Site Selection & Logistics ManagementTue, 09/30/2014 - 17:13
Moderator: Florian Paugam, Sales and Marketing VP of Kuehne & Nagel
Panelist: Salomon Noble, CEO of Intermex
Panelist: Leo Torres, Director of Purchasing & STA of Ford de México
Panelist: Alberto Sanchez, Automotive Leader of Ferromex
Moderator Florian Paugam, Sales and Marketing Vice-President of Kuehne & Nagel, began an analysis of external factors that were moving the automotive supply chain in Mexico. The major factor he dwelt on was a “democratic shift”, in which younger customers are buying cars and are demanding a supply chain that is more responsive to their needs. Paugam referred to a study by PwC that tracked the economic impact this shift was having on the automotive supply chain. “More emphasis now needs to be placed on features instead of on performance. This is not only true in the Western world, as economic growth will see Brazil, India, China, and Mexico become ever more important bases of automotive purchasing. Accelerated urbanization will change the aftermarket and service supply chain, as it will demand models such as car sharing. Furthermore, infrastructure will become more congested, demanding more effectiveness in the supply chain,” he explained. This theme of infrastructure would be a central one for the rest of the panel. The CEO of Intermex, a shelter services company based in Chihuahua, began by pointing out the need for industrial real estate developers to develop infrastructure able to respond to new automotive trends. Salomon Noble named infrastructure as one of a few variables that determine where automotive projects will be set up. For example, the site must be near existing power lines, close to the railway system and be within easy commuting distance for workers. Aside from infrastructure, the variables included the availability of skilled labor, logistics, and easy access to natural resources.
Leo Torres, Purchasing Director of Ford Mexico, sought to develop the impact that the supply chain has on an OEM’s business. He stated that 75% of a vehicle’s cost is spent on the supply chain, which leads Ford to seek long-term relationships with its suppliers. “We have 26 suppliers in our Hermosillo plant, many of these have been with us for more than 10 years. Over that time, we have only changed three of them, due to reasons pertaining to technology,” added Torres. He pursued by revealing just how the suppliers’ own supply chains and how they helped to grow local Tier 2 and 3 companies impacted the costs of the final product. As such, to help smooth out processes lower down the supply chain, Ford has a supplier technical assistance division that works with suppliers to minimize costs and find the right suppliers of their own. He ended by saying that suppliers’ main competitive advantage no longer lay in price but in costs, such as transportation and assembly.
Torres then added that Mexico would have to take certain steps if it wanted to match the design and engineering capacity of automotive hubs like the US, Germany and Japan. He stated that advanced economies have an advantage in logistics because of the costs of energy and telephone services. Unless Mexico can improve these areas, it will not compete with developed countries. He also pointed to railway service as an area in which Mexico is falling behind, its population largely still relying on automotive transportation, which is far from being as efficient.
The unimpressed vision of the Mexico railway network was met with caution by Alberto Sánchez, Automotive Leader of Ferromex. In his eyes, the privatization of the Mexican railway system in 1995 had resulted in a great evolution, leading to more than US$4.8 billion being invested in the railway system since. Sánchez said that Mexico had followed the example of American and Canadian railways to boost the competitiveness of its railways. “Today, Ferromex was catalogued as one of the most efficient railway systems in Latin America by the OECD. Mexico’s railway system is participating with every new automotive plant. 15 years ago Ferromex was moving 500,000 vehicles but it is estimated we will move 2 million in 2015,” he ended. The strategy Ferromex has used to obtain this growth is to tackle its preparation for new plants with years ahead of its construction. He states that such early prudence is not only wise, but it is necessary if Mexico wishes to smoothly go from the seventh-largest producer worldwide to fifth.