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Supply Chain
Changing the Landscape and Supply Chain in Mexico
By Juan Francisco Fregoso, Managing Director, Riverwood Solutions Mexico
sumption, benefits the initial invest- ment and there is the benefit of indi- rect jobs created while the companies start building their facilities. There is also the benefit derived when the direct and indirect labor get their money, and the spending in the area simply moves the economy. This has been the case since the EMS industry came to Mexico more than 20 years ago, and derrama economica really describes the many benefits the Mex- ican economy and particularly the electronics supply chain has enjoyed. The local supply chain has de-
D
veloped enormously in Mexico, ini- tially for indirect material such as packaging, labeling, fixtures, bench- es, etc., and as the industry evolves, add to the mix metals, plastics, ca- bles and other manufactured items. Larger orders and the demands for manufacturing excellence, traceabili- ty and controls that come along with
errama economica — the indi- rect economic benefit to the community — benefits con-
those orders have had a hugely posi- tive impact locally, making industry better in numerous areas. This is not just beneficial to the local suppliers and their international EMS cus- tomers, but also to domestic EMS companies and OEMs. Skill levels have increased in all
areas, partially due to best practice policies. The EMS industry sets the bar high, due to the low margins where there is no room for inefficien- cy. The mindset spreads throughout the industry and along the supply chain — you are either okay with those rules or you are out. This drives the whole industry to a new level of skills. The EMS industry ini- tially bought in its own skilled peo- ple, but they quickly trained the teams around them and they in turn trained other people, so the training reached out into the local industry to raise of skill levels throughout. The success enjoyed by Mexi-
cans is not just in Mexico. The export of talent has also been considerable.
Those hungry to learn in countries like Mexico can develop their skills in the indirect labor areas like finance, design or planning and once they have those skills they have the op- portunity to move to countries like the US, looking to develop their ca- reers and for an exciting life experi- ence. Right now, Flextronics has Mexicans all over the world, many in finance, but also in other indirect services. Even indirect companies, serv-
ice companies that “pass by” the in- dustry, benefit. For example, a good friend of mine is in the water wells business. He started his company around 1996, which is called Ar- madrill (
www.armadrill.com). He drilled the water well for Flextronics, and while visiting their offices, he took a good look at the environment — even the smaller things such as of- fice layout, open-door policy, furni- ture, etc.— and came away with new ideas. He developed his own busi- ness, negotiated his services to other EMS companies, and learned how to present himself, his company and deal with a multinational company. His company has gone from strength to strength since then. Even basic cultural behavior
has changed. While at work, people had to behave within certain bound- aries that were “new” for them or were not in their day-to-day behavior due to cultural reasons; simple things such as littering, respect and diversity. Exposure to people from other parts of the world contribute and encourage the local work force to behave differently and transmit it to their families and so things change and improve and modernize. Infrastructure too improves
when a large new industry arrives. Local and international transport and logistics companies in the areas up their game, increase their vol- umes, improve their services, invest and grow. The local government also understands that to maintain and grow the industry, they need good in- frastructure and simplified proce- dures for export and import. This can mean investment in roads and railways, better public transport to move staff around, faster and more reliable telecommunications, and even improvements in housing. Corruption has dogged Mexico
and the avoidance, or at least reduc- tion of corruption has helped the country enormously. The EMS in- dustry has a very strict code of con- duct and ethics. Corruption, which is “normal” in countries like Mexico, has been reduced substantially since the EMS industry arrived. These large companies, investing locally and bringing jobs and prosperity, en- joy major leverage with local govern- ments. The jobs they create are key
metrics upon which politicians are measured, and now taxpayers have a more powerful means to demand their rights from the government without the need to “pay” for expedit- ing them.
July, 2015
Juan Francisco Fregoso is
Managing Director, Riverwood Solutions Mexico.
I’ve worked in the industry here
in Guadalajara since the EMS com- panies arrived. I spent several years with Flextronics before joining River- wood Solutions and have seen the changes first hand. Mexico is a bet- ter place for the industry’s presence here and it is currently enjoying some real growth in the sectors that, while not directly related to EMS, have absolutely benefited from the improvements they have driven in practices, infrastructure and the sup- ply chain. r
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