MexicoNow Staff Interview
Remember that old question about the chicken and the egg?
A few years ago, one foreign economic development group – not Mexico, not U.S. -- made a pitch to a Fortune 500 auto parts supplier to locate in a proposed industrial park. The on-site tour revealed no buildings, no infrastructure. It showed no connections for logistics. All that would come AFTER the supplier signed the bottom line.
No signature ever came. The supplier couldn’t wait for promised improvements.
With more than 80 percent of the Mexico’s manufacturing products going to the U.S. market, the logistics considerations must be in place up front. While the brochures might look nice, when it comes to the total cost of doing business, you can bet logistics operations influence site selection.
Luis Aguirre, vice president of government relations and logistics for Sanmina, also knows that the upcoming Trans-Pacific Partnership and Mexico’s more than 40 trade agreements means additional multi-dimensional thinking when it comes to site selection:
When it comes to logistics, what must a company understand for the type of business that it is in, what do they need to know about logistics in Mexico?
Every day the electronics sector is becoming a key player for multiple sectors in the consumer market, for example, around 80% of cars have electro- mechanical elements for assembly. For other sectors like multimedia, industrial, telecommunications, the electronic sectors have become a very important player for the manufacturing for these end products.
In logistics you need to consider what are the sectors and customers that you are going to serve and where your supply chain sources are located. Based on that you need to identify the cost, times and the flexibility that is demanded by your customers for on-time product deliveries.
How do you know if a supplier is reliable on deliveries?
Certification is becoming very important in the logistics network, the inbound and outbound logistics process. Why? Because this needs to be about certainty, reliability and confidence in all your supply chain about security, about trade compliance guidelines and all the elements.
Certifications provide you the support for reducing your cost and times in the import and export process for achieving this type of security, reliability and confidence.
You have talked about aligning with the OEM, the eventual customer, while you are talking about certification. Put these together. How does the sum of these drive competitiveness?
The OEMs or the end customers that we serve want to have the major flexibility, the on-time deliveries acceptance with a lower cost of logistics in the process.
If you are a certified company for security, like a C-TPAT in the United States or NEEC for Mexico, if you have reasonable care, due diligence in your temporary importation management and you have a good certification in the end you are going to have good quality products delivered on time.
You will have a product with low cost possibilities in logistics and you will have the confidence from the customs authorities and all the supply chain elements for having contract manufacturing in Mexico.
Always in the back of one’s mind are the security considerations. How does that fit into the logistics, site selection?
The security is not an issue any more because security is now 100% implied with all the certifications. Everything that you are doing in manufacturing, in logistics and supply chain, all these aspects consider the security element. These types of certification are included in the security process in place and it is something that we need to keep permanently.
How does labor fit in the logistics formula?
You are competing with other regions. You are competing with other states in Mexico and other sites. You need to put in the balance sheet the pros and cons for the supply chain that you need for your sourcing and where the markets are located or the customers that you are going to serve.
Considering this at the beginning and the end you need to identify whether that site offers the capabilities and logistics network and government relations for supporting the manufacturing sector in the location. All these points come into consideration, not only labor, not only the cost of labor or the availability of the labor, but the universities, the technicians and all the staff skills that you need to have in place for the site decision. The site location is influenced by the logistics network and capabilities based on the supply chain source and the market and customers that you serve.
What does the entrepreneur or the investor or the people with the company need to tell the governments upfront about what their needs are for location as well as logistics?
This is about government institutions, not about the government persons or the individual that is now in the part of the government. The most important for a site location and the confidence to define an investment in a place is that the local government has institutions that guarantee the permanence of the vision for continued improvements and growing your investment in the manufacturing sector.
The commitment of the public institutions and the private sector in that area also plays an important role for the certainty for a good site for manufacturing process.
What are some of the key measurements or considerations people should be watching for as they progress in evaluating Mexico?
Key elements to consider go beyond the capabilities. It is important to have the vision for the projects they are creating in the regions in Mexico. This has two sides, the government for the public programs that they have in place and on the other hand the private sector.
The synergy between the private sector and the government creates conditions for the investment. The continuing growth of the investment and the development of the local suppliers, the logistic suppliers, academy or universities and the technical schools to providing the skills, capable people for attending the manufacturing demand are part of the key elements to consider in the site selection.
What do people need to know about customs inbound and outbound?
Customs in Mexico is making good progress, very good improvement. Based on the certification that I have talked about and when you are certified the confidence that you provide to the customs authorities is 100 percent you have important benefits to apply for saving time and costs in your import and export operations. The implementation of technical assistance in the process for importing and exporting in Mexico has provided a huge step in this field.
I am very happy with the improvements that we have in customs in Mexico and open door policies that they have for companies to provide ideas to implement projects for reduced cost and times in the import and export operations while taking into consideration security statistics and other issues that are important for the country.