Join the manufacturing
By Xavier Hurtado
Mexico’s Manufacturing Facilitator
facilitator@AmericanIndustriesGroup.com
www.Su...
About American Industries Group
American Industries Group is a
private Mexican company that has
helped over 200 global com...
Our Locations & Score Card
Shelter & Start-up Services Real Estate
• 50 Customers.
• Over 8,500 Customer’s headcount
• Ove...
What we’ll cover today:
• 10 Reasons to Manufacture in Mexico as part of the global supply chain
• Location of manufacturi...
10 REASONS TO MANUFACTURE IN MEXICO AS PART
OF THE GLOBAL SUPPLY CHAIN
Leveraging Mexico’s advantages for your profitabili...
10 Reasons to Manufacture in Mexico
as part of the global supply chain
1. Immediate access to the manufacturing industry i...
Bombardier Success Story
• Bombardier opened its new plant
in Querétaro Aerospace Park, with
an investment of 255.9 millio...
Myth: Everything in Mexico will
be inexpensive
Facts:
• Labor will be very inexpensive –
up to 80% in savings compared to
...
Myth: There is low quality in the
labor force in Mexico
Facts:
• The labor force in Mexico is trained to
meet internationa...
Aerospace manufacturing
quality in Mexico
Mexico is one of the few countries
that has entered into a bilateral
agreement f...
Myth: Security in Mexico is a
threat to manufacturers
Facts:
• Manufacturers have not
been threatened since they
do not ha...
LOCATION OF MANUFACTURING INDUSTRIAL CLUSTERS
IN MEXICO: FINDING YOUR CUSTOMERS
Where are your current or potential custom...
Mexico reported 232
aerospace companies that
employed more than
30,000 workers in 2010,
and primarily serve the US,
Canadi...
Aerospace Industry in Mexico
Aerospace Clusters and
Supply Chain Integration
Beechcraft
Beechcraft operates 3 plants in the state
of Chihuahua that are focused on
medium & major aircraft subassemblie...
Mexico took the 8th place among the top 40 Vehicle producers on a global level!
International Organization of Motor Vehicl...
Automotive OEMs in Mexico
Automotive Clusters and
Supply Chain Integration
Veyance – Success story
Veyance has 2 manufacturing plants in
Chihuahua, Mexico, serving the
international heavy truck ind...
Medical Devices Industry in Mexico
Other Industries that have
grown in Mexico:
From OEMs and assembly operators to Tiers 3
• Appliances
• Engineering Design
...
Mexico is the most cost effective
location for US companies as far as
labor and freight
2011 US Manufacturing-Outsourcing ...
5 STEPS TO DO SITE SELECTION IN MEXICO
Elements to consider to find the most cost-effective location
Site Selection Process
Selected Site
Due Dilligence
Specific Site Selcetion
Site Rough Cut Cost Analylsis Evaluation Matri...
Understanding the Project
• Project Scope: What?
– Product, Facility Size, Volumes, Equipment, Headcount &
Skills, Utiliti...
“Information IS NOT
Knowledge”
- Albert Einstein
Key Factors to consider for Regional
& Specific Site Selection:
 Business Environment
 Labor
 Demographics
 Academic I...
 Business Environment
• Labor
• Demographics
• Academic
Infrastructure
• Quality of Life
• Political Environment
• Geogra...
• Business Environment
 Labor
• Demographics
• Academic
Infrastructure
• Quality of Life
• Political Environment
• Geogra...
• Business Environment
• Labor
 Demographics
• Academic
Infrastructure
• Quality of Life
• Political Environment
• Geogra...
• Business Environment
• Labor
• Demographics
 Academic
Infrastructure
• Quality of Life
• Political Environment
• Geogra...
• Business Environment
• Labor
• Demographics
• Academic
Infrastructure
 Quality of Life
• Political Environment
• Geogra...
• Business Environment
• Labor
• Demographics
• Academic
Infrastructure
• Quality of Life
 Political Environment
• Geogra...
• Business Environment
• Labor
• Demographics
• Academic
Infrastructure
• Quality of Life
• Political Environment
 Geogra...
• Business Environment
• Labor
• Demographics
• Academic
Infrastructure
• Quality of Life
• Political Environment
• Geogra...
• Business Environment
• Labor
• Demographics
• Academic
Infrastructure
• Quality of Life
• Political Environment
• Geogra...
• Business Environment
• Labor
• Demographics
• Academic
Infrastructure
• Quality of Life
• Political Environment
• Geogra...
Cost Analysis
For both the Regional & Specific Site Analysis, operating
cost scenarios must be determined by considering t...
Evaluation Matrix
City / Site / Building
Option A Option B Option C
Key Factors
 Company defines priorities & weights of ...
Due Diligence
 Zoning
 Ownership
 Utilities Feasibility
 Water
 Sewage
 Electricity
 Natural Gas
 Permits & Regist...
Local Knowledge is Key to :
 Obtain up-to-date & detailed information
 Clearly differentiate pros and cons of the availa...
5 Business models to start
manufacturing operations in Mexico
Different ways to leverage Mexico’s advantages for your oper...
5 Business models
• Finding a Joint
Venture Partner
• Acquiring an existing
operation
• Starting up with a
Stand Alone
ope...
5 Business models
 Finding a Joint
Venture Partner
• Acquiring an existing
operation
• Starting up with a
Stand Alone
ope...
5 Business models
• Finding a Joint
Venture Partner
 Acquiring an
existing operation
• Starting up with a
Stand Alone
ope...
5 Business models
• Finding a Joint
Venture Partner
• Acquiring an existing
operation
 Starting up with a
Stand Alone
ope...
5 Business models
• Finding a Joint
Venture Partner
• Acquiring an existing
operation
• Starting up with a
Stand Alone
ope...
5 Business models
• Finding a Joint
Venture Partner
• Acquiring an existing
operation
• Starting up with a
Stand Alone
ope...
 Incorporated
Operations are performed under clients’ Mexican Legal Entity.
This requires a more robust organization and ...
10 things to look for in a Start up
Partner or Shelter Program
Make sure you get the following benefits:
1. Free Cost Mode...
1 STEP TO GET A FREE COST MODEL
SIMULATION FOR MEXICO
How much will it cost you to operate in Mexico?
When you request a Cost Model Simulation, you will
be able to compare the total monthly operating cost
and cost per hour o...
Sign up for your Free Cost Model Simulation at:
http://CostModel.SupplyChainInMexico.com
By Xavier Hurtado
Manufacturing i...
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Supply chain integration in mexico

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How to attract foreign suppliers to Mexico

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Supply chain integration in mexico

  1. 1. Join the manufacturing By Xavier Hurtado Mexico’s Manufacturing Facilitator facilitator@AmericanIndustriesGroup.com www.SupplyChainInMexico.com Supply Chain in Mexico
  2. 2. About American Industries Group American Industries Group is a private Mexican company that has helped over 200 global companies (OEMs and suppliers) to successfully establish and run manufacturing operations throughout Mexico since 1976 through Site Selection, Administrative “Shelter” services and Industrial Real Estate.
  3. 3. Our Locations & Score Card Shelter & Start-up Services Real Estate • 50 Customers. • Over 8,500 Customer’s headcount • Over 30,000 trouble-free import and export transactions per year. • We built a 12 M Sq. Ft. Portfolio. • Full Mexican Market Coverage • 9 Industrial Parks • 90 Buildings • 89 Customers
  4. 4. What we’ll cover today: • 10 Reasons to Manufacture in Mexico as part of the global supply chain • Location of manufacturing industrial clusters in Mexico: finding your customers • 5 Steps to do Site Selection in Mexico • 5 ways to start up your manufacturing supply chain operations in Mexico • 1 Step to get a Free Cost Model simulation for your supplier operation in Mexico
  5. 5. 10 REASONS TO MANUFACTURE IN MEXICO AS PART OF THE GLOBAL SUPPLY CHAIN Leveraging Mexico’s advantages for your profitability
  6. 6. 10 Reasons to Manufacture in Mexico as part of the global supply chain 1. Immediate access to the manufacturing industry in Mexico and the US market. 2. Immediate re-manufacturing turnaround. 3. Skilled labor: up to 80% in savings with manufacturing, assembly, engineering & Design capabilities (Catia 5) 4. Technical training support: Schools, R&D and training centers. 5. Quality culture: ISO 9000, AS 9000, NADCAP. 6. Solid Manufacturing Clusters & Supply Chains: more than 3,000 foreign companies doing business in Mexico. 7. Tariffs savings: free Trade Agreements with 44 countries 8. Legal certainty for Intellectual Property 9. Tax incentives: No VAT and NO Income Tax under the Shelter Programs for the first 4 years of operations. 10.Developed “Soft-landing” culture to help manufacturers start up operations in Mexico in a fast-track, risk-free shelter programs.
  7. 7. Bombardier Success Story • Bombardier opened its new plant in Querétaro Aerospace Park, with an investment of 255.9 million USD. This project will generate approximately 1,105 direct jobs. • The Learjet 85 is a project surrounded by technological innovation, the use of new compound materials for the production of structures such as the fuselage, wings, control surfaces, among other pieces, will facilitate the creation of a completely different airplane from the current Learjet models. The production of the first Learjet 85 prototype is an achievement for the Mexican aerospace sector.
  8. 8. Myth: Everything in Mexico will be inexpensive Facts: • Labor will be very inexpensive – up to 80% in savings compared to certain locations in North America. • Utilities, logistics, real estate leasing and utilities will be about the same costs as in the US.
  9. 9. Myth: There is low quality in the labor force in Mexico Facts: • The labor force in Mexico is trained to meet international quality standards at technical training centers or at their own academic institutions. • Manufacturing plants have gotten their certifications in ISO 9000, NADCAP, AS 9000 and other certifications on their first attempt. • There are some plants with Engineers in process of getting manufacturing patents of processes that they optimized.
  10. 10. Aerospace manufacturing quality in Mexico Mexico is one of the few countries that has entered into a bilateral agreement for the mutual recognition of aeronautical certification - BASA (Bilateral Aviation Safety Agreement) with the U.S. Federal Aviation Administration (FAA), while companies operating in Mexico have certified their procedures in keeping with industry standards, such as ISO – 9001, AS 9100, and NADCAP (National Aerospace and Defense Contractors Accreditation Program). Mexico offers you the Available, Skilled and Affordable Talent you need for your Aerospace Manufacturing operation
  11. 11. Myth: Security in Mexico is a threat to manufacturers Facts: • Manufacturers have not been threatened since they do not handle cash in their day-to-day operations. • Manufacturers already established in Mexico have not left the country, but they have expanded or plan to expand their operations in Mexico.
  12. 12. LOCATION OF MANUFACTURING INDUSTRIAL CLUSTERS IN MEXICO: FINDING YOUR CUSTOMERS Where are your current or potential customers in Mexico?
  13. 13. Mexico reported 232 aerospace companies that employed more than 30,000 workers in 2010, and primarily serve the US, Canadian, German and French markets Source: Aerostrategy Mexico – Global leader in aerospace manufacturing investment attraction
  14. 14. Aerospace Industry in Mexico
  15. 15. Aerospace Clusters and Supply Chain Integration
  16. 16. Beechcraft Beechcraft operates 3 plants in the state of Chihuahua that are focused on medium & major aircraft subassemblies, fuselage subassemblies, sheet metal forming & cutting, extrusion machining, hidroforming, heat treatment, water & glicol and wire harnessing. This is a success story in Mexico with over 460,000 sq ft of industrial floor and over 900 employees that has been integrating its supply chain in the region with different key manufacturers and service providers, including special processes.
  17. 17. Mexico took the 8th place among the top 40 Vehicle producers on a global level! International Organization of Motor Vehicle Manufacturers (OICA) Mexico’s Light Vehicles Exports Mexico is the #1 Autopart supplier for the US Automotive Industry Numbers & Trends
  18. 18. Automotive OEMs in Mexico
  19. 19. Automotive Clusters and Supply Chain Integration
  20. 20. Veyance – Success story Veyance has 2 manufacturing plants in Chihuahua, Mexico, serving the international heavy truck industry. They have a complex process that has been certified by ISO9000 from the very first attempt in all their plants. They human resources team has always been skilled and stable: no strikes in more than 16 years. They have successfully integrated their local supply base for tooling and required services.
  21. 21. Medical Devices Industry in Mexico
  22. 22. Other Industries that have grown in Mexico: From OEMs and assembly operators to Tiers 3 • Appliances • Engineering Design • Electronic • Food • Heavy industry • Metal Mechanical • Multimedia • Petrochemical & plastics • Pharmaceutical • Software • Textile
  23. 23. Mexico is the most cost effective location for US companies as far as labor and freight 2011 US Manufacturing-Outsourcing Cost Index
  24. 24. 5 STEPS TO DO SITE SELECTION IN MEXICO Elements to consider to find the most cost-effective location
  25. 25. Site Selection Process Selected Site Due Dilligence Specific Site Selcetion Site Rough Cut Cost Analylsis Evaluation Matrix Final Site Selection Regional Site Selection Cities Rough Cut Cost Analysis Evaluation Matrix Final City Selection Understanding the Project Project Scope Company Objective Corporate Criteria
  26. 26. Understanding the Project • Project Scope: What? – Product, Facility Size, Volumes, Equipment, Headcount & Skills, Utilities & Consumption, Raw Material(s), Supply Base, Customer(s)... • Company Objective: Why Mexico? – Cost reduction, Proximity to Customer(s), Logistics, Suppliers.... • Corporate Criteria – Time Frame – Buy or Lease – Existing or BTS Facility – Project Confidentiality / Company Exposure – City Profile • Border, interior, big, small. – Expat Quality of life – Outside or Inside Industrial Park – Curb Appeal
  27. 27. “Information IS NOT Knowledge” - Albert Einstein
  28. 28. Key Factors to consider for Regional & Specific Site Selection:  Business Environment  Labor  Demographics  Academic Infrastructure  Quality of Life  Political Environment  Geography & Climate  Accessibility  Supply Base  Infrastructure
  29. 29.  Business Environment • Labor • Demographics • Academic Infrastructure • Quality of Life • Political Environment • Geography & Climate • Accessibility • Supply Base • Infrastructure • Turnover Rate • Absenteeism • Labor Environment • Unemployment Rate* • Labor Availability • Labor Culture / Vocation • Union Presence • Established Companies & Competitors Key Factors to consider for Regional & Specific Site Selection:
  30. 30. • Business Environment  Labor • Demographics • Academic Infrastructure • Quality of Life • Political Environment • Geography & Climate • Accessibility • Supply Base • Infrastructure • Availability • Skills • Fully Loaded Cost Key Factors to consider for Regional & Specific Site Selection:
  31. 31. • Business Environment • Labor  Demographics • Academic Infrastructure • Quality of Life • Political Environment • Geography & Climate • Accessibility • Supply Base • Infrastructure • Population • Total • Economically Active • Average Age • People Entering the Workforce Key Factors to consider for Regional & Specific Site Selection:
  32. 32. • Business Environment • Labor • Demographics  Academic Infrastructure • Quality of Life • Political Environment • Geography & Climate • Accessibility • Supply Base • Infrastructure • Universities • Community Colleges • Technical Schools • Training Centers • Research Centers Key Factors to consider for Regional & Specific Site Selection:
  33. 33. • Business Environment • Labor • Demographics • Academic Infrastructure  Quality of Life • Political Environment • Geography & Climate • Accessibility • Supply Base • Infrastructure • Residential Areas • Country Clubs • Lodging • Restaurants • Hospitals • Shopping Malls • Convention Centers • Cultural / Sport Activities • Financial Services • Bilingual Schools & Universities • Expat Community Key Factors to consider for Regional & Specific Site Selection:
  34. 34. • Business Environment • Labor • Demographics • Academic Infrastructure • Quality of Life  Political Environment • Geography & Climate • Accessibility • Supply Base • Infrastructure • Attitude towards business • Incentives • Political party in power Key Factors to consider for Regional & Specific Site Selection:
  35. 35. • Business Environment • Labor • Demographics • Academic Infrastructure • Quality of Life • Political Environment  Geography & Climate • Accessibility • Supply Base • Infrastructure • Topography • Temperature • Humidity • Prevailing Winds • Rainfall • Elevation Key Factors to consider for Regional & Specific Site Selection:
  36. 36. • Business Environment • Labor • Demographics • Academic Infrastructure • Quality of Life • Political Environment • Geography & Climate  Accessibility • Supply Base • Infrastructure • Airports • Commercial / Cargo • Domestic / international flight’s frequency • Main roads connections • Railroad connections • Distance to other cities • Distance to the port of entry • Parcel services • Freight services • Freight costs • Air • Land • Rail • Sea Key Factors to consider for Regional & Specific Site Selection:
  37. 37. • Business Environment • Labor • Demographics • Academic Infrastructure • Quality of Life • Political Environment • Geography & Climate • Accessibility  Supply Base • Infrastructure • Services • Maintenance • Special processes • Heat treatment • CNC Machining • Chemical • Tool & Die Casting • Injection Molding • NDT • Other • Metrology • Laboratory • Raw Materials. Key Factors to consider for Regional & Specific Site Selection:
  38. 38. • Business Environment • Labor • Demographics • Academic Infrastructure • Quality of Life • Political Environment • Geography & Climate • Accessibility • Supply Base  Infrastructure • Industrial Parks • Location • Available Buildings • Available Land • Building Lease Rate • Land Prices • Rail Spur • Utilities • Water • Potable • Treated • Sewage • Electricity • Tension (Low, High, Mid) • Natural Gas • Telecommunications • Copper, Fiber, Wireless Key Factors to consider for Regional & Specific Site Selection:
  39. 39. Cost Analysis For both the Regional & Specific Site Analysis, operating cost scenarios must be determined by considering the following: + Labor + Process Utilities + Freight, Customs & Logistics + Building (Lease Rate, Triple Net, Utilities, CAM Fees) + Administrative = Monthly Operating Cost & Fully Burdened Cost/hr
  40. 40. Evaluation Matrix City / Site / Building Option A Option B Option C Key Factors  Company defines priorities & weights of the factors to be considered
  41. 41. Due Diligence  Zoning  Ownership  Utilities Feasibility  Water  Sewage  Electricity  Natural Gas  Permits & Registrations  Easements  Site Studies  Soil Mechanics  Topographic  Environmental Studies  Phase One  Phase Two After selecting a site, a due diligence process is required: You can by-pass this process when you lease your facility with American Industries Group.
  42. 42. Local Knowledge is Key to :  Obtain up-to-date & detailed information  Clearly differentiate pros and cons of the available options  Avoid unnecessary problems & costly mistakes before and after the operation.
  43. 43. 5 Business models to start manufacturing operations in Mexico Different ways to leverage Mexico’s advantages for your operations
  44. 44. 5 Business models • Finding a Joint Venture Partner • Acquiring an existing operation • Starting up with a Stand Alone operation • Contract Manufacturing • Starting up with a Shelter Program
  45. 45. 5 Business models  Finding a Joint Venture Partner • Acquiring an existing operation • Starting up with a Stand Alone operation • Contract Manufacturing • Starting up with a Shelter Program – They might be experts to do business in Mexico – They might speed up the start up process due to local networking – They might be well connected to help you import & export – You do not have full control of your operation – You have the risk of losing your intellectual property – You will face liabilities in Mexico in case of any mistakes or problems with the operations
  46. 46. 5 Business models • Finding a Joint Venture Partner  Acquiring an existing operation • Starting up with a Stand Alone operation • Contract Manufacturing • Starting up with a Shelter Program – Employees will already have the needed training for your process – Legal and operational permits might already be compliant – High entrance cost – You will be responsible for all the previous and ongoing legal and operational liabilities
  47. 47. 5 Business models • Finding a Joint Venture Partner • Acquiring an existing operation  Starting up with a Stand Alone operation • Contract Manufacturing • Starting up with a Shelter Program – You will have full control of your operation – High entrance cost – High and costly learning curve – Lack of local networking – High risk and liabilities for all legal, labor, fiscal and customs start-up and operational permits (functions that are not your core business)
  48. 48. 5 Business models • Finding a Joint Venture Partner • Acquiring an existing operation • Starting up with a Stand Alone operation  Contract Manufacturing • Starting up with a Shelter Program – You will never have control of your production – You risk your intellectual property
  49. 49. 5 Business models • Finding a Joint Venture Partner • Acquiring an existing operation • Starting up with a Stand Alone operation • Contract Manufacturing  Starting up with a Shelter Program – You will have immediate access to the local networking and know- how to do business in Mexico – You have full control of your operation – You can start up in less than 9 weeks – You can choose to not have a legal entity in Mexico – No liabilities in Mexico: labor, fiscal, legal and other operational permits
  50. 50.  Incorporated Operations are performed under clients’ Mexican Legal Entity. This requires a more robust organization and income tax obligations. Recommended only if you are required to invoice your customers in Mexican Pesos  Not Incorporated Operations are performed under American Industries’ Mexican Legal Entity. It simplifies the compliance with Mexican regulations, translating into important cost savings. You will be exempt from income tax if you do not incorporate in Mexico. American Industries is able to offer the same scope of services in either framework. Sales in Mexico can be done in both scenarios. Legal Entity’s Working Framework Starting up under a shelter program: Legal entities
  51. 51. 10 things to look for in a Start up Partner or Shelter Program Make sure you get the following benefits: 1. Free Cost Model Simulation comparing different regions 2. Flexible commitment: on any size project (headcount or Sq. Ft.) 3. No entrance or exit fee at the termination of your contract (with coordinated exit strategies) 4. Fast and worry free start-up operations (9 weeks) 5. Flexibility on how to operate in Mexico: incorporated or not Incorporated 6. Tax Savings: No VAT and no INCOME TAX for the first 4 years of operations 7. Billing transparency & no mark ups on purchasing in Mexico 8. Full Compliance Assistance: fiscal, customs, labor and environmental (no red tape and no administrative risk or liabilities) 9. Customs Certified Program: quick processing on cross-border transactions 10. Ask for full administrative support: it will allow you to concentrate 100% on your manufacturing operation, not on human resources recruitment, looking for suppliers and so on.
  52. 52. 1 STEP TO GET A FREE COST MODEL SIMULATION FOR MEXICO How much will it cost you to operate in Mexico?
  53. 53. When you request a Cost Model Simulation, you will be able to compare the total monthly operating cost and cost per hour of your operations in different regions in Mexico, including the following criteria:  Cost of direct and indirect labor  Cost of shipments to and from the International Ports of Entry  Cost of Real Estate Facility and Utilities  Other costs of operating in Mexico Get a Cost Model Simulation Request your free cost model today at: http://CostModel.SupplyChainInMexico.com
  54. 54. Sign up for your Free Cost Model Simulation at: http://CostModel.SupplyChainInMexico.com By Xavier Hurtado Manufacturing in Mexico Facilitator facilitator@AmericanIndustriesGroup.com www.SupplyChainInMexico.com
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