EMS@C-LEVEL
As Forbes, Entrepreneur, Fast Company and SCOOP writer, Philip Stoten, continues to talk to EMS (Electronic Manufacturing Services) executives he learns more about their individual and collective experiences and their expectations for their own businesses and for the entire electronic manufacturing industry.
EMS@C-LEVEL
The Success of Mexico's Manufacturing Industries Amidst Geopolitical Shifts with Ivan Romo of SMarTsol
Mexico's manufacturing industry is thriving amidst geopolitical shifts, regionalization, and reshoring? This episode promises an in-depth look into this intriguing evolution. We've got an industry insider sharing valuable insights on the most prevalent investment regions, the expansion of the automotive and EV market, and the strategies Mexico is employing to handle talent shortages. Let's not forget the crucial role of exchange rates and the surge of automation integrators. Plus, discover how Mexico is embracing digital transformation, navigating the technology landscape with agility and acumen.
Next, we switch gears to talk about the growth and success of the distribution industry, with a spotlight on SMarTsol's strategic investments in Mexico. We'll share how their strategic moves have led to improved service for their customers and principles. Here's a teaser: SMarTsol's new demo room in El Paso and their upcoming open house in December are a testament to their ongoing success. So, buckle up as we unpack the opportunities and challenges that are shaping the manufacturing and distribution landscape in Mexico.
You can learn more about SMarTsol Technologies at https://smartsol.mx/
EMS@C-Level is sponsored by global inspection leaders Koh Young (https://www.kohyoung.com) and Creative Electron (https://creativeelectron.com)
You can see video versions of all of the EMS@C-Level pods on our YouTube playlist.
It's been a good 12 months for Mexico. The geopolitics around the world and regionalization and reshoring we hear about as having probably a bigger impact here than in the USA. Tell me what that means in terms of the investment you've seen and what people are asking for in terms of capital equipment.
Speaker 2:Okay, basically still the same from the last conversation that we had a few months ago. This new shorting with the United States, the relocation of the manufacturing back into the United States, is converting Mexico into a very attractive region to do more vertical integration, and a lot of the final assembly products, of course, would have been in the United States, but all the electronics is being assembled in Mexico, so still a big trend for Europeans and Taiwanese companies to be doing new factories set up into different regions of the country.
Speaker 1:And what regions are you seeing the most investment in? We're in Guadalajara today. I've always seen this as one of the key centers, but there's almost not that much space for the great.
Speaker 2:Well, basically, if we compare the government numbers about new jobs generations, you can find out that 80% of the new jobs are related to the manufacturing industry and 80% of that new job into the 80% total is in fire states. So this is Chihuahua, nuevo León, jalisco, guanajuato, and number five is Coahuila, another that is very attractive for the automotive industry.
Speaker 1:And the automotive industry is an interesting one. We were talking earlier about data and the importance of separating traditional automotive from what we're seeing in EV, because we're seeing lots of also perhaps new growth in EV. Where is most of that investment?
Speaker 2:happening. We see a lot of investment for EVs into the Monterrey, nuevo León state a little bit in Tamaulipas. Tamaulipas, reynosa, is nearby Monterrey, so that is what that cluster is very attractive for the automotive. And of course in the Bajillo region, carretaro region is one of the most claimed region for the European companies to be installed Germans, italians, french companies into the Carretaro region and that is becoming very attractive for the EVs to product transition.
Speaker 1:Okay, and one of the things that is, I guess, stopping some of that manufacturing growth happening in the USA is talent. Plant shortage is something we're hearing in all of the development markets, particularly Europe and the US. In Mexico, we had a big spike in wage costs because the minimum wage go went up, and when the minimum wage goes up, even people who aren't on the minimum wage need to get a pay rise as well. What's the situation here with talent at the moment? How hard is it to get people and how much more expensive is that becoming?
Speaker 2:No, of course, engineering and regular label is getting more expensive. But if we analyze the population again, going into the tradition of Mexican family, for example, the families that the parents are between 40 and 50, they have an average of two or three sons in each family and right now they are getting to the productive age. So that means that right now we still have a lot of people available for the industry. Youngest generations they are moving into one or two. So eventually, within the next 15, 20 years, that can be a problem, but from now, considering a 2.5 child per family in Averash, that means that we have enough people for the current industry needs. Thank you, we have right now a strange situation because the exchange rate with the dollar, so Peso is getting stronger than the dollar, but we feel like it's going to be a short period and of course, right now the labor is more expensive in terms of the dollar exchange rate. But we hope that at the end of the year the exchange rate is going to be back into the regular one and we will be more competitive than right now.
Speaker 2:It's easy to find people. Yes, just the companies are investing more in training, in rotation programs and, of course, how to facilitate to the people to get into the factories. We are moving people from one hour away, one and a half hour away. So all the electronics assembly industry is very, very focused on how to offer better solutions for their employees in terms of transportation. As you know, here in Mexico most of the companies have their own transportation services. So for all the labor they don't need to pay transportation and they don't pay for the meals inside the factory. So it's one of the great advantage that we have for the electronic assembly into the different regions of Mexico.
Speaker 1:Yeah, and it's interesting even. We need to encourage more people to take STEM education and graduate, but we clearly need to encourage that younger generation to reproduce more as well. So that's going to be an interesting one of the ways people are mitigating talent shortages outside of Mexico, but also here, is greater use of automation and clever use of automation. So co-bots, conveyors, those kind of things Is that an area of demand that's increasing in your business?
Speaker 2:Absolutely yes. A few weeks ago we were doing an analysis of how many automation integrators are in Mexico. We find out that it's more than 100. Companies focus on the automation for the electronic assembly industry, which is our major niche. We see large projects coming for final assembly that are very focused and targeted into the torchless lines. Of course all the automotive models assembly has been torchless lines years ago but right now, let's say for vacuum cleaners, other lifestyle goods are also working to do torchless assembly and that will bring a lot of the requirements for high specialization jobs to manage the automatic lines.
Speaker 1:That makes it more interesting, doesn't it? We definitely see constant progress in where Mexico is in that digital transformation, in the investment in automation, in the way it sees itself as a manufacturer. It doesn't feel like a low-cost, high-volume manufacturing environment that isn't able to adapt. Now it feels much more advanced technology industry. Is that something you see?
Speaker 2:Yes, yes, and of course, all that digitalization that is moving so fast, but moving so fast that we are not really seeing what are step by step Like. Last week one of our customers in Monterey came to run Audit here and the Audit was most related to the safety in our warehouse and demo rooms, people, human resources, management. And the level of detailization is that I was able to show all the evidence in my cellular phone cameras, alarms. Everything is in the hand. So it's the same in the factory Right now the thought management can see everything in the smartwatch or in the cellular phone. So all that transformation it was not a stop in the industry to do the translation. It was a step by step, but so fast that if we compare the way that the industry is being managed today with 10 years ago, it's completely different. But there was no day zero for that transformation.
Speaker 1:Yeah, it happened incrementally. The other thing I've seen, I think particularly over recent years, is large global players seeing Mexico as their sandbox for digital transformation. They're almost doing stuff here first and proving it out and then deploying the best practices around the world. That must be quite gratifying as a Mexican to see that happening here.
Speaker 2:Yes, and we see that also. I mean that is the traditional EMS doing that sandbox here, but we see that also in the equipment manufacturing. A lot of the big suppliers for the equipment in today's industry are setting up engineering and manufacturing plans here and then they're going to deploy that new knowledge into the worldwide factories that they are managing. Yeah, so of course it's a natural transition that Mexico is working together with the worldwide more important equipment suppliers, but it's a good moment in general for the people and for the companies.
Speaker 1:Yeah, and I think it's an important moment for SmartSol. When I look at the growth you've had over the recent decade and how the business has developed and the service structure you have, the huge number of contact points you have with the customer, it's not just valuable from a point of view of can SmartSol sell more machines than other people, but it's also valuable in terms of SmartSol can give us a lot more feedback than perhaps any of our other representative companies because they are touching so many of our customers. How much of those relationships have become kind of strategic in two way, in terms of data and advice and impacting each other's roadmaps.
Speaker 2:Yeah, I mean we're attending quarterly meetings with a lot of our customers and we always begin that quarterly meeting sharing what we see in the market and they are sharing with us. What are the roadmaps so we can find the way to work together. As SmartSol is not in the market because we sell products, basically we are selling solutions to the customers. We listen to them, we analyze what are the best solutions for them. Then that become into a proposal and, of course, that become into a long term relationship with the customers. So, as you saw our warehouses, we have inventory for equipment for consumables. As you saw our demo rooms, when we have real time applications, not only for the traditional and less empty products, we have a lot of automation here and simulations for different situations that we need to solve in the industry. So that relationship is with the customers. They come to visit us every day with a problem and they go out with a solution.
Speaker 1:Yeah, what I think is fascinating is that huge investment you have made in inventory, obviously being out with the customers having that data, understanding their world and being able to provide them with solutions as important but they want those solutions quickly. How important do you think that massive investment you've made in in stock has become?
Speaker 2:Well, it's one of the driving, or what is driving the decision in the customers how fast are they going to get it and how cheap. Because right now logistics is the major cost driving for the customers. So, if we are having the machines in stock here and the consumables so we can deliver as long as they need it, so they can reduce their total time for the launch of the new products at least to 50 percent, because there are no waiting time for manufacturing of the machines and there are no waiting time on the transportation and between the longest distance of Mexico the longest driving distance in the truck is two days. So, basically, getting an order today and we need to deliver in Tijuana with the north east part of yes, it's a 24 to 36 truck hours driving, so and that will reduce a lot of money.
Speaker 1:And that's a game changer. And the other thing that reduces money is you're bringing stuff in in advance by by sea freight, which is the most economic. They're getting stuff as if it's been flown in in a kind of emergency situation and not having to pay that uplift on freight. That must be important to.
Speaker 2:Absolutely yes, yes, yes, I mean we're transferring the cost of our sea freight, but no extra charges for expediting and others. So and that is a big difference between the smarts and any other distributor in the industry.
Speaker 1:Yeah, and I see multiple differences that you know the more I dig. I see you know a super impressive integration service installation team that you've built over recent years, a huge amount of data that you're collecting from the market and you're able to share with both principles and customers. It's become much more than a company that just buys and sells equipment.
Speaker 2:Absolutely yes, yes, and you know that right now we are not only focusing Mexico, we are selling to Central and South America and to United States also. Or new demo room in El Paso we are going to do in December an open house. I hope that you can join us for that open house in December time frame, and that is to serve only the market in the United States. We already have a warehouse over there for a inventory, but we're going to open a similar demonstration room that the one that you used here in Guadalajara and that is open house. That are for more business outside Mexico, meaning in the past years, mexico represents more than 95% of auto sales. Right now we are 70-30, so that means a very good balance between regions.
Speaker 1:Yeah, and what's exciting, ivan, is, even with that mix changing, mexico is still growing for you and you're growing the business elsewhere. So congratulations on that. It's a really exciting and quite unique business it's. It's grown into something that is very focused on servicing, serving both your customers and your principles. So thanks for talking to me and thanks for your time and continued success. Welcome to Marson.