Auto Manufacturers Struggle with Mexican Supply Chains

by Ken Allen, on June 2, 2016

Screen_Shot_2016-05-17_at_3.03.32_PM.pngMexico plays an important role in the North American auto industry. Thanks to competitive wages, free trade agreements and a strong location, the nation has proven to be an attractive investment opportunity for major automakers looking to build new assembly lines. In fact, one in five vehicles produced in North America is made in Mexico, according to the Detroit Free Press - double the rate recorded in 2004. By 2020, the nation could be responsible for one in four vehicles built on the continent.

But this is not to say that Mexican auto manufacturers have enjoyed growth without problems. One persistent issue appears to be the quality of the supply base in the country.

"Manufacturers struggle with sourcing quality products at good prices."

A new survey conducted by the Entrada Group found that 90 percent of auto manufacturers operating there say that having a reliable supply base is "very important." However, only 17 percent of those surveyed believe that the current state of the supply chain is "excellent." Meanwhile, 23 percent say it is in poor shape.

An article on Plastics Today explained that manufacturers struggle with sourcing quality products at good prices. Some say they still don't fully understand the country's different regions. Due to these and other difficulties, many automakers continue to import components for assembly that they may have otherwise wanted to make in Mexico.

"This creates not only a transportation cost issue, but also a broader cost issue consisting of Mexican compliance issues, payment to Mexican customs brokers, as well as warehousing and storage fees," Doug Donahue, vice president of business development for Entrada Group, told the news source.

The benefits of Mexican manufacturing are significant enough that automakers need to focus on improving supply chains within the country. One way to boost supply chain efficiency is through the implementation of an Enterprise Label Solution that can add intelligence and centralized control to their systems. The ability to better track the parts they need helps manufacturers identify and address quality issues as they arise.

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