, Jalisco, Sonora, and Tamaulipas are close behind, with many medical equipment manufacturers operating within their borders.
What are the greatest benefits of nearshoring in Mexico?
Henrichsen: The greatest benefit of nearshoring medical device manufacturing to Mexico is that the country offers a highly-trained and educated workforce.
Another great benefit of nearshoring is that academic, government, and private sector collaborations in the country promote device manufacturing and improve efficiency. Medical device manufacturing in Mexico is globally recognized for its high quality by the world’s most prestigious medical device companies. These and other manufacturers produce FDA Class I, II, and III products, which are subject to the same safety regulations as products manufactured in the U.S. and meet FDA standards, with facilities that are FDA, CE, and ISO 13485 certified. The updated USMCA trade agreement has promoted further growth and investment in the industry by providing greater certainty for investors. It added several provisions to foster growth in the medical devices industry by streamlining processes for importing medical and pharmaceutical production and harmonizing and enhancing regulatory compatibility
Finally, nearshoring to Mexico is a great benefit because the proximity to the U.S. provides several cost-effective benefits over other global locations like China.
What are the leading challenges and risks?
Henrichsen: Regulatory approval is required from the national health agency, the Federal Committee for Protection from Sanitary Risks (COFEPRIS), a department within Mexico’s Ministry of Health. The complexity of the approval process depends on the definition of risk classification guidelines. The process tends to be slower than in other countries and pricing for commercial use of medical products is another potential challenge.
What’s the most common mistake medical device manufacturers make when nearshoring in Mexico, and how can that be avoided?
Henrichsen: The biggest mistake we see companies make is not doing their homework on the regulatory requirements, which then makes for surprises when companies hear about registration times. Many frustrations on the side of manufacturers can be prevented by making sure the right information on registration times is fed early in the planning process. Mexicans see time as flexible and flowing, with a stronger emphasis on personal interaction than formal conversation. It doesn’t matter how long something takes, just that it gets done
What cultural differences should you be aware of when doing business in Mexico?
Henrichsen: Personal relationships, loyalty, strong hierarchy, and status consciousness are the main characteristics of Mexican business culture. Unlike the United States and Canada, the decision-making process remains almost exclusively from the top, and no input is expected from junior employees.
Personal relationships play an essential role, to a point where the impression you have and level of relationship you maintain with your local counterparts can override your business proposal. Mexicans usually invest much time and effort into their relationships. Getting to know those with whom they work and networking is not done without intent.
What are some helpful nearshoring resources for medtech developers who are considering nearshoring or who want to move forward?
Henrichsen: For devices sold in Mexico, regulations are set by COFEPRIS. Products imported from abroad must meet the national guidelines of those import countries. Mexico’s General Health Law (Ley General de Salud) sets out the framework for regulating the import and export of medical devices, drugs, and other biological products.
Companies manufacturing medical devices to sell in Mexico must file an operation notice with COFEPRIS. Under the General Health Law, COFEPRIS has 60 working days to review this application. The regulatory authority ensures that manufacturers are following all applicable standards (in Mexico, NOMs).
Related: Contract manufacturers fuel medtech expansion in Costa Rica
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