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News Article

Reinforcing North America’s Supply Chain

By Andrea Villar | Thu, 09/23/2021 - 13:41

You can watch the video of this presentation here.

 

Supply chains in all industries have taken a hit from disruptive events that have gone beyond the pandemic. High demand for semiconductors and tight supply, the blockade in the Suez Canal that is still wreaking havoc and the new USMCA have posed enormous challenges for numerous industries, especially automotive. Mexico, however, holds a privileged position to put itself ahead of other regions in the world. 

In recent years, national, regional and multinational companies have flocked to the country as an attractive destination to relocate their supply chains, said Mónica Doger, Director of the Clúster Automotriz from Puebla and Tlaxcala. Attracted by both geographic and labour benefits, businesses from all industries have set their sights on Mexico, “not only for manufacturing but also for applied technology projects,” said Doger. Yet the challenges Mexico faces in attracting further investment are numerous, she added.

According to Martin Toscano, President of Evonik, foreign direct investment in Mexico has not been impacted as much as in other regions. “It has been hurt but we have been one of the countries that have been hit the least,” he said. “That is a good sign and a positive indication that we have lost our fear of the new USMCA and that it will bring a lot of opportunities.” Today, he added, Mexico stands as a global production hub for the aerospace and automotive sector, not only driven by its proximity to the US market, but also by its potential as an exporter to other regions.

Gradually, Mexico has moved from being solely a manufacturing country to become an attractive spot for R&D projects for national and international companies, said Ruben Lostal, Location Manager of MUBEA. For this to fuel further growth, he added, encouraging more people to study engineering is key. “Right now Mexico is producing more engineers than the US per 100,000 inhabitants,” he shared. “We need to seize on that but we need to improve secondary education.”

The ongoing changes the country has experienced in its industries, coupled with events including the pandemic and its disruption of supply chains, have prompted Asian companies to migrate to the region to centralize their value chains, said Cristobal Magallanes, Automotive Sales Director of SKF. “Suppliers to customers have been coming to Mexico,” he said. “This will allow for more competition and therefore level the playing field for everyone.”

Multinational professional services group KPMG, which in recent years has assisted the country's manufacturing industry, has developed transformation strategies to help businesses seeking to establish operations in Mexico. “We help them take their projects from an operational and reactive stage to a more intelligent and predictive one where technology is key,” explained Victor Galvan, Senior Manager of KPMG Mexico. Data mining, virtual reality, data analytics, AI and Industry 4.0 principles are just a few of the tools the company is leveraging to accelerate enterprise growth.

Mexico also stands out globally for being “open for business,” Toscano said, because the regulatory environment is much less protectionist than at other large economies such as Brazil. To capitalize on Mexico's unique strengths vis-à-vis other regions of the world, all players in the ecosystem have to pull their weight. “We no longer play alone,” Toscano stressed. “Today we are all connected in some way.”

Andrea Villar Andrea Villar Journalist and Industry Analyst