Obstacle to Sourcing from Mexican SuppliersMon, 09/01/2014 - 09:43
With the majority of automotive production in Mexico targeting the US market, this country’s standards are most often used to assess whether a supplier is qualified or not. This situation has placed Roberto Moran, Procurement Manager for MAN Truck & Bus, in an odd position. The Volkswagen subsidiary tends to use European standards, but must deal with suppliers that are very US-centric in their orientation and way of doing business. “US and European standards do not match perfectly, which means spending time and money to clarify whether or not we can use certain products,” says Moran. “The main difference is in the size and the measurements being used, which can result in some practical difficulties. Our drawings and specifications do not match theirs, so we need to align both sides.” Another difference is the variation in emissions standards. Europe sets Euro standards while the US sets EPA standards. Furthermore, the Euro standards become more stringent and complex each year, meaning that MAN Truck & Bus has to address fresh challenges with each improvement.
Moran explains that when analyzing which technology to use in the Mexican market, MAN Truck & Bus must balance out the cost of its own investments versus those it wants to see from its suppliers. “The volumes we move in Mexico do not justify the investment needed to develop a new engine for this market. OEMs need to adapt their technology to the market they are in but suppliers must become better adapted to suit the variety of markets that might be supplied from Mexico as a production hub,” he says. He accepts that this adaptation is not easy to do for suppliers and is beyond the financial capabilities of many. This is why MAN Truck & Bus prefers to bring parts from long-term suppliers in countries where the technology is already being produced. However, the company is now actively looking to increase its Mexican supply base. A dedicated team visits potential suppliers to assess them on a variety of areas, including engineering, quality control, and purchasing. If any one section of the team has a problem with a supplier, the selection process will halt. Any who pass this audit must then send prototypes to MAN Truck & Bus’ offices to ensure their products meet the company’s own BBI quality system.
Another challenge that any potential supplier must meet is the ability to deliver products in low volumes. Moran explains that a lot of suppliers do not want to work with MAN Truck & Bus based on this limitation. “It is difficult to find suppliers who can provide the right volume levels. Most of them work with light vehicle OEMs who require far larger volumes than we do. Suppliers have to see us as additional volume rather than as their main customer. They need to have a flexible production base in order to supply us,” explains Moran. One important factor that can tip the odds the other way is that when a supplier is chosen to work with MAN Truck & Bus, it has the chance to work with other companies in the Volkswagen group. Moran acknowledges that these stringent standards and requirements do make it hard for the company to source more local suppliers. The fact that the quality control for Mexico is run out of Brazil only adds a further level of complexity. “It can take from six months to a year to bring a new supplier on board. Not having the ability to establish a new supplier here by ourselves means a lot of time is being lost. We would like to have our own engineering and quality processes in place in Mexico,” adds Moran. Despite these challenges, the company is looking for suppliers in Mexico and the US for almost all areas, including axles, chassis, engines, and lead springs. He points out that the government has launched initiatives to support the cooperation between OEMs and local suppliers by helping the suppliers develop the right quality systems. MAN Truck & Bus has been working directly with the government of Queretaro to host workshops that will train suppliers. The amount of parts the company imports naturally varies on the product itself. “Around 25% of components for the 8-tonne trucks we produce are sourced in Mexico, with the rest coming from Germany. For other lines, we source most of the parts from Brazil. We are actively looking for more suppliers in Mexico, and encouraging our Brazilian procurement team to source here,” says Moran. Part of the process in procuring more parts from Mexico is increasing the Brazilian team’s confidence in the Mexican supply base. For this to succeed, Moran knows the next batch of parts that MAN Truck & Bus sources from Mexican suppliers must avoid any quality problems whatsoever.