Weekly News Review | 10 October 2016 | Automotive Purchasing and Supply Chain Automotive Purchasing and Supply Chain

Talking Point

The future of Mexico

Mexico’s automotive industry has erupted in recent years, with huge investments from global OEMs and carriers who are capitalising from the region’s free trade agreements and attractive labour costs. While being positioned just south of the US, Mexico sits perfectly in between Europe and Asia, providing global powerhouses the chance to utilise their transport operations and cut supply chain costs significantly.

However, like many emerging automotive markets, Mexico is not without its setbacks. For example, high crime rates can cause major delays and cost haulage companies millions in theft, damage and late deliveries. Another issue concerns toll roads, adding further costs for transport providers using the designated routes in order to avoid lower quality roads with no security. For these businesses with multimillion dollar contracts, it is not worth the risk. To overcome such important issues as these, it is important that we as an industry come together to discuss how the region can overcome challenges and continue to develop in front of rival markets. And, at the Automotive Leaders Summit in Mexico City last week, we did exactly that. The turnout included top level OEM executives, automotive authorities and logistics specialists from the US and Mexico, who discussed how the neighbouring regions could work together to allow continued progression in Mexico’s booming industry.

One issue highlighted within the conference was the challenge of incorporating Mexican suppliers with global OEMs, as most are coming from abroad, suppressing homegrown businesses. KPMG’s Mario Alberto Hernandez voiced his concerns, believing that the government needed to find ways in which there was an integration of suppliers from these larger companies in order to improve. From an OEM standpoint, Raymundo Garza, Purchasing and Supply Chain Director for General Motors Mexico, explained that the OEM is buying $50 billion worth of components; 60% of which is being brought in Mexico and exported to other facilities. On top of investments from the OEMs, such as supplier parks, Mexican suppliers must continue to be competitive in the market, making sure that they have the highest levels of integration in their supply chain, along with innovative ideas and manufacturing flexibility. This will ensure a healthy and long term relationship, based on trust and transparency. “It is important to be competitive, not just for GM, but Mexico,” Garza assured the summit.

Most of the growth in Mexico is located around the big manufacturers. However, there is now a need to look for new locations that do not have a manufacturing history as it is becoming very expensive and difficult to recruit enough workers. This means that recruiting becomes a great challenge in these areas, so OEMs and suppliers will need to evaluate the wages of the region and look for support from local governments and schools in order to start the basic recruiting and training process, while continuing to invest correctly. The next step is to retain the workforce, as there will be other businesses in the region looking to hire workers. By using technical schools to train workers to fit the needs of the organisation, a business can take on workers who have trained specifically for the job, thereby increasing productivity. This is vital in achieving expansion within Mexico and will fuel the region's growth. Mexico is booming, but it must maintain this level of growth over the next decade if it wants to reach its full potential.

This is why events that bring the industry together are so important. They allow a wide range of industry experts the chance to meet with each other in one location, instead of taking ten individual trips for example, and discuss the topics of their choice.

The full Mexico Summit report will be included in this month's Automotive Purchasing and Supply Chain magazine.

Alex Kreetzer

Alex Kreetzer - News Editor

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