Manufacturers Intensify Sourcing from Mexican Suppliers
In recent days, we’ve had several conversations with manufacturing business leaders focusing on the potential crises looming in both Asia and Europe, potentially affecting their suppliers. They are concerned that intense Chinese military drills in the area surrounding Taiwan and Russia’s slashing of natural gas supplies to Europe are going to impact suppliers’ ability to deliver in both regions.
This comes at a time when a number of large global manufacturing companies are in the process of building their Mexican supply bases, both for cost reduction and supply reliability purposes. Companies that are considering increasing their supply from Mexico are not too late to find capable suppliers but will find it harder given that others have had a head start.
APD has completed Mexican supplier identification projects for over a dozen commodities since the start of 2022. Some of the lessons we’ve learned are:
1. Engage local support for communicating with potential suppliers. Recruit someone – on your team or outside – who has manufacturing purchasing experience, is fluent in Spanish, and understands the Mexican business culture.
2. Identify the critical attributes that your new supplier must have, and quickly screen out suppliers that don’t meet these requirements. Consider technical competencies (e.g. working with specific materials), significant company aspects (e.g. financial health), and other factors important to your business (e.g. experience in your industry).
3. Then, as quickly as possible, screen out supplies that aren’t hungry to win your business. Consider factors such as cost competitiveness, forecasted capacity, and their willingness to invest to improve capabilities you need.
4. Plan to conduct site visits to validate the supplier attributes you screened for in step 2. Dig deeper to understand aspects like their management processes, growth plans, and sub-supplier management process. While on site, gather documentation for things like quality certifications, company financials, and technical capabilities.
5. Determine cost competitiveness through marketing testing. Include your current suppliers as well as those you’ve validated through site visits and compare total landed costs to get an accurate, apples-to-apples cost picture.
Want to learn more? Watch APD’s recent webinar on Finding Suppliers in Mexico, where we share lessons learned from recent Mexico sourcing projects.