May, 2017


www.us- tech.com


Page 23


OEMs Consider Cross-Border Move in Face of Uncertainty Continued from previous page


ent low labor cost regions. This includes light- and high-volume assembly in Mexico and in Asia.


Cross-Border Relocation Even if manufacturers decide to relocate op-


erations back to the United States, a full move back to a location thousands of miles from Mexico may not be viable. Another option is to relocate a plant to just north of the border. This would allow OEMs to take advantage of the existing supply chain, expertise and labor force with minimal dis- ruption. As it stands, industrial border towns, such as


El Paso, already work in a symbiotic relationship with the Maquiladora industry. El Paso sits across the boarder from Cuidad Juarez, Chihuahua, Mex- ico. With more than 1,100 manufacturing opera- tions in the region, it boasts one of the largest bilingual, binational workforces in the Western Hemisphere. The city already serves as the co-


ordination point for logistics and the receipt of raw materials into Mexico. Key personnel and much of the work- force live in El Paso and travel back and forth across the border daily. “Being in El Paso, we are strate-


gically located to help relocate manu- facturing on this side of the border if needed,” says Macias. “Everything that is going into Mexico right now is kept in staging warehouses here in El Paso, so it’s already there. The raw material does not have to enter into Mexico, it can stop here for assembly.” El Paso also has some of the


lowest wage requirements in the United States, operating at the na- tionwide minimum $7.25 per hour.


Any significant increase


in the cost of goods from Mexico will leave U.S.


companies that rely on lower-cost labor with a tough decision.


While higher than labor in Mexico, 29 other states, including California, al- ready mandate wages above the fed- eral minimum. As a case in point, wire, cable


and wire harnesses are labor-inten- sive, with much of the work requiring manual assembly using fixtures and jigs. Little, if any, of the process be- yond can be automated. For high volumes, wire harness-


es are typically assembled in Mexico or other low-wage countries. Macias has prior experience in the wire har- ness industry in Mexico for a compa- ny that produces $300 million per year in product. For lower-volume, custom work,


much of the wire harness work re- mains in the U.S. at facilities like Northpoint Technologies. These wire harnesses are typically aftermarket products used in industrial equip- ment, such as forklifts. Given the ex- isting infrastructure and supply chain, ramping up operations to de- liver larger volumes in El Paso could be achieved with minimal increase in costs.


Move to Asia? In recent decades, an alterna-


tive to Mexico was to move operations or source products from Asia. Howev- er, with the new administration’s stance toward China, the prospect of tariffs or a trade war seems even more likely. At the same time, labor costs continue to increase at a rate of 15 to 20 percent each year, removing


See at BIOMEDevice, Booth 855


Northpoint’s products include flexible circuits and assemblies.


some of the allure of turning to Asia. Mexican wages, on the other hand, have been more stable.


In Asia it can also be very difficult to manage


operations. For example, many OEMs that contract directly with offshoring suppliers experience com- munication difficulties that can lead to errors with subassembly materials or dimensions, avoidable lo- gistical difficulties, or even cost miscalculations.


Uncertain Future Proactive OEMs would be wise to consider


their options, even before any new trade regula- tions or tariffs were to take effect. Failure to do so could leave U.S. companies at a competitive disad- vantage both at home, due to escalating prices on goods, and in competition with other global manu- facturers that also source products from Mexico. Contact: Northpoint Technologies, Inc., 13321


Tobacco Road, El Paso, TX 79938 % 915-591-6300 E-mail: sales@northpoint.com Web: www.northpointech.com r


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