Mexico Fighting to Become Global Hotspot for Manufacturing

 

Mexico is a strategic production location in today’s modern manufacturing world, where producers of all sizes must establish their own operations in one of several regional hubs across the globe. Not to be left out, many European companies are leveraging in-country Mexico operations, taking advantage of NAFTA as well as Mexico’s other free trade agreements—the most held by any country – and a highly skilled workforce with cost-competitive rates that rival other countries in the region.

For evidence of this trend in Europe, look no further than two of Germany’s leading automakers. In 2014, BMW announced its plans to build a $1 billion manufacturing facility in the central Mexico state of San Luis Potosi, which will come to fruition in 2019. Audi will operate its own plant in Mexico, a $1.3 billion facility in San Jose Chiapa, where the Q5 luxury SUV will be produced in the coming years. In order for global OEMs and Tier One suppliers (from the auto sector as well as others) to succeed and qualify for Mexico’s numerous free trade agreements including NAFTA, they will need to source local content from a quality supplier base that is operating in Mexico. In turn, European suppliers understand they need to be near their clients and future clients, which requires them to ideally be situated in a cost-competitive location for North American production, as they round out their global manufacturing strategy. Mexico is turning out to be that attractive option for them in the Americas.

EBM caught up with Entrada Group, a firm that has a two-decade track record of guiding global suppliers in establishing their own manufacturing footprint in Mexico. Doug Donahue, one of Entrada’s Principals and Vice President of Business Development, shared his insights into the drivers that are compelling European suppliers to choose Mexico as their production location, and why it is paramount they have a regional partner in place who can successfully help them execute their operations. 1 -Some of our readers may or not be familiar with Entrada Group. Can you tell us whom Entrada Group is? We are a U.S./Mexican company with two manufacturing campuses in central Mexico, where we enable Mexico Looking To Lead The Way For All Things Manufacturing Doug Donahue europeanbusinessmagazine.com 19 international manufacturers seeking to enhance their competitiveness. We not only help them establish their own production footprint at our campuses, we oversee all non-production-related support services for our clients, enabling them to serve their clients in the most efficient manner throughout the North and South American markets. 2-What is driving global OEMs to set up a manufacturing base in Mexico?

Mexico has become one of the most compelling manufacturing locations for many sectors—automotive, aerospace, electronics and medical devices, to name a few. OEMs gain a competitive advantage by producing in Mexico for many reasons. First, it puts them in proximity to the markets of fellow NAFTA members U.S. and Canada, also offering additional growth opportunities across the rest of the Americas thanks to Mexico’s free trade philosophy. Second, Mexico offers international manufacturers a cost-effective production location in the region—in most cases, more cost efficient than what Brazil, Colombia and Argentina, to name a few, can offer. Third, Mexico’s motivated and educated labour force, in which the average skilled worker is in their mid-20s, also appeals to international manufacturers. Mexico graduates nearly 114,000 engineering, manufacturing and construction students per year. They earn degrees from key technical institutions that teach them the most sought-after skills critical to labour-intensive manufacturing for the growing automotive, aerospace and

1 -Some of our readers may or not be familiar with Entrada Group. Can you tell us whom Entrada Group is? We are a U.S./Mexican company with two manufacturing campuses in central Mexico, where we enable Mexico Looking To Lead The Way For All Things Manufacturing Doug Donahue europeanbusinessmagazine.com 19 international manufacturers seeking to enhance their competitiveness. We not only help them establish their own production footprint at our campuses, we oversee all non-production-related support services for our clients, enabling them to serve their clients in the most efficient manner throughout the North and South American markets. 2-What is driving global OEMs to set up a manufacturing base in Mexico? Mexico has become one of the most compelling manufacturing locations for many sectors—automotive, aerospace, electronics and medical devices, to name a few. OEMs gain a competitive advantage by producing in Mexico for many reasons. First, it puts them in proximity to the markets of fellow NAFTA members U.S. and Canada, also offering additional growth opportunities across the rest of the Americas thanks to Mexico’s free trade philosophy. Second, Mexico offers international manufacturers a cost-effective production location in the region—in most cases, more cost efficient than what Brazil, Colombia and Argentina, to name a few, can offer. Third, Mexico’s motivated and educated labour force, in which the average skilled worker is in their mid-20s, also appeals to international manufacturers. Mexico graduates nearly 114,000 engineering, manufacturing and construction students per year. They earn degrees from key technical institutions that teach them the most sought-after skills critical to labour-intensive manufacturing for the growing automotive, aerospace and

2-What is driving global OEMs to set up a manufacturing base in Mexico? Mexico has become one of the most compelling manufacturing locations for many sectors—automotive, aerospace, electronics and medical devices, to name a few. OEMs gain a competitive advantage by producing in Mexico for many reasons. First, it puts them in proximity to the markets of fellow NAFTA members U.S. and Canada, also offering additional growth opportunities across the rest of the Americas thanks to Mexico’s free trade philosophy. Second, Mexico offers international manufacturers a cost-effective production location in the region—in most cases, more cost efficient than what Brazil, Colombia and Argentina, to name a few, can offer. Third, Mexico’s motivated and educated labour force, in which the average skilled worker is in their mid-20s, also appeals to international manufacturers. Mexico graduates nearly 114,000 engineering, manufacturing and construction students per year. They earn degrees from key technical institutions that teach them the most sought-after skills critical to labour-intensive manufacturing for the growing automotive, aerospace and hightech sectors in Mexico. 3 –Why should suppliers to Tier One manufacturers consider Mexico? Because Tier One and OEMs operating in Mexico cannot succeed without their suppliers producing nearby them. Today, we are seeing a need for higher-quality, reliable Mexico-based suppliers to better serve the Tier Ones and OEMs who have invested hundreds of millions of dollars in the country. The smart, forward-looking international suppliers are setting their sights on Mexico for their next manufacturing operations. They understand it is critical that their clients obtain Mexico-originating content to fulfill international trade agreements, and service them in the most cost-effective and efficient way possible. In addition, Central Mexico specifically is important for suppliers seeking expansion into several industry sectors, as it has become the heart of Mexico’s fastest-growing manufacturing region. Our firm, Entrada Group, situated our manufacturing campuses in this area to be near to numerous OEMs and Tier One producers from many sectors. This proximity makes it cost-effective for suppliers to service their current customers, and position them well for potential future customers as well. 4-You claim Entrada Group can minimize risks and costly first-time mistakes and offer reduced costs without making many of the expenditures typically associated with such startups. How do companies working with you specifically benefit? As compelling as the strengths and potential rewards of Mexico are, fundamental challenges of doing business in a foreign country remain, particularly for smaller and midsize suppliers that are not aware of the business and political nuances. Even if a customer invites them into Mexico, many struggle with the essential question – will they be able to make it work and make it sensible financially? The urgency to get to Mexico may be created by OEM and Tier One customers, but the cost, risk and lack of know-how may prove too great for many smaller suppliers. That’s where working with a partner like Entrada Group—which takes responsibility for the administrative and non-manufacturing business aspects—becomes essential. In addition, we can offer them economies of scale that they otherwise wouldn’t be able to get. Freight operations is a perfect example. Any single supplier can purchase freight to the U.S. or to Canada for a certain cost, but if we leverage the volume of all of our clients, we can reduce this cost by 20%. This consolidated purchasing power applies to all the services we provide and the technology we purchase, further lowering exposure for our clients. 5- So if a company was looking to open a manufacturing base in Mexico, what would you say your specialty is? Why would a head of operations from Europe use Entrada Group over another? For numerous reasons. Above all, we offer them speed, quality and scalability they cannot get if they go about establishing a manufacturing footprint in Mexico on their own. Mexico can represent a new phase of growth for midsize suppliers, if they manage the whole process correctly and carefully with the insight of an experienced partner like Entrada Group. We have been operating in Mexico for nearly two decades and focus on providing the support and services our clients require so they can best serve their clients. We handle all non-production-related support, allowing suppliers to solely focus on their core business and quickly increase their output and profitability. Specifically, on behalf of our clients, we assist with their strategic plans, and take full responsibility

3 –Why should suppliers to Tier One manufacturers consider Mexico? Because Tier One and OEMs operating in Mexico cannot succeed without their suppliers producing nearby them. Today, we are seeing a need for higher-quality, reliable Mexico-based suppliers to better serve the Tier Ones and OEMs who have invested hundreds of millions of dollars in the country. The smart, forward-looking international suppliers are setting their sights on Mexico for their next manufacturing operations. They understand it is critical that their clients obtain Mexico-originating content to fulfill international trade agreements, and service them in the most cost-effective and efficient way possible. In addition, Central Mexico specifically is important for suppliers seeking expansion into several industry sectors, as it has become the heart of Mexico’s fastest-growing manufacturing region. Our firm, Entrada Group, situated our manufacturing campuses in this area to be near to numerous OEMs and Tier One producers from many sectors. This proximity makes it cost-effective for suppliers to service their current customers, and position them well for potential future customers as well. 4-You claim Entrada Group can minimize risks and costly first-time mistakes and offer reduced costs without making many of the expenditures typically associated with such startups. How do companies working with you specifically benefit? As compelling as the strengths and potential rewards of Mexico are, fundamental challenges of doing business in a foreign country remain, particularly for smaller and midsize suppliers that are not aware of the business and political nuances. Even if a customer invites them into Mexico, many struggle with the essential question – will they be able to make it work and make it sensible financially? The urgency to get to Mexico may be created by OEM and Tier One customers, but the cost, risk and lack of know-how may prove too great for many smaller suppliers. That’s where working with a partner like Entrada Group—which takes responsibility for the administrative and non-manufacturing business aspects—becomes essential. In addition, we can offer them economies of scale that they otherwise wouldn’t be able to get. Freight operations is a perfect example. Any single supplier can purchase freight to the U.S. or to Canada for a certain cost, but if we leverage the volume of all of our clients, we can reduce this cost by 20%. This consolidated purchasing power applies to all the services we provide and the technology we purchase, further lowering exposure for our clients. 5- So if a company was looking to open a manufacturing base in Mexico, what would you say your specialty is? Why would a head of operations from Europe use Entrada Group over another? For numerous reasons. Above all, we offer them speed, quality and scaleability they cannot get if they go about establishing a manufacturing footprint in Mexico on their own. Mexico can represent a new phase of growth for midsize suppliers, if they manage the whole process correctly and carefully with the insight of an experienced partner like Entrada Group. We have been operating in Mexico for nearly two decades and focus on providing the support and services our clients require so they can best serve their clients. We handle all non-production-related support, allowing suppliers to solely focus on their core business and quickly increase their output and profitability. Specifically, on behalf of our clients, we assist with their strategic plans, and take full responsibility

4-You claim Entrada Group can minimize risks and costly first-time mistakes and offer reduced costs without making many of the expenditures typically associated with such startups. How do companies working with you specifically benefit? As compelling as the strengths and potential rewards of Mexico are, fundamental challenges of doing business in a foreign country remain, particularly for smaller and midsize suppliers that are not aware of the business and political nuances. Even if a customer invites them into Mexico, many struggle with the essential question – will they be able to make it work and make it sensible financially? The urgency to get to Mexico may be created by OEM and Tier One customers, but the cost, risk and lack of know-how may prove too great for many smaller suppliers. That’s where working with a partner like Entrada Group—which takes responsibility for the administrative and non-manufacturing business aspects—becomes essential. In addition, we can offer them economies of scale that they otherwise wouldn’t be able to get. Freight operations is a perfect example. Any single supplier can purchase freight to the U.S. or to Canada for a certain cost, but if we leverage the volume of all of our clients, we can reduce this cost by 20%. This consolidated purchasing power applies to all the services we provide and the technology we purchase, further lowering exposure for our clients. 5- So if a company was looking to open a manufacturing base in Mexico, what would you say your specialty is? Why would a head of operations from Europe use Entrada Group over another? For numerous reasons. Above all, we offer them speed, quality and scalability they cannot get if they go about establishing a manufacturing footprint in Mexico on their own. Mexico can represent a new phase of growth for midsize suppliers, if they manage the whole process correctly and carefully with the insight of an experienced partner like Entrada Group. We have been operating in Mexico for nearly two decades and focus on providing the support and services our clients require so they can best serve their clients. We handle all non-production-related support, allowing suppliers to solely focus on their core business and quickly increase their output and profitability. Specifically, on behalf of our clients, we assist with their strategic plans, and take full responsibility

5- So if a company was looking to open a manufacturing base in Mexico, what would you say your specialty is? Why would a head of operations from Europe use Entrada Group over another? For numerous reasons. Above all, we offer them speed, quality and scalability they cannot get if they go about establishing a manufacturing footprint in Mexico on their own. Mexico can represent a new phase of growth for midsize suppliers, if they manage the whole process correctly and carefully with the insight of an experienced partner like Entrada Group. We have been operating in Mexico for nearly two decades and focus on providing the support and services our clients require so they can best serve their clients. We handle all non-production-related support, allowing suppliers to solely focus on their core business and quickly increase their output and profitability. Specifically, on behalf of our clients, we assist with their strategic plans, and take full responsibility

6-You claim Entrada Group can minimize risks and costly first-time mistakes and offer reduced costs without making many of the expenditures typically associated with such startups. How do companies working with you specifically benefit? As compelling as the strengths and potential rewards of Mexico are, fundamental challenges of doing business in a foreign country remain, particularly for smaller and midsize suppliers that are not aware of the business and political nuances. Even if a customer invites them into Mexico, many struggle with the essential question – will they be able to make it work and make it sensible financially? The urgency to get to Mexico may be created by OEM and Tier One customers, but the cost, risk and lack of know-how may prove too great for many smaller suppliers. That’s where working with a partner like Entrada Group—which takes responsibility for the administrative and non-manufacturing business aspects—becomes essential. In addition, we can offer them economies of scale that they otherwise wouldn’t be able to get. Freight operations is a perfect example. Any single supplier can purchase freight to the U.S. or to Canada for a certain cost, but if we leverage the volume of all of our clients, we can reduce this cost by 20%. This consolidated purchasing power applies to all the services we provide and the technology we purchase, further lowering exposure for our clients. 5- So if a company was looking to open a manufacturing base in Mexico, what would you say your specialty is? Why would a head of operations from Europe use Entrada Group over another? For numerous reasons. Above all, we offer them speed, quality and scalability they cannot get if they go about establishing a manufacturing footprint in Mexico on their own. Mexico can represent a new phase of growth for midsize suppliers, if they manage the whole process correctly and carefully with the insight of an experienced partner like Entrada Group. We have been operating in Mexico for nearly two decades and focus on providing the support and services our clients require so they can best serve their clients. We handle all non-production-related support, allowing suppliers to solely focus on their core business and quickly increase their output and profitability. Specifically, on behalf of our clients, we assist with their strategic plans, and take full responsibility of the legal and practical requirements of setting up operations in Mexico, and also provide ongoing production support (general & administrative) services. This type of value-add is what we refer to as our Turnkey System, which is a strategic way for many mid-sized suppliers to get into Mexico and see how it really goes, rather than trying to establish operations on their own. In the end, it leaves them free to focus fully on their key competency: manufacturing great products.