Foxconn marries custom electronics orders to fast deliveries

By Michael Hissam

Computers just keep on coming…

Tens of thousands computers head to the marketplace daily from Foxconn, located just south of the U.S.-Mexican border at San Jeronimo, a few kilometers west of Ciudad Juarez.

Simple math means millions of components daily needed by the 150-acre production complex. Speed-to-market rules production even for customized computer products.

That means the supply chain must think more than just bulk shipments. The “right” numbers come in to production really fast to San Jeronimo and other Foxconn-Mexico locations.

Francisco “Pancho” Uranga, corporate vice-president and chief business operations officer for Foxconn Latin America understands that the “mega” supply chain story combined with geography mean much in his industry.

What are the specialties of each Foxconn location in Mexico?

The initial location is Chihuahua City which began as a mobile operation facility and today does the dish receivers and repair for mobile phones. Then we have the operations in Juarez where we have operations for HP, for Dell and for Cisco. On the HP and Dell side of we do servers, desktops and notebooks. On the Cisco side we do switchboards for cable and some routers.

In Tijuana we have the TD facility and Eson which does the plastic injection and molding for our operation and our operation in Guadalajara which does servers for IBM. In total we have seven facilities, two in Tijuana, three in Juarez, one in Chihuahua and one in Guadalajara.

What does CTO stand for; how does it apply and how does the customer win?

CTO model means Customer-to-Order. What that means is we manufacture on the spot anything that has been ordered online. We do not manufacture bulk orders. For example if Walmart were to do a “back-to-school” sale and they need a million computers for the entire United States, those will be manufactured in China in advance. They will be sent to the U.S. by boat and distributed. That is one single product, one single spec.

CTO means every order is different and unique because it is a computer made for one specific customer who ordered it with its own specification. You could have two that looked alike but they will be for two different people. You have the variable of time, when you buy online, you always have the shipping time depending on the region, two days, five days, six days; location is also very important.

The largest market in the world for CTO is the United States and Canada, being in Mexico capitalizing from the proximity and cost is what drove these companies to ask us to set up their operation for CTO on the border.

Literally you can see the United States from operations in Tijuana and San Jeronimo.

That is correct.

As you take a look at the products and this business model it sounds as though you have to be responsive on a moment’s notice -- you have to be agile. To what extent is that true?

That is completely true. It is 100 percent agility. The moment you order a computer today those will be captured by the customer site. That information will be sent overnight to Foxconn. We will pull components for those different computers tomorrow. They will be on site tomorrow night and the day after will be completely assembled and shipped back to the U.S.

As noted, you are within view of the border. Your company has been doing something to expedite crossing goods. What is the latest that you can share with us?

President Peña Nieto presented the change or the amendment to the laws concerning firearms in March and he has asked Senate for approval to allow U.S. Customs and Border Patrol agents wearing uniforms to bear guns in plain sight, side-by-side with Mexican Custom Agents in specific locations designed by both governments.

Initially it will only be on the border and initially the pilot project will be in Otay Mesa for produce and the one in Santa Teresa for manufactured products. The process in Otay Mesa for produce is different producers. The one in San Jeronimo and Santa Teresa only applies to that specific operation of Foxconn. It is not for all FOXCONN operations yet. It is only for that one to prove the model and understand what needs to be tweaked so it can be applied to the entire border.

We will be getting an additional benefit that is very good for us now that will make the operation even more efficient because we will be bypassing every gridlock or bottleneck coming south or going north on the border because that means we have dedicated agents on site to clear the incoming goods and clear the finished products out through a dedicated door.

One concern of Foxconn making computers is the thinking that raw materials or components are well over 90 percent sourced from Asia. What needs to happen if the goal from the Mexican management is to get more local sourcing? How do you close the gap?

The Mexican government has to develop a program to the likes of the automotive program that was created 25 years ago to incentivize for lack of a better term -- incentivize meaning to obligate us -- the electronic sector to begin relocating some of those suppliers from other parts of the world to Mexico.

Today there is no program to first obligate through incentives and therefore no company is looking at that. The best model and the best example is the automotive program that was created 25 years ago and has put Mexico on the global spot. We need to do that for electronics, aerospace and medical products.

You have been talking to the government, how are they responding to what you are talking about?

Surprisingly they have been very receptive lately, not so in the past. I think this year 2015 perhaps due to the economic constrains and pressures, the government has taken a completely different view of what we have been trying to push for seven years now. As a result of that with the President in March consenting to change the law, they are beginning to understand the need and the necessity. We as a sector need to do our part but we need to push.

You want you suppliers to be very close to you. How will all this work lead to their taking a look at the bottom line -- total cost of doing business -- to be right there by Foxconn?

It is not just Foxconn as I mentioned. No supplier will relocate an operation to supply one single manufacture. That is why I mention that we only look out for each other and we need to have different operations needing to buy or get one single product. Therefore these suppliers will be interested and relocate operations to supply not just Foxconn but supply the other companies that require such a product.

So much of your success depends on communication, it depends on involvement, does Foxconn participate in regional organizations?

I participate directly and am involved with the Borderplex Regional Alliance in El Paso, Juarez and Las Cruces. Tijuana, San Diego have their own which is Smart Border Coalition. I am not a direct member of that but I have participated by invitation from them to see what we are both doing good or bad and what we can copy or help each other with.

Those organizations are very important because you begin to think first on a regional basis first that becomes a bi-national opportunity or in the case of Juarez, El Paso and New Mexico it is three states, Texas, New Mexico and Chihuahua in two countries. You put a lot of the efforts into one single objective.

We can continue pushing these types of efforts. Both of them have the same goals for their own needs and their own region, then the echo that the governments will hear in Washington or Mexico City. It will be completely different than a single company trying to do that effort.