Mexican Manufacture Needs Updates to Remain Competitive
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Mexican Manufacture Needs Updates to Remain Competitive

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Sofía Garduño By Sofía Garduño | Journalist & Industry Analyst - Wed, 05/11/2022 - 15:41

The current context of uncertainty is changing manufacturing, which is being affected by customization demands from consumers, geopolitical issues, inflation and technological changes, among other trends. Moreover, global trade perspectives show a clear shift toward regionalization, according to consulting firm McKinsey. Mexico stands to benefit from this transition but to do so the country needs to update its practices and capitalize on its free trade agreements (FTA).


“Mexico is now a global manufacturing player,” said Martín Toscano, President and General Manager, Evonik. Currently, Mexico is the fourth auto parts producer in the world, he added. While in 2021 Germany’s auto parts production amounted to US$87.22 billion, Mexico closed the year with production valued at US$94.78 billion, as reported by MBN. Digitalization and e-commerce have been essential to achieving this. E-commerce has seen the same growth during the past two years as it experienced 20 years ago.  


“The manufacturing processes that we are currently witnessing are completely different from those of 20 years ago,” said Francisco Ríos, Business Director, Enterprise Singapore. Two decades ago, the manufacturing sector was one of the most important in the country and during the past six months, manufacturing has regained some of the importance it had in the past, according to Ríos. This renewed importance comes in part thanks to the shift from a “just in time” manufacturing process to a “just in case” view, he added.


Production processes have been transformed as advances in manufacturing technology arise. The combined capabilities of the industrial internet of things (IIoT), cloud computing, robotic process automation and artificial intelligence (AI), among other tools, have greatly improved manufacturing over the last few years. Manufacturers who embrace digital capabilities capture growth and protect long-term profitability.


The companies that have put AI at the core of their business have become market disruptors through the discovery of all-new business processes and commercial propositions that are often overlooked by the human eye. AI can help manufacturers achieve the greatest degree of product quality within their processes. This technology can be used in manufacturing neural networks, machines and deep learning, among others.


However, there are still challenges to overcome to fully position Mexico’s manufacturing industries. McKinsey calls manufacturing companies that have successfully adopted technology “lighthouses” but “in Mexico only Henkel is considered to be a lighthouse and, with the use of technology, it has achieved tangible impacts in terms of productivity, flexibility and sustainability,” said Miguel Ángel Alzaráz, Partner, McKinsey.


While the challenges are many, the sector is well on its way to embrace digitalization. “In Mexico, we are actively working towards industry 4.0,” said Toscano. The manufacturing industry in Mexico knows where to head and both the public and private sectors are working together to achieve these goals. The road to industry 4.0 has obstacles such as the need for digitalization, the lack of 5G infrastructure, limited awareness about cybersecurity and the need to identify relevant topics for education programs.


However, numerous companies have made great strides in Industry 4.0 adoption. In Mexico, 54 percent of automotive companies have active or in-development AI projects and one in every three companies uses IIoT to be more efficient and improve its capabilities, according to PwC. Meanwhile, 66 percent of Mexican companies have big data analytics projects.


To successfully transition to Industry 4.0, Mexico must start looking at similar markets, said Ríos. Developments achieved in Southeast Asia can be applied in Mexico since the region faces similar challenges. “Mexico can benefit from a partnership with companies from Singapore to take advantage of their technological developments,” said Ríos.


The road toward Industry 4.0, however, is not straightforward. “We fall into the trap of focusing only on assembly manufacturing and we are not developing patents nor new technologies,” said Nolasco. To truly be successful, Mexico needs to be more than a manufacturing hub; it needs to be an active developer of technology and innovation, but this can only be done through investment. “The establishment of R&D activities requires resources to export ideas and concepts,” said Toscano. Mexico must invest in training people in the STEM field as the human factor is the most important element, according to Nolasco.


Mexico is also dealing with the poor image that some international companies have of local businesses. “For Asian companies, doing business in Mexico represents a challenge in terms of language, culture, risk and the perception of lack of seriousness in doing business in any sector,” said Ríos. He warned that many countries have limited knowledge of Mexico’s business practices, infrastructure and capabilities, a trend that can only be fixed through promotion initiatives such as the “El Gran Bajío.”


Global manufacturing industries are being challenged by geopolitical changes, sustainability, the lack of maritime freight and the trend of consumer personalization, said Alzaráz. In this context, Mexico must find ways to provide added value, capitalize on its numerous FTAs and diversify its capabilities to manufacture innovative products and reach new consumers, Ríos said.

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