Page 18 - MetalForming September 2014

Best Practices
By Bob Dobrowsky
Mexico: It’s Kind of a Big Deal
It’s hard to believe that 25 years ago Mexico was viewed as little more than a reposi-
tory for light assembly opera- tions. Today, businesses go to Mexico for a variety of value- added operations, including engineering, manufacturing and research and development. And that’s only going to continue.
Why has Mexico become so popular, and what pitfalls should companies be aware of when contemplating a move to Mexi- co? Here’s a brief overview of the bueno, the not-so-bueno and the maquiladora program in Mexico (IMMEX).
The Bueno
One of the biggest factors driving Mexico’s continued popularity is interest from premium automotive brands. BMW, for example, recently announced plans to open a facility in central Mexico in 2017; production will start in 2019.
Because the automotive industry is flourishing in Mexico, other industries have been encouraged to similarly develop. For example, Mexico is the world’s largest producer of flat- screen TVs and two-door refrigerators. And, the aerospace industry has experienced double-digit growth during the last decade. The country has become a hotbed of activity for these and other industries in part because it’s lost the “low- quality” label that plagued it for years. Mexico now has become quite the opposite—a country whose manufactur- ers produce high-quality products.
In addition, labor continues to be relatively inexpensive, and Mexico’s vast array of trade agreements makes it very attractive as a stepping stone to other markets. The United States has no trade agreements with South America, but Mexico does. In fact, Mexico has many “amigos”—the coun-
Bob Dobrowsky is a partner with the Cleveland office of Plante Moran, and is one of the leaders of the firm’s Ohio Manufacturing and Distribution practice. He has been delivering professional services to pri- vately held companies for the past 21 years. Bob has authored the annual PMA Benchmarking Report since 2003, serves as a member of the board of directors for PMA’s Cleveland district, and has presented at var- ious district level meetings.
www.plantemoran.com Bob.Dobrowsky@plantemoran.com
try has trade agreements with 46 countries or economic regions, the largest number of trade agreements in the world. This obvious advantage is a major reason why Honda, Mazda and BMW decided to set up assembly plants in Mexico.
The Not-so Bueno
Lower-end labor is inexpen- sive in Mexico, and there’s no shortage of semiskilled workers. However, many companies struggle to find mid- to high- management-level staff that speak English proficiently and have experience working for a
foreign company. In fact, a recent survey of automotive sup- pliers by the Original Equipment Suppliers Association iden- tifies finding and retaining talent as the primary concern.
Further, once companies find the talent they may strug- gle to keep it. Manufacturers don’t just have to worry about competitors poaching employees; customers also may target top talent. Therefore, while it’s important to be located close to customers, you don’t want to be too close. And, it’s also why company culture becomes so important. To retain talented staff, companies must ensure their employees feel like they’re part of something bigger. Show them that you care about them and their families, and that opportunity for growth exists within the company.
Another challenge to keep in mind: Mexican manufac- turers conduct business somewhat differently than do U.S. manufacturers. Mexico runs on relationships, so compa- nies must invest the time into building those relationships. Also, the pace of business and life is slower, so it’s important to exercise patience.
Finally, the definition of success in Mexico has changed. In the past a company could succeed by providing a single manufacturing operation. Today’s customers expect more. It’s critical to stand out and be different, either by providing addi- tional services (painting, welding, holding inventory etc.) or by excelling in customer service. The market is very com- petitive and only becoming more so.
The IMMEX
The IMMEX program (formerly known as the maquilado- ra program) allows companies to temporarily import machin- ery, equipment and the raw materials required to manufac-
The OEM Perspective: Supply-Chain Opportunities in Mexico
Material and Component Availability
Wide availability of raw materials for most common man- ufacturing processes
Foreign companies are successfully identifying and localizing their raw-material/subcomponent purchases
Extensive support from local government to identify and develop local suppliers and/or locate suppliers for export
Developing a Supply Base
Initial relocation with current supply base Transition to Mexican supply base Negotiating with suppliers
Localized Mexican strategic partnership
16 MetalForming/September 2014
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