Considering Mexico as a Strategic Business Partner? - Here's some food-for-thought on the Supplier Development Process

It was just recently that I had the opportunity to share some insights on this topic at an event in Chicago. It wasn’t really much of a surprise that nearshoring trends and practices are becoming more attractive to the manufacturing community in the United States, but what amazed me was that despite the rapid growth in the Mexican market, a lot of companies still struggle to find the right suppliers and develop the adequate partnerships to sustain a successful nearshore operation. Our experience has taught us that there are still many important considerations that cannot be taken from granted when undertaking these efforts. Therefore, I wanted to share the top three questions I was asked during the event along with simplified yet illustrative responses that summarize our experience:

1)      How is the supplier base in Mexico today different from what it was a few years back?

ü  The maquiladora environment is changing and identifying suppliers in Mexico in a contract manufacturing capacity is becoming more and more relevant. New taxation requirements are reshaping the landscape.

ü  The Automotive and Aerospace industries are driving the phenomena by developing manufacturing clusters that generate collateral business to tiered suppliers and foster a competitive environment, which is developing at an increasingly fast pace.

2)      What are the challenges in identifying suppliers in Mexico these days?

ü  Suppliers in Mexico weren’t prepared to hone on the business potential and therefore are still hard to find – Regional databases are limited (with only Promexico supporting the effort from a federal, regional and local basis) and private databases are scarce and often expensive.

ü  Suppliers are not used to advertise themselves and don’t know how to do it effectively, many of the struggle to attack the market without adequate platforms.

ü  Certain industries are restricted as new antidumping practices are imposed on certain commodity groups (metals predominantly).

3)      How should we address those challenges to successfully develop a robust and sustainable supplier base?

ü  Supplier communications are still extremely involved – face to face discussions or at minimum over the phone interactions are required. E-mail does not suffice.

ü  Opportunities should be clearly stated to suppliers upfront – from a business and revenue standpoint as well as a relationship and expectations basis. Mexican suppliers build trust based on interactions.

ü  Collaborate with agencies and institutions at a government level. Promexico’s capabilities may be serve as a great resource. Complementing those efforts with professional assistance will support a smoother process and effective transition.

While these questions may not cover it all, they do provide a summary of the foundation needed to start thinking about a successful initiative. If your company is expecting or evaluating a nearshoring effort for 2016 understanding that the Mexican landscape is evolving rapidly and knowing that there are tools and mechanisms to navigate it efficiently is the first steps towards devising an adequate strategy. Every initiative will be different, and efforts need to be properly targeted and aligned with the corporate objectives as challenges must be anticipated.