Delphi strength in Mexico drives opportunities for supply chain

By Michael Hissam

Automotive sector’s rebound in the past six years has done much for an industry that in the view of many anchors manufacturing and research in Mexico.

While much has been made of OEM activity and millions of vehicles annually rolling off production lines in Mexico owned by global players, Tier-I suppliers have learned that technology, not commodity drives success.

Delphi-Mexico’s roots go back to the 1970’s with the first system and component supply plants literally within view of the Rio Bravo/Rio Grande shipping what would turn out to be billions of products a year, depending on billions more on the input side via the burgeoning supply chain.

Hector Gutierrez, Delphi-Mexico Executive Director, has witnessed much of the growth to locations far from the river or the frontera during his nearly 30 years with the company:

One thing that is happening corporate wide is new leadership for Delphi. What are you seeing with the changes?

Our new CEO Kevin Clark is bringing a robust strategy that will accelerate our day-to-day execution to our customers and our investors. For our customers we need to continue to make a difference for technology, we need to increase our portfolio with more advanced technological products. For the Mexican operations we need to increase our performance in our operations, in quality and delivery with the involvement of each of our employees. In summary, Delphi will be a more focused organization for the customers, investors and employees globally.

Delphi has done some product streamlining in the past year. How does this position Mexico in terms of competitiveness?

The strategy and the portfolio that we have in Delphi are clear for the main targets we have for the future. Delphi has been in Mexico for over 35 years. We see the new products that are going to come. These will use a lot of technology, and are going to benefit Mexico as well.

As you describe Delphi on a global scale and Mexico specifically, you have used the words “safe, green and connected”. Is this a new trend for Delphi?

Ten years ago we did not have our philosophy very clear on our products and strategy for Delphi. And 10 years ago we defined that we should use something that benefit the customers, benefit the environment and develop products that were in line to the global situation at that time. That is why we came with safe, green and connected. It is important that after 10 years we have reaffirmed that those “mega” trends should be used in the future as well.

What is driving Delphi in the sense of technology?

In Delphi Mexico we changed the approach like any manufacturing company. In Mexico in 1995 we moved from just assembly to the design and release of products that can be used globally. This was happening in 1995. It was the breakpoint for Delphi that is driving all companies to also do the same change for the future. What I expect after over 25 years designing in Mexico is more focus on new technology products, on new products that are going to be aligned to the new strategy with technology for Delphi globally.

To what extent can you say that Delphi in Mexico is shifting more toward specialized rather than just commodities by volume?

Even if it is commodity or even if it is technology-driven products, we have the same commitment to build these with high quality, on time, on the quantity that the customer wants. For the plants in Mexico they do not view or differentiate shape, technology and commodity. What they know is whatever they have in their hands to produce it has to be delivered at the right part, at the time, right quantity.

In the so called “old days” at a plant it was high volume, very few part numbers. To what extent has that changed to lower volumes, more part numbers?

In 2009 when we had the global economic crisis, especially in North America, our customers discovered they could not produce any more high-volume, low-part numbers products. They discovered they needed to increase flexibility and only build what the customer wanted -- the final customer. That was also driving the supply chain -- like in our case -- to do the same. We developed our own operating system to bring agility and flexibility so we can match what the customer wants, when they want it and the quantity they want.

Let’s go to quantity, what can you tell us about the Mexican operations production data?

Mexico produces more than 13,000,000 parts per day and we process 88,000,000 pieces from 2,000 suppliers. That is very important. We ship over 20,000,000 parts every workday to 8,000 customer locations. Our delivery on time numbers and quality are all over 99.5 percent in quality -- two rejected parts per million. If we could compare how we started many years ago to where we are today, I am going to use the example of one wiring harness. When we use a small quantity of cable to produce the volumes we were building, today we use nearly 7,000,000 kilometers of wire per year to make harnesses. This is enough wire to take you to the moon and back almost nine times.

How much does Delphi rely on Mexican sourced materials?

As any industry evolves, we evolved in Delphi with our supply chain. We need to recognize that the suppliers are very key part of our process. If we do not have good quality suppliers on location, this is not going to be good for Delphi or our customers. Today between direct and indirect material we buy 27 percent in Mexico. Not necessarily that the 27 percent we buy is produced in Mexico but is the contracts and delivery that are done in Mexico. When you see how we evolved from five percent to 27 percent is a maturity level.

To what extent does Mexico have the capacity to meet -- really grow -- its role in this supply chain?

When you look at the current numbers from direct and indirect materials, you will find that our thinking is like a customer. When a customer thinks about suppliers they want to have the supplier next door. That is the ideal way to do business but this is not going to happen. The way we identify today the level of opportunity for Delphi knowing that we have 27 percent of supply from Mexico, we still need the 73 percent open for the supply base to move to or deliver from in Mexico.

With that type of opportunity, what quality demands will you be placing on prospective suppliers, let alone your current supply base?

The level of quality always must be perfect quality. The supply base must have processes to deliver at that level. If they cannot deliver at that level, they will struggle with any company to get contracts for the future.