Shakeup for North American Supply Chain – Who Wins?

Commentary by John Paul McDaris

Much has been written about how Mexico is stealing away an increasingly larger share of the global auto market from China, for a raft of reasons: Wages in China are growing at an unsustainable rate, supply chain issues there remain unsolved, the Chinese currency is inherently unstable and so on.

As Peter Appel, director of transportation and logistics with consulting firm AlixPartners, states in this article in Automotive Logistics, “Wage inflation in China is growing faster than anywhere in the world. When you take all the factors together, the China cost could reach parity with the US cost within a couple of years. Certainly Mexico and India are ahead of the game, but it is no longer a situation where you look at Chinese wage rates and it’s an automatic decision to go to China.”

With the modern auto industry relying on a growing number of global platforms and more co-location of model production across geographies, there has also been a growth in the exchange of materials between countries. And who is the big winner under that type of model? The suppliers. Suppliers of all sizes can leverage presence in Mexico, for example, as a way to gain new business within North America as a hub.

To put it another way, the issue isn’t as simple as companies moving production wholesale from China to Mexico or anywhere else. Mexico is one of the more promising hubs for the production of global platforms. But in today’s auto industry, companies need multiple sources – materials from the German plant, the Mexican plant, the Asian plant…and so forth, to stay competitive.

Back to Mexico
All that said, establishing a reliable logistics supply chain in Mexico is essential, because you won’t find everything you need from a production standpoint locally. Tier one, tier two or tier three suppliers operating in Mexico need to coordinate the logistics of getting materials to and from major sea and land ports within Mexico. Shelter operators like Entrada Group are best positioned to provide this level of logistical navigation and experience, allowing manufacturers to focus on their core operations.

Source: Automotive Logistics

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