In an increasingly interconnected world, supply chains have become critical to business growth and survival. Given its strategic geographic position and growing industrial strength, Mexico has emerged as a crucial epicenter in this global network. Specifically, supply, management, and investment in the supply chain have experienced rapid growth in the country, especially in the post-pandemic era.
Companies from Asia and Europe have recognized the value of Mexico as a supplier ally, taking advantage of its proximity to the United States and its ability to offer efficient supplies at competitive costs. But what exactly does procurement imply, and why is it so relevant in today’s global scenario?
This blog will provide an in-depth look at sourcing in Mexico, explain how it works, and why it has become an essential component in global supply chains.
The supply dynamics in Mexico and its strategic role in the Global Supply Chain
What is the supply?
Procurement implies effective administration and investment in supply chains. That is, it includes all the activities associated with obtaining essential goods and services for the optimal functioning of a company. This comprehensive process ranges from the meticulous selection of suppliers to the timely delivery of final products to customers.
How does the supply work in Mexico?
In Mexico, the supply operation is a complex interconnected system that covers several sectors and involves a variety of actors. Local and foreign businesses seek suppliers to provide high-quality goods and services at competitive prices.
These suppliers, whether manufacturers, distributors, or service providers, must comply with various requirements and regulations to operate, including quality standards, environmental rules, and labor laws.
What is the supply chain?
The supply chain is a network of companies and activities that work together to design, produce, and deliver a product or service to the end customer. This chain includes everything from sourcing raw materials to growing, storing, transporting, and delivering final products. Supply plays a crucial role in this process since it guarantees that companies can access the goods and services necessary to operate efficiently.
Strategic Advantages of the Mexican Procurement for Companies
Improvement in Efficiency and Cost Reduction
Mexico’s strategic geographic positioning gives companies the advantage of proximity to the robust US market, making this country an ideal destination for relocating business operations. This factor has led to optimizing the supply chain in many areas, mainly in the country’s northern region.
Rise of Supply in the Mexican Manufacturing Industry
The biggest beneficiary of this dynamic has been the Mexican manufacturing sector, which has experienced increasing integration into global supply chains. This integration has allowed local companies to benefit from foreign direct investment and growing demand from the United States.
Positive Impact of Procurement on Employment in Mexico
According to data from MMS Mexico, approximately 16% of Mexican companies with 100 or more workers have experienced direct benefits due to this trend. It reflects the multiplier effect that the supply has on the local economy, creating more employment and generating more excellent investments.
How Mexican suppliers can help companies optimize their supply chain
Technology and Efficiency in the Supply Chain
Technology is the fundamental pillar for efficiency in the supply chain, providing real-time data that facilitates informed decision-making. Six key strategies can be identified to promote an efficient supply chain:
● Assertiveness: Access to quality, real-time information enables business leaders to make more accurate projections and informed decisions.
● Implementation: Using technologies such as barcode systems, QR codes, and ERP, among others, streamlines operations and reduces costs.
● Effective Management: High-quality information facilitates the effective management of inventories and the correct planning of demand.
● Customer Segmentation: An adequate data analysis allows a more precise customer segmentation.
● Quality Improvement: Implementing methodologies such as Six Sigma can substantially improve the quality of service.
● Optimal Transportation: Efficient transportation management, including monitoring and control of fuel consumption and proper fleet maintenance, can significantly reduce costs.
Regional Supply and Just-In-Time
The adoption of regional supply by companies allows them to have a more concentrated and secure presence while facilitating the implementation of the ‘Just-In-Time’ production strategy. This strategy is crucial to minimize costs and maximize efficiency throughout the supply chain.
Implementing regional supply strategies in Mexico is becoming a trend for companies seeking to concentrate their operations strategically and safely. Selecting local suppliers allows companies to optimize the flow of their goods, minimize transportation delays, and reduce uncertainty associated with geographic factors.
In this context, the ‘Just-In-Time’ production strategy is increasingly important. Originating in Japan and now used worldwide, this production methodology aims to improve efficiency by minimizing the amount of inventory on reserve and synchronizing production with demand to reduce storage costs and increase inventory turns.
In Mexico, many companies are integrating the Just-In-Time strategy into their supply chains, allowing for a smoother production flow, minimizing operating costs, and improving customer satisfaction by ensuring faster and more reliable deliveries.
Procurement and its Promotion of Innovation and Research and Development (R&D)
Stimulating Innovation through Procurement
The regional concentration of companies, especially those with a strong focus on supply, encourages innovation. This stimulus is due to creating a competitive and cooperative environment in which providers strive to improve and diversify their products and services. Likewise, using new materials and technologies contributes invaluably to the value of logistics organizations and supply chains.
Promotion of Research and Development (R&D)
A prominent example of this phenomenon is the recent expansion of Chinese companies in Mexico to supply the United States aerospace industry. This situation has generated a growing demand for new materials and technologies, thus encouraging research and development of innovations. Additionally, this dynamism enables hiring of local engineers and technicians, contributing to developing human capital in specialized areas.
How to select and collaborate with suppliers in the context of the Mexican Procurement
Supplier selection criteria
To ensure reliable sourcing, it is crucial to take a strategic approach to supplier selection. Below are several criteria to consider in this process:
● Delivery time: Evaluate the supplier’s commitment to delivery times.
● Price range: Compare the prices offered by different providers.
● Discounts: Examine the provider’s discount policies.
● Transportation methods: Consider the efficiency and reliability of the supplier’s transportation methods.
● Insurance: Find out if the provider offers adequate insurance coverage.
● Payment methods: Review the provider’s payment options and conditions.
It is important to remember that you should rely on more than one provider to prevent interruptions in business processes.
Specific evaluation criteria
Once the above criteria have been considered, more specific factors should be examined:
● Reliability: Suppliers must demonstrate the ability to deliver quality products on time and in the correct quantities.
● Stability: Vendors with a proven track record of industry experience are generally more reliable.
● Location: The supplier’s proximity can influence delivery speed and shipping costs.
● Payment Terms: Evaluate the provider’s credit policies, including payment terms, financing options, and late payment penalties.
● Certifications: Suppliers that comply with international standards, such as ISO standards, tend to be more reliable and make it easier to build relationships of trust.
By following these steps and criteria, companies can effectively identify and collaborate with trusted suppliers in Mexican procurement.
The Impact of Procurement on Employment and the Labor Market in Mexico
Generation of Employment and Labor Opportunities
The expansive dynamic of suppliers in Mexico has positively affected hiring local labor. The stimulus to employ Mexican workers has been increasing, which has led to the generation of quality jobs in various sectors. Among the benefits derived from this growth, the following stand out:
● Education and Training: The demand for specialized personnel has prompted companies and the government to invest in the training and education of the Mexican labor force, preparing it to join new companies and perform technical and specialized roles.
● Credit and Innovation Stimulation: The growth of the supply sector has encouraged innovation in manufacturing inputs, which could boost the availability of credit for improvement and expansion initiatives.
● Technology Adoption: The supply advancement in Mexico promotes the development and adoption of new technologies in response to the needs and demands of companies established in the country.
With these factors in play, the outlook for the Mexican labor market looks very promising.
Procurement, international trade, and globalization
Globalization in international trade has been an excellent incentive for Mexican companies. Such is the case of the hydrocarbons sector, where a promising collaboration between states is glimpsed, especially in the north.
It will encourage the manufacture of inputs to the aerospace industry, making other states join. Thus, they would contribute by offering related goods, increasing the added value. In this way, the arrival of more Mexican companies to the supply lines is promoted.
A host of opportunities
The Mexican supply shows a sustained advance thanks to technology and globalization. Being the natural neighbor of the United States is something beautiful. Consequently, taking advantage of this advantage is crucial.
The benefits include generating jobs, the demand for technical labor, and the approach to research centers. Likewise, the arrival of new technologies and the creation of new materials add invaluable value to the supply in the country. Efficiency will be an excellent standard.
We promote success
At AMN Quality Solutions, we offer a solution tailored to your organization. Throughout 30 years, we have strengthened the Mexican supply chain, specializing in quality inspections, assembly and advanced manufacturing, logistics, and warehouse solutions.
Contact us, and we will help you raise the quality of your products. With us, your operations will be at their best.
