Near-shoring: Advantage Mexico

As per this recent article in Logistics Management on Near-Shoring/Right-Shoring Strategies, a recent poll of 80 C-level executives across more than 15 industries by AlixPartners found that 63% of senior executives chose Mexico as the most attractive locale for re-sourcing manufacturing closer to the U.S. market. With its geographical proximity and recent improvements in transportation services between the borders, Mexico is regaining its attractiveness. If 33% of senior executives are going to re-shore within the next three years, Mexico could be on track to regain its former glory. Especially since its attractiveness ranking by these executives was more than seven times that of Central America and Brazil.

Why is Mexico more attractive than the BRIC? In addition to near-shoring, lower freight costs, and improved speed-to-market times, as cited in the article, it’s also lower cost. Costs in the BRIC are rising aggressively. Manufacturing is getting more expensive by the day in China. Services are getting more expensive by the day in India. Raw Material costs are rising in Russia. And inflation in Brazil is over 6%.

Plus, there are the time-zone advantages, cultural alignment with the rest of North America, workforce passion, and free trade zones. Security is still a concern, but the number one cause of death for foreigners in Mexico is still car accidents, not crime. Crime has doubled since the economic crisis of 1994, but most of the crime is non-violent. Unfortunately, “organized crime” (gangs and cartels) is still very violent and a real concern, especially in the northern border region. However, near-shoring to other regions of Mexico is, on average, not much more of a security concern than Home-Shoring in the more dangerous US cities, and a viable alternative.

Better Data On Its Own Will Not Ensure Success

A recent post over on the HBR Blogs by Daryl Morey that stated that “Success Comes From Better Data” is on the right track, but not quite right. Better data is a necessary condition for success, but not a sufficient condition. In order to make good decisions, you need:

  1. Better Data
  2. Better Tools
  3. Smarter Analysts

When Daryl says that you need raw numbers, not the people and programs that attempt to make sense of them, he’s missing the point that raw numbers need to be distilled into information through the use of good tools that can be distilled into knowledge through smarter analysts. Without the right knowledge, a business leader will not be able to make the decisions that lead to success. While it is true that real advantage comes from unique data that no one else has, this data must be transformed into knowledge. It’s a Knowledge Economy, not a Data Economy.

VMO Best Practices or General Organization Best Practices

A recent article over on SIG on “How to Build A World Class Vendor Management Organization” noted that the most important element of success was execution. Execution that involves the:

  • identification and allocation of appropriate resources (people)
  • identification and implementation of enabling technology
  • development of policies in collaboration with key stakeholders
  • documentation of processes and workflows for key programs
  • application of segmentation strategy to align resources
  • pilot strategy and program that supports Business Units and Suppliers
  • testing, refinement, and redesign of processes as required
  • communication, communication, and communication

This is all good, and everything that should be done in the establishment of a Vendor Management Organization, but an organization would do the exact same if it was establishing a Global Procurement Organization. Or if was establishing a Shared Services Organization. Or if was establishing a Consulting Services Organization. No matter what organization is being established, it will not be successful without:

  • people who know what they are doing
  • technology to support them
  • policies to guide them
  • processes to enable them
  • strategies to make the best use of resources available
  • support from affected Business Units (which is won through incremental wins)
  • adaptability to changing circumstances and
  • constant communication

In other words, the article contained good advice, but nothing specific to VMOs.

So what is the real key to a good VMO?

A focus on the vendor. It may take different forms, but the vendor, and its success, should come first as vendor success enables organizational success.

Good Public Procurement Recommendations from the McClelland Report, Part III

It may have been written five years ago, but the recommendations from the McClelland Report, which inspired Scotland Public Procurement to new levels of efficiency and performance, are as poignant today as they were then. These recommendations include:

  • Procurement “Centres of Expertise” should be established on a commodity-by-commodity basis.
    And these centres of expertise, which can be cross-disciplinary should be coordinated by a centre of excellence.
  • It is obvious that there is a level of mandatory compliance required for the effective operation of the [contracts] model described above.
    Projected cost avoidance is only realized if the plan is followed.
  • A Charter for Suppliers should be established for the complete public sector in Scotland. It should essentially describe the sector’s commitment to suppliers by defining the generic standards which suppliers can expect from the operation of public-sector procurement and in turn what will be expected of them as suppliers to the sector.
    Suppliers should know what to expect and what to deliver.
  • There should be total transparency in connection with procurement decisions.
    Hidden opportunities are lost opportunities.
  • There should be a review of non-core activities to establish candidates for outsourcing evaluation.
    Remember, outsourcing doesn’t necessarily mean offshoring. You can outsource to an operation down the street. Outsourcing is about doing what makes financial sense. Letting someone do non-core activities that they are better at than you so that you can do what you’re good at.
  • A clear and unambiguous central information systems strategy for the Scottish Public Sector would deliver major benefits in terms of effectiveness of services, staff productivity and overall cost, including improved benefits to procurement.
    Good technology enables good processes and good results. Plus, good technology enables good data, which enables good data analysis, which leads the way to good results.

Your Manufacturing Is Lean, But Are Your Communications?

A recent article over on Industry Week on how “Lean Communication Strategy Can Bolster Marketplace Position” asked a great question:

How does a manufacturer implement external communication initiatives without compromising performance or proprietary information?

Because, as the article points out, those companies that can elevate their brands and voices can also leverage incremental revenue streams.

So how does a company implement these external communication initiatives? According to the article, the answer lies in a lean model that unites functions; mirrors the manufacturer’s approach to efficiency and effectiveness; and utilizes QC initiatives that ensure accurate information is dispensed while trade secrets are not. In other words, through a lean communication strategy.

So how does one implement a lean communication strategy? According to the author, it’s effectiveness, prioritization, and ongoing analysis to ensure that the answers to the following questions are always available so that the correct message is always conveyed.

  • What is the value of the story?
    Will it support new business initiatives, influence public policy, establish the brand, burst with innovation, or echo CSR?
  • Who needs to hear the story?
    A niche market, the entire industry, or the public at large?
  • What is the best way to tell the story to the intended audience?
    General press release? Senior officer? One-on-one interview with the innovator?
  • What is the best channel for the story?
    Traditional news sources like radio, TV, or newspapers? Industry specific magazines? Social Media? Sales collateral through targeted channels?
  • Is there a strategic time to tell the story?
    That would enhance a new product launch or business expansion?
  • Who forms the review, vetting, and approval team?

The answers to these questions allow for the development, and deployment, of focussed communications that gather attention without wasting time and resources (to flood the market with messaging that is indistinguishable from the rest of the background noise).

It’s a logical application of lean. And hopefully Supply Management is involved to direct Marketing to the right innovations to focus on.