The Role of Maquiladoras in the International Supply Chain
Companies considering reshoring to Mexico really should realize that Mexico isn’t the same thing as China.
Production can be completely outsourced to China. However, companies that contract with maquiladoras must provide their own management and secure their own supply chains. Chinese view gaps in the supply chain as an opportunity to profitably solve a problem while Mexicans view such a situation as an unacceptable risk.
Listen to this unique and timely podcast to learn about the following:
- Why are there two minimum wages in Mexico? Which one applies to your business?
- What services do maquiladoras offer? Which services don’t they provide?
- How does the quality of the labor force found in maquiladoras compare to a Chinese workforce?
- How do negotiating practices differ with Mexicans and Chinese in terms of pie expanding efforts, acceptance of ambiguity, creativity and decisiveness?
- What law governs dispute resolution in the maquiladoras?
- What is the quality of the infrastructure between the maquiladoras and the U.S.-Mexico border?
- Are companies that manufacture in maquiladoras expected to furnish living accommodations to their employees?
Andrew Hupert lives and works in Mexico where he helps international businesses get their supply chains under control. After over 20 years in Asia (Shanghai, Taipei, Hong Kong, Saigon), Andrew decided to follow his own advice and move his operations closer to home.
He is now based in Saltillo, Coahuila, the ‘Detroit of Mexico’, where he shows companies how to expand or adjust their supply chains.
00:00:59 – It’s not one size fits all, but there’s definitely a lot more concern than there was three years ago.
The situation in China is untenable for a certain type of business if you are a brand that is trying to produce, but you want to ship your stuff to malls and department stores.
In the United States, or you want Amazon to deliver your stuff to the United States, you’ve got to really rethink the China supply chain.
Ok, be cheap is not cheap and what used to be a known quantity is no longer a known quantity. But if you are manufacturing for production and for marketing in Asia, in China or in Asia or in, you know, parts of Europe, then it still might make a lot of sense.
It’s not one size fits all, but there’s definitely a lot more concern than there was three years ago. Ok. So for people that are running. Japanese, Korean, Australia and New Zealand companies that currently have facilities in China and they want to, may want to move out of China, but not necessarily to Mexico, maybe another place in Southeast Asia.
But for those American companies, Canadian companies, Mexico could make a lot of sense. It’s obviously much closer geographically.
00:09:48 – In Mexico, you don’t get that informal supply chain help where someone in one of your engineers …
. I don’t want to say special economic zone because it’s got a terrible connotation here in Mexico and Latin America. But if you’ve been doing business in China and you’re familiar with special economic zones, don’t say SZ in Mexico.
But it’s that sort of thing where there’s a guy who will take care of everything. Ok. The bad news is that does not include sourcing and supply chain of services, yes, there will be someone to help find you.
Labor, drivers, logistics, accounting, all of those things. There’ll be someone to help you with but.
In Mexico, you don’t get that informal supply chain help where someone in one of your engineers knows another engineer who knows another engineer, and they can make those things happen and like, and i’m thinking Shenzhen, or the special economic zones around Suzhou.
00:28:23 – So I’m giving Full disclosure here…
So I’m giving Full disclosure here. But these the successful companies, the successful macula Dora companies are walking in with their own supply chain.
Ok, OK. Caterpillar isn’t setting up an operation and then going out and looking for steel and looking for coal and looking for processors.
They are walking in with that stuff, you know, with everything in place, including the bit right down to the Bill of materials.
And I’ve just come out of a whole series of meetings where there are people who wanted Mexicans who want to do business with American Americans and with multinationals. But the idea of. But there are two problems.
00:34:47 – They’re union jobs. People want these jobs.
Are there typically unions that have to be dealt with and our labor costs going up? You know, in China they’ve gone up, but what about Mexico?
Ok, let’s right now let’s focus our conversation on those modulator, those auto factories that have, you know these are brand new factories but with the best equipment and these are the best jobs you can get in Mexico. People are moving within Mexico for these jobs.
These jobs are the gateway to the Mexican middle class. Ok, they’re good jobs.
They’re union jobs. People want these jobs. In these kinds of factories, the certifications and all the rules and having the Toyota method or ISO 9000 this is like a religion.
They are so quality conscious and they are so down with the program that it’s you know it’s definitely noteworthy that there is no.
00:40:16 – But the shift changes, that’s one of the big logistics challenges for the shelter organizations.
There is sort of cafeterias where there are cafeteria facilities available, but it’s not, it’s not like China where they’re building dorms, OK? They can leave.
They’re allowed to leave. Now their biggest problem is like providing buses. Ok.
But the shift changes, that’s one of the big logistics challenges for the shelter organizations. Ok, what’s the quality of infrastructure like?
So the companies have buses or you know the working on the buses to transport their workers back and forth. But when the product is produced, if it’s 100 miles away from the US border, how good are the highways to get to the points of entry?
00:48:46 – This is set up for Mexican entities to deal with one another within Mexico.
But the official line is everything that happens in Mexico is governed by Mexican by Mexican law. And you will be expected to have a Mexican entity whether or not you are using the shelter organization or your own.
You know, like facility of your own you are.
This is set up for Mexican entities to deal with one another within Mexico. That being said, a lot of, you know, a lot of what Mexico does, especially in these US within US MCA.
The subject of US MCA transactions. A lot of what Mexico does is set up to favor. American investors. Ok, so how good is the English speaking ability of Mexican managers and supervisors?
In the month Ladora section on the border, it’s excellent in many cases. They’ve gone to school in the United States. I’m trying to speak, I’m trying to learn Spanish. In the South I get to use my Spanish.
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