Identifying Suppliers in Mexico
Finding suppliers in Mexico has become much more difficult with the rapid surge of nearshoring activities in the past 18 months. Recently, seven C-level executives and purchasing leaders at manufacturing companies shared their experiences related to finding suppliers in Mexico at an online Executive Roundtable. One topic that stood out was the increasing emphasis on reducing lead times and decreasing geopolitical risks as justification for moving supply bases from Asia to Mexico. For many commodities, cost savings are minimal, but the strategic advantages of nearshoring are making these moves a priority.
Here are the discussion highlights from the Finding Mexican Suppliers Executive Roundtable.
- Vice President of Purchasing for an incubator manufacturer shared that they are in the process of bringing their mostly Asia-based supply base to North America. Key reasons include:
- Better lead times due to long transit times from Asia
- Better alignment on time zones and holiday schedules
- Easier to obtain the necessary visas to visit suppliers
- More efficient to implement engineering changes due to shorter transit times
- They also shared their experience with sourcing to specific regions in Mexico:
- Guadalajara has a strong supply base for electronics
- Monterrey and Saltillo have strong supply bases for mechanicals
- Querétaro has a strong supply base for plastics
- Mexico City area is known for supporting automotive
In addition, they shared that they’ve found it fairly easy to move supply of plastics and aluminum from Asia to Mexico, but electronics has been harder. They shared that they’ve been experiencing supplier lead times of up to a year from North American suppliers and up to two years from Asian suppliers.
- President of an automotive and heavy truck OEM supplier shared that they entered into an agreement with a shelter organization to establish a manufacturing operation in Mexico. The shelter organization will build out a facility and supply labor, and they expect to achieve a 75% reduction in labor costs vs. manufacturing in U.S. They also shared:
- They’ve switched from sourcing electronics from China to sourcing from Taiwan due to the U.S. tariffs
- They continue sourcing electronics from Asia because many sub-suppliers are in Asia
- Warehouse space if very tight in Nogales
- In their opinion, matching the right size supplier to your company’s size is a big factor for ensuring you get the right attention from suppliers
- Lead times from Texas Instruments have increased from 60 days to 2 years
- CEO of a manufacturer of labels and decals for heavy truck OEMs shared that their customers are raising concerns about sourcing to Asia including tariff costs, long lead times, transportation costs, and communication delays. They also shared:
- They are considering using a shelter organization to begin manufacturing in Mexico and are opening a distribution facility in Texas to support U.S. customers (they are based in Canada)
- They’ve hired a consultant to help them find capable and willing suppliers, but have found that many suppliers don’t want their business due to their low volume/high mix requirements
- They’ve looked at 100+ supplier and have found a couple that they are conducting APQP audits
- They are finding it’s a 6-month lead time from China (order to delivery)
- Holidays in China put a lot of pressure on planning because they don’t align with North American holidays
- Associate Director of Mechanical Commodities for an audio products manufacturer shared that they’ve found that real estate in Mexico moves quickly – they are bringing on a second manufacturing operation in Juarez and missed out on their first 3 choices. They also shared:
- They currently source about 80% from China and Taiwan – The organization started considering nearshoring when the U.S. tariffs went into effect, and recent geopolitical risks are adding to the justification (esp. Taiwan)
- They are finding the Total Ownership Cost for sourcing to Mexico isn’t too much worse than sourcing to Asia
- They cited labor and freight costs as important factors making Mexico more competitive
- It’s been difficult to find suppliers in Mexico – they’ve found it easier in China
- They are a low volume/high mix manufacturer with high cosmetic standards
- They are looking to add a purchasing person in Juarez to help with finding suppliers
- 80% of their BOM is materials, and they are starting to reengineer their assembly process to include more automation
- CEO of an injection molder shared that they’ve had a plant in Saltillo for 25 years, in addition to their 8 U.S.-based plants. They’ve moved a lot of customer programs from U.S. manufacturing to their Mexican operation, but haven’t been able to find cost savings moving programs from China to Mexico.
- CEO of a hydraulic components re-manufacturer shared that they currently buy about ½ their supply from China, and long lead times are tying up more capital. They anticipate the recent Covid-19 shutdown in Shanghai will affect their third quarter. They would like to increase their sourcing to Mexico, but find they are overshadowed by automotive OEMs.
- VP of Strategic Sourcing for a furniture manufacturer share that they are currently focusing on their indoor hospitality product line with the goals of de-risking the supply chain and shortening the cash cycle. They also shared:
- They buy a lot of finished goods out of Asia, and freight costs have been a tremendous impact due to the bulky nature of their product
- The hospitality furniture industry (e.g. hotel lobby furniture) is highly fragmented with a manufacturing center in Guadalajara that mainly serves the domestic Mexican market
- They are moving some of their outdoor furniture manufacturing to Juarez and are hoping to leverage their Spanish-speaking resources to help with finding Mexican suppliers
If you are interested in learning how APD helps companies find and qualify suppliers in Mexico, take a look at the following: