Local Support for International PlayersFri, 12/01/2017 - 14:53
Having a partner in Mexico can help companies maintain cost-effective operations and access advantages offered by the country’s IMMEX program, says Heberto Angulo, General Manager of Pencom CSS Manufacturing. “Manufacturing costs are much more affordable in Mexico,” he says. “As part of the IMMEX program, companies can offer tax breaks and temporary imports to customers. We can offer those same benefits to our local clients as long as they are also part of the IMMEX program.”
Headquartered in California, Pencom saw an opportunity to support its clients from Mexico, offering lower production costs while maintaining key competitive advantages. According to Angulo, the company chose Sonora as its investment destination due to the area’s skilled human talent, the state’s proximity to California and all the large aerospace companies in the local market. Pencom used to buy components from a company based in Nogales called CSS. Eventually, business grew enough for Pencom to buy CSS, creating what is now Pencom CSS Manufacturing.
Even the volatility in the dollar-peso exchange rate has proven to be an advantage for Pencom as most of the company’s raw materials are imported from the US due the need for certifications. However, Pencom’s headquarters takes care of these purchases in dollars so there is no impact on the company. “The advantage is in our operations in Mexico and the costs the company has to pay in pesos. The current peso-dollar exchange rate leads to increased profits.”
The company started as a machining and welding partner for companies in the aerospace and medical devices sectors but its scope has evolved significantly due to the demands from existing and potential clients. “Since we had to send components to other companies for testing after they were welded, our CEO had the vision to introduce nondestructive tests to our portfolio and eventually anodizing,” says Angulo. The company is continuously analyzing the potential of different processes and is gradually growing its services according to the needs of the industry. “Our operations are ISO 9001:2008 certified and we are transitioning to the
ISO 9001:2015 certification. We are also in the process of revising our AS 9100 D certification.”
Pencom has three facilities in Nogales with a total working space of 85,000ft2, including warehousing and space for chemical processes such as anodizing, passivation and chem film. All operations are ISO, AS and NADCAP- certified, in the last case for chemical processes, NDT and welding, in line with aerospace standards and, according to Angulo, the company’s nondestructive tests and welding processes will be NADCAP-certified by February 2018. “Our goal is to have all necessary processes for our operations in-house.” Only two of Pencom’s three buildings are in use at the moment but Angulo expects that new business from the US aerospace sector will shortly fill its remaining facility. “We have ambitious goals and we expect to start assembly operations at our third facility. The building is already complete and we only need to finalize all safety and legal requirements to start operating,” he says. “Our expectation is to begin mass production between 3Q18 and 4Q18 but we will most likely begin testing our operations by 4Q17.”
The Nogales operations employ 200 people but once the third building is up and running at full-tilt, Angulo expects to increase the company’s workforce by 50 percent. In terms of production, he is hoping to grow machining capabilities at least 30-40 percent. This puts Pencom in a strong position to target the growing industry, which according to Deloitte’s 2017 Global Aerospace and Defense Sector Outlook, has an all-time high backlog of 13,500 aircraft, which represents over nine years of the current global production.
Although Angulo has positive expectations for the company, he acknowledges that Pencom still needs to evolve to better cater to the industry’s requirements. “We still need to develop our administrative capabilities regarding the approval processes for production parts to be competitive enough for large clients such as Safran, Honeywell or even Boeing,” he says. Rather than being a concern, this has become a development opportunity, according to Angulo, who says Pencom’s growth strategies are allowing the company to diversify from its initial focuses.