José Luis Zuñiga
Director of the Aerospace Program
TechBA
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Strong Network Can Help SMEs Enter Global Supply Chains

By Alicia Arizpe | Thu, 08/06/2020 - 11:14

Q: How has TechBA helped to strengthen Mexico’s aerospace industry during the pandemic?

A: TechBA has helped numerous companies enter the local aerospace supply chain, which now comprises about 360 businesses. We are fully aware of the many challenges the aerospace sector faces due to the pandemic but we are certain that Mexico’s strengths, which place the country near the Top 10 of aerospace suppliers in the world, will help the sector overcome this complex situation. The Mexican aerospace industry employs over 60,000 highly trained individuals and exports US$9.6 billion thanks to its double-digit growth over the past 10 years. The sector is now an engine for Mexico’s economy.

We have developed a network that comprises clusters, institutions, associations, the federal government,  ministries of economy from state governments, new companies and  businesses that have worked with us over the past 12 years to understand where they are now, what challenges they are facing and how we can help them in this situation. We are also developing programs that allow us to tailor our solutions to the needs of every company.

Q: What should companies prioritize when restarting operations?

A: The first priority is employee safety. Companies need to provide clear and comprehensive information to their plant and office employees on how to remain safe under the current environment and implement protocols that guarantee safety at their workplace. The second priority is to maintain constant communication with employees, especially those working from home, regarding the measures that companies are taking and will take in the coming months. Companies will have to increasingly adapt to digital communication tools. We have discovered that some executives are still struggling with technology. Yet, they will have to adapt as opportunities will arise through these channels. We are also encouraging companies to maintain close communications with suppliers and clients and to understand that they are also facing a complex situation.

Another priority is having a clear risk management strategy that allows companies to ensure the continuity of their operations under difficult circumstances. This is required by norm AS9100, which is essential for aerospace companies but it is not entirely well defined, so companies interpret it at will. While no one could have imagined that a global pandemic would destabilize global supply chains and the world’s economy, this is a lesson for companies to develop strategies that allow them to prepare for future emergencies. At this point, investments should be effective and take into account potential risks. Companies need to reevaluate their debt, equipment plans and differentiating elements such as certifications. For instance, this period may allow companies to certify themselves to capture clients whose demands are going unmet due to supply chain disruptions. Keeping healthy finances will allow companies to weather future challenges.

Q: How can Mexican companies penetrate global value chains that have been disrupted by the pandemic?

A: Since 2017, the TechBA Aerospace team focuses on implementing a national supplier development strategy coordinated by FEMIA and the main aerospace clusters. Within this program, we analyzed the capabilities of 200 companies working in the aerospace industry and other related sectors to determine how they could fit international supply chains. We are talking to major players in the industry to understand their needs because we now have a broad portfolio of specialized, local capabilities.

We are also working on the relocation of several work packages. Because of the COVID-19 outbreak, many companies based in the US but with plants in Mexico had to pause their operations abroad, which meant intensifying their operations in Mexico. This caused them to saturate their plants, which were unable to manage so many projects.

The pandemic has also taught the sector the importance of having more than one supplier, especially if that supplier is based in Asia. Mexico now manufactures doors, electronic components, harnesses, engines and many other parts for the aerospace sector. The country has the necessary capabilities and talent to manufacture many more critical products.

Q: What financial challenges are local aerospace companies facing at this point?

A: Some companies are concerned about meeting the commitments they made before COVID-19. We are supporting them by reviewing their contracts with investors and lessors to help them find alternatives to face these commitments during these troubling times. Although the entire sector is suffering, we are focusing on SMEs. The reason is that the 4 million SMEs in the country are a very important source of employment and represent one of the main engines of the economy in Mexico. Several state governments are also aware of their importance and are developing flexible financial and economic revival plans accordingly. The aerospace industry has generated many opportunities for economic development for large regions.  

Q: How can aerospace companies identify new opportunities in this rapidly changing market?

A: At this point, one of the most viable solutions companies can implement is to diversify their portfolio. Companies can use this time to investigate new opportunities in different sectors. For instance, Safran recently began collaborating with CONACYT and the Ministry of Health to build ventilators in Queretaro. These adjustments do not mean that companies will lose focus. Rather, it will allow them to identify new opportunities to generate liquidity and continue operating.

TechBA has several multidisciplinary teams that include specialists from the automotive, medical devices, plastics, agribusiness, IT and aerospace industries. These teams are able to guide companies in finding new opportunities, restructuring their business models or developing focused strategies that help them address their priorities.

Q: How is TechBA supporting the development of local talent for the aerospace industry?

A: The COVID-19 pandemic will cost the sector about 20,000 direct jobs and lead to a reduction in exports. Globally, the aerospace sector is expected to contract by about 30 percent. But many in the sector are developing strategies to minimize the damage and help the industry recover. TechBA has been working with academia and governmental institutions to develop courses to support individuals who will lose their jobs due to the crisis. These programs will allow them to strengthen their skills and to be prepared to return to the workforce once the crisis is over. It will also allow companies that had to lay off their employees to rehire them once they need them again.

Q: What is necessary for the aerospace industry to go back to pre-COVID-19 levels?

A: The aerospace sector might take two years to recover to pre-crisis levels in terms of finances and investor confidence. At this point there is significant uncertainty but we believe that USMCA will be key for the industry’s recovery as it will strengthen trade and investment, which will allow Mexican companies to enter global value chains. The treaty will strengthen the region and highlight the benefits of manufacturing in Mexico, such as proximity to customers. Many companies are already turning to Mexico. For instance, Safran recently announced the construction of a new plant in Chihuahua. Moreover, in 2021 the country will host the first major post-COVID-19 aerospace event: FAMEX, which will highlight the strength of Mexico’s aerospace industry. In 2021, the aviation industry will also begin to recover and as airlines return to regular operations, they will also restart their acquisitions of new aircraft, which will reinvigorate the sector.

Photo by:   TechBA
Alicia Arizpe Alicia Arizpe Senior Writer