A Return to South of the Border Sourcing? (Part 1 of a 2 Part Interview)

This morning, I'd like to welcome Aptium Global's Lisa Reisman back to Spend Matters (by posting, she is giving me a break from my crazy travel schedule these past few weeks). In full disclosure, I have an economic interest in her firm, considering that she's my wife. Oh yeah ... and if you ever have an issue with something controversial on this blog, blame her, as she put me up to it.

Hey, what about Mexico?

For all of the recent press surrounding China, it started to make us wonder why we don't hear anything about Mexico these days. And so I picked up the phone to call one of the best sourcing guys I know, German Dominguez, who led Goodyear's Mexican sourcing efforts and is currently a Consultant on Mexico Sourcing matters, and asked him what he is seeing in terms of US sourcing activities.

Can you comment on current trade relations between the US and Mexico?

Let's face it -- everyone wants to do business with someone that they feel comfortable with. There is a long history of trade between the US and Mexico. This counts for a lot. The US has invested a lot of time and money into Mexico. Companies have developed a lot of resources to teach lean manufacturing and to develop suppliers in Mexico. Mexico has always strived to achieve the quality that Americans want. It has taken time but Mexico is now producing parts like components for aerospace engines.

Can you comment on what you see as the trends in terms of China vs. Mexico sourcing?

I'm not sure if these are trends or more opportunities stemming from NAFTA. If you remember, NAFTA was signed over 10 years ago. We are just now starting to see a trend in that the US is opening its borders for cross-border trucking. This means instead of the two trucks today that have to move a shipment, now you will be able to ship one truck all the way through to the US destination. This will substantially cut down lead times. From a total landed cost perspective, you have shrunk your supply chain by at least a full day and further reduced transactional expenses. These changes will allow US companies to use Mexico as a "buffer stock" supplier. In addition to Mexico serving as the "buffer stock" supplier, Mexico becomes an interesting partner to US "virtual manufacturers" (those companies focused primarily on directing new product development, marketing, sales, idea generation and coordinating and leading manufacturing operations but not doing it). Trends like mass customization can make Mexico a more desirable source of supply over China.

What types of parts/products/categories are companies asking you to source in Mexico?

From a direct materials perspective we are seeing a lot of metal fabrication opportunities, specialty steel plate, weldments (part of metal fabrications), machined components and across the board metals (automotive grade materials). Anything from 1010, 1008, 300 and 400 series stainless steels, to carbon steel plates such as A-36 and A-572. Structural steel A-656 is a bit harder to get as the Service Centers enforce minimum order quantities. By the same token, A-514 material is among the most difficult to find in Mexico and so at times is stainless steel at competitive prices. On the other hand, cold rolled and HRPO (hot rolled pickled and oiled), metal stampings from HSLA (high strength low alloy) material for complex chassis parts, and components that are made from coated materials are all good items to be sourcing from Mexico.

Stay tuned for Part 2 of this interview on Spend Matters tomorrow.

Lisa Reisman is Middle Markets Editor of Spend Matters. She can be reached via email @ lreisman [at] aptiumglobal [dot] com. German Dominguez is a Strategic Sourcing Specialist with over 10 years in the Direct Purchasing industry. He has worked with such companies as Delphi, Philips, and Goodyear. He presently serves SmithCNC-USA, LLC as a Mexico Sourcing Consultant. He can be reached at german [at] mexicosourcingassistant [dot] com.

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