April 22, 2022 Strategic Cost Reduction Roundtable
The roundtable theme was moving/expanding manufacturing in Mexico. Highlights of the roundtable discussion are summarized below.
- CFO of an automotive supplier of decorative interior components shared that their customers (primarily automotive tier 1’s) are expanding operations in Mexico, creating opportunities for their company to grow Mexican production 3-4X in the next 18 months. They have been manufacturing in the Chihuahua area for a decade and have found the region to be a stable environment. They have operated within a shelter up until now but are in the process of transitioning to an independent operation. They recommend that companies setting up Mexican manufacturing use a shelter to start.
- Purchasing Director for a glass building products manufacturer shared that they have been manufacturing in the Matamoros areas for 15 years, and are finding that it’s easier to find labor there than in their Michigan operations. They recently added a purchasing person in Mexico and are growing their local supply base there. They reported they are seeing significant price increases for wood pallets in Mexico, to the point that pallets are cheaper in Texas.
- CEO of an automotive supplier of labels and nameplates shared that they have engaged someone in Guajajara to help them find suppliers to replace Chinese suppliers to address issues with lead times, transportation costs, and risk. They are struggling to find suppliers that can support quality and capacity needs and are finding potential suppliers in Mexico to be slow to respond.
- Note: APD’s experience is that we routinely identify and vet 5-7 suppliers within 4 weeks (typically resulting in 2-4 capable suppliers with capacity)
- Vice President of Purchasing for an automotive sunroof supplier shared that they are in the process of increasing the amount of goods purchased in Mexico to support their North American facilities from 24% to 27% by the end of 2022 (primarily moving from U.S. suppliers). They have met with cluster companies to assist with identifying potential suppliers. They shared that they are starting to see capacity issues in Mexico and are anticipating wage inflation as the Mexican manufacturing economy grows. They are having some success finding suppliers, but struggle with some specific commodities.
- General Manager for an aerospace forgings supplier, who also has responsibility for sourcing synergies across their parent company’s 70 locations, shared that they have a maquiladora factory in Chihuahua. They have been actively moving their supply base from the U.S. to Mexico and find that many suppliers have sub-suppliers in Asia. They also shared that they participate in a non-profit Onshoring Project that is associated with Industry Week and AMT/IMTS (see www.theonshoringproject.com).