Uncover the strategic moves in building a global manufacturing footprint with Paul Jona, President and CEO of VEXOS in our latest episode, as we delve into their newest addition: a 40,000 square foot factory in Juarez, Mexico. Learn how this move is a response to the shifting sands of geopolitics, global trade and what it signals for the future of manufacturing in the Americas. We take you behind the scenes of VEXOS' meticulous approach to replicating the success and performance of their Markham factory, from the ground up in Juarez, and how they're ensuring the same high-quality training and integration.
As our conversation with Paul unfolds, we navigate the broader implications of regional growth and pinpoint what fuels operational excellence in today's competitive landscape. From spotlighting VEXOS' strategic moves to discussing the art of keeping a workforce engaged and driven during times of disruption and expansion, this episode is a masterclass in corporate agility. We also explore the potential for further growth through strategic acquisitions and wrap up with a reflection on the clear and tangible benefits of regional production — a move that promises not just to meet customer demands but to significantly improve sustainability through shorter supply chains.
Join us for an episode that offers an invaluable playbook for scaling operations with precision and vision.
Learn more about VEXOS at https://www.vexos.com
Like every episode of EMS@C-Level, this one was sponsored by global inspection leader Koh Young (https://www.kohyoung.com) and Adaptable Automation Specialist Launchpad.build (https://launchpad.build).
You can see video versions of all of the EMS@C-Level pods on our YouTube playlist.
Uncover the strategic moves in building a global manufacturing footprint with Paul Jona, President and CEO of VEXOS in our latest episode, as we delve into their newest addition: a 40,000 square foot factory in Juarez, Mexico. Learn how this move is a response to the shifting sands of geopolitics, global trade and what it signals for the future of manufacturing in the Americas. We take you behind the scenes of VEXOS' meticulous approach to replicating the success and performance of their Markham factory, from the ground up in Juarez, and how they're ensuring the same high-quality training and integration.
As our conversation with Paul unfolds, we navigate the broader implications of regional growth and pinpoint what fuels operational excellence in today's competitive landscape. From spotlighting VEXOS' strategic moves to discussing the art of keeping a workforce engaged and driven during times of disruption and expansion, this episode is a masterclass in corporate agility. We also explore the potential for further growth through strategic acquisitions and wrap up with a reflection on the clear and tangible benefits of regional production — a move that promises not just to meet customer demands but to significantly improve sustainability through shorter supply chains.
Join us for an episode that offers an invaluable playbook for scaling operations with precision and vision.
Learn more about VEXOS at https://www.vexos.com
Like every episode of EMS@C-Level, this one was sponsored by global inspection leader Koh Young (https://www.kohyoung.com) and Adaptable Automation Specialist Launchpad.build (https://launchpad.build).
You can see video versions of all of the EMS@C-Level pods on our YouTube playlist.
Hello, I'm Philip Stotun, from my House to Yours. Welcome to EMS at Sea Level. I am joined once again by Paul Jonah from Vexus. Paul, we spoke last October and I had a little look back through that video to see what we talked about to make sure I was on message. And about 13 minutes in we were discussing expansion plans and you intimated that you might be announcing something in the next few months, and truly a word. You've actually done that. So exciting to hear that Vexus are now in Mexico. I think it's a really smart move for you as a business. Tell me a bit about that and tell me what you have down there.
Speaker 2:Yeah, thank you, Philip, Good to talk to you again. Yeah, I gave you a cliffhanger and promised you breaking loose. Well, here we are, announcing the opening of our brand new factory in Juarez, just across the border from El Paso. It's a 40,000 square foot facility, brand new. We're just laying down the EST floor and we're bringing the equipment. We plan on starting production in the end of April. It will be all managed by the team from Markham, from our Toronto team. They have grown a lot and they have a very strong engineering team. They'll be bringing down some people there. We've already hired a local general manager, Guillermo, with a lot of EMS and electronics experience, and he's hiring his team at the moment. But we have people already coming down on a regular basis.
Speaker 2:We're talking to customers. There are very exciting. There's the geopolitical concerns, why people want to go onshore. We have plenty of customers that are very happy with Vietnam. Of course, the production for our North American customers in China has decreased due to the tariffs but has moved to Vietnam. We feed Mexico really as a new growth area With basically three growth areas Vietnam, our new facility on the West Coast and in Mexico. We're very happy with our expanded global footprint. We have a lot of presence now in North America in Canada, two in the US coast to coast and Mexico in three months from now. That combined Asia footprint is going to keep us very busy in the near future.
Speaker 1:I think it pushes all the buttons for the US OEMs, but also for global customers. You look at what US OEMs are thinking about now in terms of some level of reshoring and decoupling with China. If that's something that's important to them, You've got a footprint that allows them to do that with low-cost environment in the Americas as well as low-cost environment in Asia outside of China. That makes a lot of sense. 40,000 square feet how many SMT lines are you putting in there?
Speaker 2:We're starting right away with two Panasonic SMT lines. They've been ordered and they are on its way. Those are the first. We will install in February, early March. Then all the other equipment solderways, selective soldering ovens, all those things, inspection, aoi, x-ray. That is going to be done in the next three months. We have done it in Vietnam with our China team. We're going to do the same now with our Canadian team in Mexico. Interesting thing now it is also European customers that we're talking to now that have always been interested in also working with us in the US but have a particular interest in Mexico. Multiple European customers that have taken an interest after the press release.
Speaker 1:Yeah, and I think that's absolutely the case. When I look at European OEMs there and European EMS companies, they're zoomed in pretty much on Mexico and thinking how can they utilize Mexico with the tariff arrangements to import their goods into or to manufacture their goods for the North American consumer market?
Speaker 2:We have 350 customers. Of course we've got more customers with control, with the acquisition, and everybody has their particular interests. Some people want to stay very close at home, like the close by engineering support, want to have that proximity to visit their manufacturing facility. So we have customers that want to stay very local. We have customers that want to stay local with us but have the production in a lower cost country and in the case of Mexico, of course they want to stay nearby or on shore. And there's customers that are interested to go for lowest cost, that often choose for Vietnam.
Speaker 1:Yeah, and when you look at Mexico, ems has been there for 25 years now. It's grown as an ecosystem. There's a good solid supply chain down there, but there's talent down there. There's really good talent coming out of the universities that can fit straight in. What's that like in Juarez?
Speaker 2:Well, as I said, we just hired Guillermo, our general manager, who has all that experience and he's worked at several companies in electronics across several facilities in Mexico and he has a whole network of talent. So we're bringing in his own direct reports and we have a so-called shelter company that helps us with bringing in all the direct labor and indirect labor.
Speaker 1:Yeah, that's great. And last time we talked we talked a bit about talent and you had a really solid approach to kind of sharing skills across different regions and training and developing your own talent. So that becomes increasingly important the more facilities you add to your footprint, I guess.
Speaker 2:Yeah, and, as you know, QoROS is going to be basically a satellite factory of market. We're going to put this equipment in there. You know better selling SMT lines and we are going to. You know it's all brand new and we have the opportunity to not just put a low cost facility there, but a world class facility. We will be sending, as I said, teams from Canada that will thoroughly train the people.
Speaker 1:Yeah, of course yeah, and they'll be there until they're trained. And when you do that, do you basically build QoROS in the image of Markham? Are you basically using the same equipment, set putting the same lines in, maybe update?
Speaker 2:it a little bit. Exactly the same shop floor software system. Age is factory logic. It will be connected with our ERP systems in Markham and then you working short-term autonomously. The idea is to have them actually become totally independent from Markham over time. We are going to take our time with that and slowly transition to total autonomy for the Mexican facility. They will be working with customers directly and not through the Markham team in the first year.
Speaker 1:It makes sense, doesn't it? If you have exactly the same line there. Anything that is going on down in Juarez Markham can assist on. As you say, they can train people. You can even use engineering skills remotely. You look at modern inspection equipment. You can interrogate it from a remote location as well. You have got a huge benefit by doing that.
Speaker 2:The other direction we can start looking at actually supporting our facilities in US, canada from Mexico with administrative tasks, back office jobs etc. Which of course are low cost. In Mexico there is a lot of human capital available for those jobs in sourcing, in finance etc.
Speaker 1:You will find the same in engineering, in programming. There are various things that can be done remotely, that you can manage the pressures of volumes and different dynamics much more simply. You grew to 250 million over the last five years. Some of that was with acquisition. Why choose to do a greenfield site in Mexico rather than acquire? Is it just because there isn't the available companies to acquire, or was it always something that you wanted to do?
Speaker 2:We looked at it. We didn't find the right company to acquire. Often the company came with other issues.
Speaker 1:We were in their.
Speaker 2:Mexican facility, but we did want to acquire the entire company. We have a lot of very good positive experience with the greenfield in Vietnam. We basically want to copy that.
Speaker 2:We have a very skilled team that can do this very quickly. We believe we have chosen for the greenfield. We have a lot of what we call anchor customers. We talked to several customers last year Would you be interested if we opened a facility in Mexico? And we found a tremendous amount of interest. Of course, customers do not fully commit until they see the facility. That's what we will be doing in the next few months.
Speaker 1:When do you see yourself cutting the ribbon down there?
Speaker 2:That will be the end of April. We will have a little party.
Speaker 1:That will be great. I will probably be down there around that time.
Speaker 2:I will go down straight after. You are very welcome.
Speaker 1:We will spend some time in Mexico. That will be exciting. When we talked last time, we talked about the fact that you doubled your revenue to quarter of a billion over the last five years. Quite rapid growth. Recently the markets maybe softened a little bit in order intake. We have seen some of that bullwhip of inventory find its way through to customers. For some EMS companies that means that this year might be a little bit challenging in terms of growth. Where do you see it for Vexos in terms of your organic growth? With the footprint you have got the addition of Mexico. What are your expectations for this year?
Speaker 2:Yeah, as I alluded to last time, we do see that coming out of the pandemic. And then, in combination, the very severe component shortage, especially the semiconductors, caused an overbuying of buy our customers in the end of 22 and during 23. As you say, that bullwhip or that bubble is being pushed down and being consumed, but we, our customers, believe that that will last through the first half of this year. Yeah, so they have been pushing out deliveries and orders because of their high inventory. During the tough days with the component supply shortage, people start buying. They start buying everywhere they could and that's all has all come in.
Speaker 2:Now, at the end of last year and that's being, as I said, pushed through, but that bubble will be consumed, as I said, by the summer. Then we have several growth factors I mean one, of course, is our new facilities. That is bringing in a lot of interest.
Speaker 2:It's bringing in new customers. It's bringing in new programs with existing customers and that has happened already with Vietnam. That's been ongoing for the last two years. Our facility on the West Coast never had a front end organization. The founders really ran that part of the business themselves. Now we have, of course, connected them with our vast front end organization. We have now 17 business development managers out in the field, mostly in North America, and that's already developing a very interesting bubble. The good bubble tech where Vaxx is on the West Coast will be very busy and we see that of course with Mexico. So a very interesting funnel that will start where we start onboarding and we're very busy with that already and we expect that onboarding to happen also in two quarters from now. So we have quite a ramping in Q3, q4.
Speaker 1:Yeah, I think that's there. I certainly see that in the market and particularly in the Americas, where I think demand is stronger than it is perhaps in Europe and elsewhere. So I think I would concur with that. When you have a year like this, paul, and you look at it and you say, ok, well, growth is going to be slow in the first half of the year, we're actually making the most of that opportunity because we're developing our site in Juarez and we're doing further expansion, maybe elsewhere, do you look at that as an opportunity to gaze a little bit inwards and think about operational excellence and developing automation and really, if you're honing the business's performance, so when that spike does come back or that growth does come back in the latter half of the year, you're really ready to fly with it.
Speaker 2:Yeah, in our high mix, low volume, medium volume, it is very difficult to automate, but we do automate where it makes sense, absolutely.
Speaker 2:We do shrink or call it our direct labor force where needed when business is softer. But of course, with our engineering NPI staff we are actually extremely busy these days. We are doing a lot of prototyping, fast turnaround manufacturing, validation for our new programs. We are going to onboard 75 new customers this year across six facilities. So that's huge and doesn't really allow you to reduce or relax or do anything with your staffing Because, on the contrary, we are already tight despite business being slower. We are tight because of that huge ramp that we are participating. It requires a lot of work up front, as you know, in the sales cycle. All that, what I just mentioned, has to occur before you can safely ramp up and scale up the mass benefits.
Speaker 1:Yeah, I think it's absolutely the case. I think that engineering talent is really important. When I look at a business of your size and going to maybe adding another 50 to 100 million or whatever you are expecting to do, the target shouldn't be to do that with less people. It should be can we grow the business with the team we have? How do we put the systems in place to do that?
Speaker 2:We've talked about balancing the direct labor forces. Of course easier in Asia, in North America you don't want to start balancing with the production volume Because you have skilled labor and it doesn't make sense to balance and then re-hire.
Speaker 1:Yeah, absolutely.
Speaker 2:We hold on to our people and we keep them very busy with all the exciting NPI work that's being done.
Speaker 1:Yeah, and that keeps them motivated. That creates a much stronger team and that creates a much stronger team globally. What about in organic growth? You know we had a cliffhanger last time we spoke. What are you looking at this year? Are there any potentially new acquisitions? I think there might be some interesting opportunities in the market, as some companies perhaps aren't as well-organised or as comfortable, and obviously there are continued growth opportunities elsewhere.
Speaker 2:Yeah, I mean we're going to be busy in the short term keeping our new acquisition busy with new opportunities. They had a fairly still funnel that we're reviving and also adding to. We're also talking to all their customers that remained fairly small because of limits on customer concentration with a relatively smaller company. Of course, those all have been lifted. So we're talking to their key customers about expanding within our global footprint. But the and also, of course, we are very busy with with, with with starting up the facility in Mexico. So, short term, there's plenty of work to be done.
Speaker 2:Longer term, the logical choice would be to expand finally in Europe as well, and I am I am in contact with with people on that as well. So yeah, and then of course, the preference would be to have the manufacturing at least in Eastern Europe for lower cost, and that's, that is. Let's call that medium, long term. Short term we are. We're making sure that we do everything right the first time with with our new acquisition and our new Greenfield.
Speaker 1:Yeah, yeah, I think it makes. I mean, I think it makes sense Building Vexos Europe would be very, would be very exciting, but you've you've got plenty to plenty to chew on this year and keep you busy. Congratulations on that Mexico facility. I think it is a absolutely smart move for for the business and and great news for you and and for your customers.
Speaker 2:Trench is here with our, with our global council forces is regional production? Yeah they don't want to stuff around the world anymore on both planes. They want to have regional production for their regional sales. Yeah we see more and more. You know, we do supply Europe from our Asian facilities, and that is that is going very well. But eventually we'd like to also go local there.
Speaker 1:Yeah, no, it makes sense. And you know, the other reason I get excited about that regionalization is is we end up with shorter supply chains, which, from a sustainable sustainability and environmental point of view, can't be a bad thing. You know, the less we ship goods around the world, maybe the better.
Speaker 2:We have seen constant gestion in ports all over the world. We've seen a great cost going up and down. Absolutely, we want to be less dependent on that.
Speaker 1:Yes, yeah, there was some fragilities in the supply chain with respect to logistics, as well as the component shortages, so that was certainly an area of identification that pushes you towards that much more regional model, which seems pragmatic and more sustainable in the long term. I look forward to seeing you in Juarez as you make your speech and cut the ribbon in the back end of April. In the meantime, thanks so much for your time. Keep us informed of any news and we'll chat again soon.
Speaker 2:We'll do it. See you soon, thank you.