Supplier Red Flags when Nearshoring to Mexico

U.S. manufacturers continue to nearshore portions of their supply base, and Mexico is a great choice. There are established regional hubs for many industries, including Automotive (Monterrey, the Bajio region, and Puebla), Electronics (the Bajio region, Baja California, and Guadalajara), and Aerospace (Bajio region and Baja California). There are also notable regional hubs for appliances, heavy machinery, textiles, medical devices, and IT hardware. 

This is part of a larger trend of increasing imports of goods from Mexico – Mexico is now the US’s top trade partner. According to the Federal Reserve, imports from Mexico have steadily increased since the Covid shutdown, with the overall value up 36% in just 3 years.   

Mexico manufacturing is growing to meet the demand, but limited capacity is becoming a problem for some categories. We’ve found several to be challenging, including brass and zinc castings, CNC machining, and advanced coatings. 

It’s pretty easy to identify potential suppliers – just ask your favorite AI chatbot!  Here’s an example prompt: “Act as an experienced buyer in the sporting goods manufacturing industry. Search the web to find injection molding suppliers based in Mexico that are experienced with producing consumer goods, have high precision mold making capabilities, and provide CAD support.” 

You can put any supplier characteristics you’re seeking into ChatGPT, Gemini, or Claude, and it will do a reasonable job of searching the web for you. However, there’s one big problem: many Mexican suppliers don’t share enough information you need on their web pages. So the chatbots are limited in what they can provide. 

Here’s what the chatbots can’t tell you. 

5 Potential Pitfalls to Avoid when Searching for Suppliers in Mexico 

1. The supplier doesn’t have the right manufacturing capabilities.
   Let’s say you’re looking for an aluminum tube supplier. But more importantly, you need a supplier that can plate, cut, bend, and weld the tubes; also, you need them to support low volume/high mix orders.
   
   
2. The supplier doesn’t have the desired industry experience and industry-specific quality certifications.
   Some manufacturers are willing to develop new suppliers to their industry, but most are looking for suppliers who are familiar with their industry requirements and already have the required industry-specific certifications (like IATF 16949, ISO 13485, or AS9100).
   
   
3. The supplier doesn’t have the required capacity at the right time.
   Sometimes you need capacity right away, sometimes you’re planning for programs that will be ramping up in two years. You need to ensure that the supplier will be able to provide the capacity you need, for each of the necessary manufacturing capabilities, at the time you need it.
   
   
4. They aren’t willing to do business on your terms.
   Commercial requirements include things like Incoterms, payment terms, order-to-delivery timing, cost competitiveness, and cost transparency. If the supplier isn’t willing to do business on your terms, it doesn’t matter if they get past the first three pitfalls with flying colors. 
   
   
5. English fluency.
   Unless your company has wide Spanish-speaking capabilities, you’re going to need the salesperson and key contacts to be fluent in English. This commonly includes the engineering, customer service, and quality functions. 

Mexican suppliers without these red flags can still be found but it takes some effort. Our typical process takes three to six weeks, depending on the category and requirements, and includes: 

• Identify the specific, detailed requirements with optimal and acceptable thresholds for each 
• Build a business case to present to potential suppliers to get them to participate in a lengthy discussion about the requirements 
• Identify potential suppliers and conduct meetings (usually with two each supplier) to see where they stand against the requirements 

Interested in more blogs, on-demand webinars, and more resources on Nearshoring to Mexico?