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Insight

Mexico New Sourcing Hub for Shell?

Wed, 01/25/2012 - 12:28

In October 2011, Shell announced that it was considering Mexico to be one of its regional and global sourcing offices alongside its existing sourcing offices in China, India and Russia. If chosen, Mexico would act as the sourcing office for Shell’s operations in the Western hemisphere. This mainly would include the company’s operations in the United States and Canada, but also activities in Central and South America.

After an initial study, Shell decided to open a small sourcing office in Mexico, which buys from a base of Mexican suppliers and fulfils demand from Shell’s operations. As Marta Jara Otero, President and Director General of Shell México explains, Mexico is extremely cost-efficient for the region. “When you include the logistics costs, the economic analysis shows that specifically for some projects in North America, Mexican suppliers could represent a real cost advantage versus other strategic sourcing locations. When you factor in inflation predictions, Mexico looks even better,” Jara Otero says.

A company must be certified in order to qualify as a potential Shell supplier. In Mexico, the supermajor has already started helping Mexican companies to enter into this process, which Jara Otero says is going extremely quickly. Some companies are already fully certified to supply, with others in process. Shell works with local suppliers in order to help them reach the standards at which they must operate to be certified.

Shell is currently sourcing only basic items from Mexican suppliers, such as canopies for service stations, valves, pumps and linepipe. The company expects that, over time, this will develop until there is a supplier base capable of delivering complex and expensive projects such as offshore platforms.

“We think that this kind of activity really adds value to our footprint in Mexico,” she says. “It helps suppliers reach other markets and diversify their demand risk. We are also cooperating with Pemex to share best practices and methodologies, because they share our interest in developing the industry supply chain.

“We think that it is an industry issue to have good suppliers. Globally, there are often areas where you see your competitors more as potential collaborators. In the case of Pemex, if in the future we become their contractor, then we will be part of the same chain that is pulling the whole sector forward.”