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Bringing It Close to Home: The Nearshoring Difference · Speaking of Supply Chain

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  Speaker 1: You're listening to Speaking of Supply Chain, a meeboch podcast.
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  Speaker 1: This is a show for logistics professionals looking to learn
• 0:13
  Speaker 1: more about the latest innovations in supply chain. Each episode
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  Speaker 1: will feature a conversation on topics such as mitigating supply
• 0:19
  Speaker 1: chain disruption and reducing risk, current automation trends, sustainability initiatives,
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  Speaker 1: and more. Let's dive right in.
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  Speaker 2: Hello, and welcome to Speaking of Supply Chain, where we
• 0:33
  Speaker 2: explore trends, current events, and innovations impacting the logistics and
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  Speaker 2: supply chain industries. I'm your host, Ellen Wood. Last week,
• 0:42
  Speaker 2: or i should say last time on Speaking of Supply Chain,
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  Speaker 2: we brought in Jonathan Egan from Badcast and we were
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  Speaker 2: talking about near shoring and just the general topic of
• 0:53
  Speaker 2: near shoring. But today we are going to get a
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  Speaker 2: little bit more into Jonathan's story and hear about some
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  Speaker 2: of those obstacles that he has experienced and how they've
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  Speaker 2: overcome them. In the process of near shoring. There are
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  Speaker 2: manufacturing operations from China to Mexico. Welcome Jonathan, Hi.
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  Speaker 3: Ellen, It's great to be back on the show.
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  Speaker 2: So today we are going to jump back into our
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  Speaker 2: conversation about near shoring. Last time on the show, we
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  Speaker 2: talked about a little bit of what those decisions were,
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  Speaker 2: what drove the decisions, what type of rois are typically experienced,
• 1:30
  Speaker 2: or even what ROI they're striving for, but also what
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  Speaker 2: some of the trends are, what industries are taking the
• 1:37
  Speaker 2: near shoring initiative and really running with it, for lack
• 1:40
  Speaker 2: of a better word, they are running away from China
• 1:43
  Speaker 2: and over to wherever their primary base is. But today
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  Speaker 2: we're going to talk a little bit more about your
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  Speaker 2: experience actually doing this, so bad Cast Solutions is your company,
• 1:55
  Speaker 2: tell us a little bit more about what exactly your
• 1:58
  Speaker 2: company produces, and kind of the history of why you
• 2:02
  Speaker 2: were in China to begin with.
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  Speaker 3: Sure, so my story begins literally twenty years ago when
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  Speaker 3: I moved from Ireland to Taiwan and I started learning
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  Speaker 3: Chinese Mandarin in the lovely city of Taipei. And then
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  Speaker 3: I moved over to the big bold city of Shanghai, Shanghai, China,
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  Speaker 3: and I started working with trading business and I was
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  Speaker 3: project managing several different projects in textiles, furniture, and automotive.
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  Speaker 3: And the automotive client was based in Michigan and I
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  Speaker 3: was basically going out to the factory in the outskirts
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  Speaker 3: of Shanghai on an almost daily basis, going in doing
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  Speaker 3: quality audits, negotiating with the factory owner, doing product development
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  Speaker 3: and so on and so forth. And the customer in Michigan,
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  Speaker 3: on one of the visits that would come out maybe
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  Speaker 3: four times a year, saw me down and said, look,
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  Speaker 3: we like what you're doing, and we would like to
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  Speaker 3: invite you to help us set up a new company
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  Speaker 3: here in China to effectively work with this factory and
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  Speaker 3: other factories. So that was an opportunity I couldn't say
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  Speaker 3: no to, and so that there was another chapter in
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  Speaker 3: the Great Adventure, and it kind of developed from there
• 3:30
  Speaker 3: and then we did great things together. But unfortunately, with
• 3:35
  Speaker 3: all the rising costs in China, there just wasn't the
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  Speaker 3: same room to have, you know, so many middleman businesses
• 3:42
  Speaker 3: between the factory and the end customer, and so obviously
• 3:47
  Speaker 3: that kind of landscape crumbled, and I ended up getting
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  Speaker 3: a formal partnership with the Chinese factory owner and becoming
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  Speaker 3: the exclusive importer of record for those products coming in
• 4:00
  Speaker 3: the United States. So that's effectively how the US company
• 4:04
  Speaker 3: was born, and it grew out of a need ellen
• 4:07
  Speaker 3: to further serve the customer. So a lot of companies
• 4:12
  Speaker 3: they would have their spend, they would find a factory
• 4:14
  Speaker 3: and they would be buying container full of product and
• 4:18
  Speaker 3: the quality Audit quality QA and the QC may not
• 4:21
  Speaker 3: have been what they needed it to be. And automotive
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  Speaker 3: can be very demanding in terms of quality and delivery. Absolutely,
• 4:30
  Speaker 3: so we set up satellite warehouses here in the United States.
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  Speaker 3: We hired a supplier, quality engineers, and admin staff, and
• 4:39
  Speaker 3: we basically were able to look after the entire process,
• 4:43
  Speaker 3: so everything from the production in China to the last
• 4:47
  Speaker 3: mile delivery, and we had sq's that would go and
• 4:51
  Speaker 3: visit our customers on a semi regular basis, not just
• 4:56
  Speaker 3: when there was a problem, but you know, with the
• 4:58
  Speaker 3: greater FaceTime, you could look lunch new projects together, you
• 5:01
  Speaker 3: can innovate together. And that spurred us to grow quite quickly.
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  Speaker 3: So we cater mostly to small, small to mid cap companies,
• 5:10
  Speaker 3: companies anywhere between maybe twenty million to tw one hundred
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  Speaker 3: and fifty million in size who may not have you know,
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  Speaker 3: overarching overseas purchasing offices and what have you, so they
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  Speaker 3: can lean on us for that. So yeah, our processes
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  Speaker 3: that we cater to, mostly as the name might suggest,
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  Speaker 3: bab cast. We do a lot of casting, which mostly
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  Speaker 3: involves high pressure die casting or gravity casting of metals,
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  Speaker 3: mostly aluminum, but a little bit of zinc as well.
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  Speaker 3: And fabrication fab fabrication of metals which is forming, bending,
• 5:46
  Speaker 3: working with sheet metal, et cetera. And I also tongue
• 5:49
  Speaker 3: in cheek like to say that, you know, we have
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  Speaker 3: a fabulous cast of people working in our organization as well.
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  Speaker 2: I mean, how can you not lean into that. It's
• 6:00
  Speaker 2: just there for the taking, Yes.
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  Speaker 3: I thought, so, well, yeah, our people are our greatest
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  Speaker 3: ousage and we're very lucky to have such a great team.
• 6:10
  Speaker 2: So in deciding to move primary production to Mexico, there
• 6:18
  Speaker 2: are a number of differences between China and Mexico. So
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  Speaker 2: I actually sat in on a cultural session about this
• 6:27
  Speaker 2: in terms of marketing. So in terms of marketing, when
• 6:30
  Speaker 2: we're looking at different geographies, there are a number of
• 6:33
  Speaker 2: different indexes that they use to kind of understand who
• 6:37
  Speaker 2: your audience is in this region of the world. And
• 6:41
  Speaker 2: so I was taking a look at some of my
• 6:42
  Speaker 2: notes from this seminar the other day, and some of
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  Speaker 2: the biggest ones the differences between Mexico and US, and
• 6:50
  Speaker 2: I'm sure you will have a lot of experience to
• 6:52
  Speaker 2: talk to this. So one of the bigger ones is
• 6:56
  Speaker 2: the way they express themselves just as individuals, as people,
• 7:00
  Speaker 2: whether they are very indulgent and flamboyant or whether they're
• 7:04
  Speaker 2: very reserved. And in Mexico they love life.
• 7:09
  Speaker 4: They're very laid back.
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  Speaker 2: The time that they propose to do something could be
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  Speaker 2: somewhere close to what they say, it could be two
• 7:18
  Speaker 2: weeks longer. You know, there's no hurrying someone who doesn't
• 7:22
  Speaker 2: want to be hurried, Whereas in China they have a
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  Speaker 2: very low indulgence, so they much more rigid, much more
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  Speaker 2: structured in terms of what is appropriate for business especially,
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  Speaker 2: but also very precise on timelines and very high expectations
• 7:43
  Speaker 2: in that regard. And those are two very different stylistic
• 7:47
  Speaker 2: ways that society, just the culture is going to influence
• 7:52
  Speaker 2: the business in those regions. And another one is direct
• 7:57
  Speaker 2: versus indirect communication, where the Chinese people are very indirect.
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  Speaker 2: One thing that the seminar told us was they will
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  Speaker 2: not say no to you outright, or they don't like
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  Speaker 2: to just tell you no.
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  Speaker 3: That's observation.
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  Speaker 2: They talk around it they say something like this is
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  Speaker 2: not something that we're considering right now, which is just
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  Speaker 2: a definite.
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  Speaker 4: Note, yes, yes.
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  Speaker 2: Whereas in Mexico there's much more direct communication.
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  Speaker 4: You tell someone to do something and they're not going
• 8:29
  Speaker 4: to do it.
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  Speaker 2: No, So what do some of these cultural differences, How
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  Speaker 2: do these impact the decisions that you have to make
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  Speaker 2: or even the way that you go about approaching the
• 8:42
  Speaker 2: decisions that you have to make. Knowing that the influence
• 8:45
  Speaker 2: of time is going to be different, the way they
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  Speaker 2: communicates going to be different, it's world's apart.
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  Speaker 3: Yeah, absolutely, they're very huge observations, I suppose for me
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  Speaker 3: having spent most of my career in China, you know
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  Speaker 3: the concept of China's speed, where things, you know, you
• 9:03
  Speaker 3: can send an RFQ or request for quotation to a
• 9:07
  Speaker 3: factory or a series of factories. You know, you could
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  Speaker 3: expect to get that quote back within a week, maybe
• 9:13
  Speaker 3: two weeks at the most, whereas in Mexico it could
• 9:18
  Speaker 3: be two weeks until never receiving the quoteback, and you
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  Speaker 3: may need to hold their hand and prompt them and
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  Speaker 3: so on and so forth. So that was a bit
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  Speaker 3: of a wake up call to me. You know, China
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  Speaker 3: speed versus Mexico speed are completely different things. And on
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  Speaker 3: the topic of quotations well, also was a major eye
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  Speaker 3: opener for me was the difference in terms of you
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  Speaker 3: would submit a quotation to say, five Chinese factories for
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  Speaker 3: a widget, you would probably get a difference of maybe
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  Speaker 3: twenty or thirty percent in the cost parameters. So for example,
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  Speaker 3: you were anticipating ten dollars to the widget and you
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  Speaker 3: get quote spanning eight to twelve dollars in Mexico for
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  Speaker 3: that saying with you, you could get anything from three
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  Speaker 3: dollars to thirty dollars, and you really have to call
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  Speaker 3: it the question their process for quoting something out, and
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  Speaker 3: actually what that is is it's just it's an acknowledgement
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  Speaker 3: that we're not really interested in the business. And that
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  Speaker 3: was something that was had to be that I was
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  Speaker 3: really something that I just couldn't get my head around.
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  Speaker 3: You know, as you quite what you said, the Chinese
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  Speaker 3: don't want to say no, and more often than not
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  Speaker 3: they will not say no. You have to basically say, look,
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  Speaker 3: you're not set up for making iPhones. You are set
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  Speaker 3: up for casting, you know, two pound parts. That's the
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  Speaker 3: problem with Chinese. But the Mexicans will say straight away,
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  Speaker 3: this is not for us. We don't do that. See
• 10:53
  Speaker 3: you later. So they were interesting cultural differences for sure.
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  Speaker 2: So let's talk about some of the issues that companies
• 11:04
  Speaker 2: are facing when they're considering this near shoring and see
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  Speaker 2: how many of them you have experienced. Now, this is
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  Speaker 2: another article that I got from supply Chain Brain. It
• 11:13
  Speaker 2: was from last month, and they list out five different
• 11:18
  Speaker 2: concerns for the move or the shift to near shoring
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  Speaker 2: to the Americas, and the first one they lift is
• 11:28
  Speaker 2: the power grid. The power grid in the US is
• 11:31
  Speaker 2: not prepared for all of these production sites that we're
• 11:36
  Speaker 2: hoping will come back. I can't speak to the Mexican
• 11:40
  Speaker 2: power grid because this article was only focusing on the
• 11:44
  Speaker 2: US specifically, but just the fact that some of these
• 11:49
  Speaker 2: new facilities with production for very technical things that are
• 11:54
  Speaker 2: going to require a lot of power to produce and
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  Speaker 2: manufacture them, are going to have an allege electric pull
• 12:01
  Speaker 2: on the grid that is, you know, the size of
• 12:03
  Speaker 2: a small town, yes, and that's not even starting to
• 12:07
  Speaker 2: really factor. And yet the electric vehicles that are going
• 12:10
  Speaker 2: to be required and other types of things that are
• 12:13
  Speaker 2: that are going to be an additional drain on the grid.
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  Speaker 2: So is that a factor that you had to deal
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  Speaker 2: with when setting up operations?
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  Speaker 3: Ellen? That was the number one issue there we go
• 12:24
  Speaker 3: that we run into and it's a national issue. The
• 12:29
  Speaker 3: new shine Bomb administration are going to have to really
• 12:32
  Speaker 3: put an emphasis on infrastructure, particularly utilities. So it's the
• 12:37
  Speaker 3: number one bottleneck with it, without a question. Some states
• 12:41
  Speaker 3: are better than others. And when you go to a
• 12:44
  Speaker 3: seminar with someone from Sai, Chihuahua or Kohila, the first
• 12:49
  Speaker 3: question that comes up is about power and it's regionalized
• 12:53
  Speaker 3: and how it works is certain industrial estates will be
• 12:58
  Speaker 3: allocated X as of electricity and then they will say that,
• 13:04
  Speaker 3: you know, in two years time you'll have Y, and
• 13:07
  Speaker 3: in four years time you'll have Z. But you need
• 13:10
  Speaker 3: to do your own research of that and make sure
• 13:13
  Speaker 3: that that allocation is actually there. When on our first
• 13:17
  Speaker 3: site search, we came upon this beautiful secondhand commercial space
• 13:26
  Speaker 3: in the logistical park that we wanted to be in,
• 13:29
  Speaker 3: which was fifteen minutes from BMW and the GM plant,
• 13:33
  Speaker 3: and it had been vacated by one of the subsidies
• 13:38
  Speaker 3: of Hyundai and it was perfect. It had fifty five
• 13:42
  Speaker 3: thousand square feet, nice tall ceilings. It already laid out
• 13:46
  Speaker 3: for it. It had a nice wide air birth for
• 13:49
  Speaker 3: us for the semis to come in and turn. So
• 13:52
  Speaker 3: if you wanted to get your CTPAT, you need to
• 13:54
  Speaker 3: have that for security. And so look, we're like, we
• 13:58
  Speaker 3: were interested. The price was right. So we sat down
• 14:00
  Speaker 3: with them and we were making great way on lease,
• 14:04
  Speaker 3: and so it came down to, well, what cavas have
• 14:08
  Speaker 3: you allocated? And yeah, they were saying working on it,
• 14:14
  Speaker 3: but we'll have it in thirty days. We were like, okay,
• 14:18
  Speaker 3: we'll wait thirty days. Thirty days came by, work's topping
• 14:22
  Speaker 3: with the kvas. We'll have it in another thirty days.
• 14:25
  Speaker 3: Sixty days went by, and this it just became a
• 14:29
  Speaker 3: wild goose chase that we wasted about four months on
• 14:34
  Speaker 3: that because even though it was an industrial state, the
• 14:39
  Speaker 3: original allocated kVA allowance had been appropriated to another facility
• 14:45
  Speaker 3: in the park.
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  Speaker 4: So they didn't even have their original power.
• 14:50
  Speaker 3: No, they didn't. And you know, this was not a
• 14:54
  Speaker 3: mom and pop broker, real estate broker we were working with.
• 14:57
  Speaker 3: This is a multi national company. I'm not going to
• 14:59
  Speaker 3: name them who they were, but they should have done better.
• 15:03
  Speaker 3: And so they actually launched their own investigation into that
• 15:07
  Speaker 3: to see what had happened, and as you probably imagine,
• 15:10
  Speaker 3: they got to a fairly murky destination. So by that
• 15:14
  Speaker 3: stage we were following it, but we'd moved on. And
• 15:18
  Speaker 3: so we actually then moved into facility that already had
• 15:23
  Speaker 3: eight hundred and fifty KBAs allocated to it. And the
• 15:27
  Speaker 3: way that works is you actually have to stump up
• 15:31
  Speaker 3: up front, so you're whatever allocated electricity you need to
• 15:34
  Speaker 3: pay CFE, which is the utility body in Mexico, like
• 15:37
  Speaker 3: government electricity, need to basically put a deposit on that.
• 15:41
  Speaker 3: What we did with our landlord was we amortized that
• 15:45
  Speaker 3: into the square foot rate over five years too, which
• 15:50
  Speaker 3: was actually a lot. We really saved us extra capital.
• 15:55
  Speaker 3: But yeah, absolutely, it's electricity is your number one issue
• 15:59
  Speaker 3: which you need.
• 15:59
  Speaker 4: To all right.
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  Speaker 2: So the second issue that they list is labor issues
• 16:05
  Speaker 2: and the labor shortages in the and again they're speaking
• 16:09
  Speaker 2: specifically to the US.
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  Speaker 4: So right now in the US.
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  Speaker 2: There are about half a million manufacturing job openings, and
• 16:20
  Speaker 2: they anticipate that in the next ten years it's going
• 16:23
  Speaker 2: to expand to be nearly two million job openings. With
• 16:29
  Speaker 2: the retirement of a lot of older individuals now that
• 16:33
  Speaker 2: are still in the job force. But also with all
• 16:36
  Speaker 2: this demand coming over to the US and Mexico and
• 16:41
  Speaker 2: not a whole lot of focus put on developing those
• 16:45
  Speaker 2: career paths for our young people.
• 16:48
  Speaker 4: So the labor shortages, it's a significant risk, and how
• 16:53
  Speaker 4: are you handling that for your company?
• 16:57
  Speaker 3: So again another great observation, Mexico produces one hundred thousand
• 17:02
  Speaker 3: plus industrial engineers every year, and you're getting great caliber
• 17:07
  Speaker 3: of talent. Your teenage student has his eyes or her
• 17:12
  Speaker 3: eyes on entering a university to get an engineering degree,
• 17:18
  Speaker 3: whereas in the US they're not quite looking at that. Okay,
• 17:22
  Speaker 3: they're looking at maybe doing marketing or legal or something
• 17:26
  Speaker 3: like that. Whereas the ambition for a lot of those
• 17:30
  Speaker 3: kids is to get into engineering because they know they're
• 17:33
  Speaker 3: going to get a good job in manufacturing in Mexico
• 17:37
  Speaker 3: and they're producing great caliber of talent. I mean, we
• 17:40
  Speaker 3: have people on our team that are buying trilingual you're
• 17:45
  Speaker 3: speaking Spanish, English, and German. You're not going to find
• 17:49
  Speaker 3: very many manufacturing heads in the US are like that. Also,
• 17:54
  Speaker 3: your median age in manufacturing in the US is probably
• 17:58
  Speaker 3: somebody in their mid to late fifties. Of course, it's
• 18:02
  Speaker 3: there's differences, but your median age in Mexico is probably
• 18:05
  Speaker 3: someone in their late twenties. So and in terms of
• 18:09
  Speaker 3: a talent and pool of talent availability, again, what we
• 18:13
  Speaker 3: liked about Central Mexico where we are in Sanmar's Potosi
• 18:16
  Speaker 3: is the stability factor. You know, people are generally happy
• 18:20
  Speaker 3: where they are and they're you know, they're naturally a
• 18:22
  Speaker 3: very loyal workforce. However, speaking to somebody who has a
• 18:26
  Speaker 3: factory on the border, the Texas border, he says they
• 18:30
  Speaker 3: have a much higher hr in out because a lot
• 18:34
  Speaker 3: of the people there sadly have one eye across the
• 18:36
  Speaker 3: border and if you know, the family member gets set
• 18:40
  Speaker 3: up somewhere nice, the next thing that blow the whistle on,
• 18:43
  Speaker 3: you have three or four workers that are out the door.
• 18:46
  Speaker 3: So we don't believe we'll have that issue as much
• 18:48
  Speaker 3: in where we are in San Ube's Potosi.
• 18:51
  Speaker 2: All right, So the number three issue, and I'm not
• 18:54
  Speaker 2: sure have PC sometimes we can't be.
• 19:01
  Speaker 3: So.
• 19:01
  Speaker 2: And in fact, the number three issue kind of leads
• 19:04
  Speaker 2: right into that. The number three issue that they listed
• 19:07
  Speaker 2: was a climate change risk, and they're talking about the
• 19:09
  Speaker 2: climate change and global warming creating weather patterns that are disruptive,
• 19:15
  Speaker 2: specifically talking about hurricanes and destruction of roads, infrastructure, railways, ports,
• 19:23
  Speaker 2: you know, the disruptions that happen there. I am going
• 19:26
  Speaker 2: to actually say that this is not necessarily a near
• 19:30
  Speaker 2: shoring issue or concern, because I feel like that's going
• 19:35
  Speaker 2: to be a concern no matter where you are, it's
• 19:37
  Speaker 2: going to be a hurricane is going to disrupt your
• 19:39
  Speaker 2: supply chain, whether you're trying to get stuff across the
• 19:42
  Speaker 2: globe or if it's happening in your own backyard. So
• 19:44
  Speaker 2: I think, and this is this is my personal opinion
• 19:48
  Speaker 2: that the climate change risk is there for everyone. It
• 19:50
  Speaker 2: has very little difference on a near shoring decision unless
• 19:56
  Speaker 2: you're looking at a specific region that has weather that
• 20:00
  Speaker 2: you're not used to. I think that could be a differentiator.
• 20:03
  Speaker 2: If you're going near a port city, yes, hurricanes are
• 20:08
  Speaker 2: going to be something you may have to deal with
• 20:10
  Speaker 2: because port cities are typically near an ocean and hurricanes
• 20:14
  Speaker 2: are a factor there, especially in the East coast of
• 20:18
  Speaker 2: the US and in the central equatorial areas where those
• 20:23
  Speaker 2: tropical storms just happen. You're not going to have that
• 20:27
  Speaker 2: same issue in Vancouver. But Vancouver has its own weather issues.
• 20:34
  Speaker 2: So I think that weather, while it may have some bearing,
• 20:38
  Speaker 2: it's not as much an issue for near shoring as
• 20:41
  Speaker 2: I think they were making it out to be.
• 20:42
  Speaker 4: What's your take.
• 20:44
  Speaker 3: Well, I agree that climate change is a global issue
• 20:47
  Speaker 3: for sure, but it is on the issue tree. Okay,
• 20:49
  Speaker 3: it's absolutely on the issue tree. So companies are trying
• 20:53
  Speaker 3: to have more resilient supply chains, and so they're trying
• 20:59
  Speaker 3: to meet gate risk. It's absolutely a risk when you're
• 21:04
  Speaker 3: when you're originally assessed, it'll be four weeks to get
• 21:07
  Speaker 3: your goods and it's now taking eight weeks and you
• 21:10
  Speaker 3: can't give a straight answer to your customer who's been
• 21:14
  Speaker 3: begging for parts. It's so there's a lot more resiliency
• 21:19
  Speaker 3: and forecast ability and dependability when your goods are well.
• 21:24
  Speaker 3: They don't have to cross an ocean, and you you know,
• 21:27
  Speaker 3: instead of it being four days, it may take five
• 21:30
  Speaker 3: days to get to you. So I think it's going
• 21:33
  Speaker 3: to become a bigger risk for sure. And you know,
• 21:36
  Speaker 3: when you have to charter a jet to bring parts
• 21:41
  Speaker 3: over from Asia, you know you're looking at six figures,
• 21:44
  Speaker 3: you know, or if you even have to do a
• 21:47
  Speaker 3: partial air afraid of parts and the rest of it,
• 21:50
  Speaker 3: you know, is an LTL. Again, it's probably wasn't in
• 21:54
  Speaker 3: your original budget not to mention the cost of upsetting
• 21:58
  Speaker 3: your customer, you know, and then he starts he or
• 22:00
  Speaker 3: she starts looking around for somebody else, so you know
• 22:03
  Speaker 3: it's on the issue tree. So on our issue trees,
• 22:05
  Speaker 3: we have geopolitical, we have labor, we have tariffs, we
• 22:11
  Speaker 3: have bilid sheet, but we also have climate change on it.
• 22:16
  Speaker 2: And number four on their list was absolutely that maintaining
• 22:21
  Speaker 2: a strong supply base.
• 22:22
  Speaker 4: And China has.
• 22:24
  Speaker 2: A very dense ecosystem of suppliers available that just doesn't
• 22:29
  Speaker 2: exist in the Americas right now because we have been
• 22:32
  Speaker 2: out of the manufacturing game for so many decades and
• 22:37
  Speaker 2: it's going to be difficult to replicate that. And to
• 22:41
  Speaker 2: your point, having to source those those parts or materials
• 22:44
  Speaker 2: from other geographies can be problematic during certain times of year,
• 22:49
  Speaker 2: during certain weather or just when it's not available and
• 22:53
  Speaker 2: you're not able to have that redundancy or resiliency in
• 22:57
  Speaker 2: your supply chain where you can get local supplies. How
• 23:01
  Speaker 2: does that work for you for Fabcast? Were you able
• 23:05
  Speaker 2: to find suppliers in the local economy or are you
• 23:10
  Speaker 2: still having to source a lot of that material from
• 23:13
  Speaker 2: your original suppliers.
• 23:15
  Speaker 3: So that's a great question. So over the last year,
• 23:18
  Speaker 3: year and a half eighteen months, we have been basically
• 23:22
  Speaker 3: putting together a rolodex of vendors service providers in Mexico.
• 23:28
  Speaker 3: So we've been visiting refractories, We've been visiting other foundries.
• 23:32
  Speaker 3: We've been speaking and visiting with raw material brokers. Who's
• 23:37
  Speaker 3: going to sell us our zamac who's going to sell
• 23:39
  Speaker 3: us our aluminum alloys A three, sixty eight, C twelve
• 23:42
  Speaker 3: and so on. Also for our coating, so we're a
• 23:46
  Speaker 3: vertically integrated operation. We're going to be doing fabrication, casting, machining, coating,
• 23:52
  Speaker 3: all under one roof, and so we've been working on that. Now.
• 23:57
  Speaker 3: For our own particular situation, hand source almost all of
• 24:03
  Speaker 3: the materials we need. There is a small bottleneck on
• 24:07
  Speaker 3: one of our product lines. We can't seem to find
• 24:09
  Speaker 3: the right ductility of aluminum tube that we require for
• 24:14
  Speaker 3: one of our customers, and so we will be sourcing
• 24:18
  Speaker 3: that out of Asia and bringing that into Mexico for
• 24:21
  Speaker 3: further processing. The overall summer finished product, once it goes
• 24:26
  Speaker 3: into the assembly, will meet the requirements of the USMCA,
• 24:30
  Speaker 3: which is the United States Mexico Canada Trade Agreement for
• 24:34
  Speaker 3: your listeners there, Basically we're undercurrent rules which are up
• 24:38
  Speaker 3: for review, I believe next summer. It depends on the
• 24:42
  Speaker 3: quotient of overseas material you have in your assembly to
• 24:46
  Speaker 3: determine whether it's made in Mexico and whether a tariff
• 24:50
  Speaker 3: will fall on that good. So it's really important you
• 24:54
  Speaker 3: know where you are sourcing your own materials. I would
• 24:58
  Speaker 3: say that there needs to be more foundries steel mills
• 25:02
  Speaker 3: set up in Mexico on the US for that matter,
• 25:06
  Speaker 3: to account for the new show, and it's going to
• 25:08
  Speaker 3: happen over the next few years.
• 25:09
  Speaker 4: Well, that's just more industry coming to our shores. So
• 25:12
  Speaker 4: that's great news.
• 25:14
  Speaker 2: But you did touch on the fifth item in this list,
• 25:18
  Speaker 2: which was the regulatory environment and all of these regulations
• 25:23
  Speaker 2: and rules and laws that these companies need to abide
• 25:27
  Speaker 2: by in this different geography. This was an interesting fact
• 25:32
  Speaker 2: and I believe this is according to the National Association
• 25:37
  Speaker 2: of Manufacturers, so this is in the US, not Mexico.
• 25:40
  Speaker 2: The industrial sector faces two hundred and ninety seven thousand,
• 25:46
  Speaker 2: six hundred and ninety six restrictions on operations from federal
• 25:50
  Speaker 2: regulations that seems that seems a little excessive, I must say,
• 25:56
  Speaker 2: but I mean, you know there's a wide range of
• 26:00
  Speaker 2: you know, manufacturing, so I suppose you know, not all
• 26:03
  Speaker 2: of those apply to every particular product that could be manufactured,
• 26:07
  Speaker 2: but environmental protection, worker safety, product standards, these types of
• 26:12
  Speaker 2: things where there's going to be laws and regulations in
• 26:16
  Speaker 2: place that are different from geography to geography. Have you
• 26:21
  Speaker 2: encountered any of those type of obstacles where something you
• 26:24
  Speaker 2: weren't anticipating having as a benchmark or a rule to
• 26:30
  Speaker 2: abide vibe that you weren't expecting.
• 26:34
  Speaker 3: Not expecting may not be the right phrase, but in
• 26:41
  Speaker 3: terms of severity, I did have some surprise. So we
• 26:45
  Speaker 3: had a visit earlier this week from I suppose you
• 26:49
  Speaker 3: could compare it to America American OSHA, and we were
• 26:54
  Speaker 3: basically it was a local superintendent who came in and
• 26:58
  Speaker 3: basically told us what we needed to do in terms
• 27:00
  Speaker 3: of civil protection. Somebody else came in from the Environmental Bureau,
• 27:06
  Speaker 3: and the mandate was quite severe that if we did
• 27:09
  Speaker 3: not abide by the certain rules and regulations that we
• 27:14
  Speaker 3: could be shut down like that. And if that does happen.
• 27:18
  Speaker 3: You have to see all operations. You then have to
• 27:21
  Speaker 3: apply for temporary permits to restart manufacturing. And it could
• 27:26
  Speaker 3: be some very mundane things, well, things which may seem
• 27:29
  Speaker 3: mundane to certain people. You know, where you hot where
• 27:32
  Speaker 3: you where you hang your fire extinguisher, or your egress
• 27:38
  Speaker 3: route for workers, or to how big the holding area
• 27:43
  Speaker 3: is for hazardous material. So I guess probably from China
• 27:52
  Speaker 3: it was maybe a little bit more lax, but in
• 27:56
  Speaker 3: Mexico it's very strict, and it's a good thing.
• 28:00
  Speaker 4: Is absolutely a good thing.
• 28:01
  Speaker 2: We do want to make sure that our employees are
• 28:03
  Speaker 2: safe and able to be productive, and if anything should
• 28:07
  Speaker 2: go wrong, that safety is the primary response. But it
• 28:13
  Speaker 2: just seems that is something that is along with the culture,
• 28:17
  Speaker 2: going to be just a shift in perspectives and really
• 28:21
  Speaker 2: understanding is what is possible, what the expectations are. But
• 28:26
  Speaker 2: you know where those rules and guidelines, where those walls are.
• 28:29
  Speaker 4: That you can't cross.
• 28:31
  Speaker 2: So I would love to hear you've just told us
• 28:36
  Speaker 2: about a story of you know, potentially running into an
• 28:39
  Speaker 2: air or a problem where you would have to shut
• 28:42
  Speaker 2: down operations and wait for permission to get started. What
• 28:45
  Speaker 2: other roadblocks obstacles have you come across. Have there been
• 28:51
  Speaker 2: any utter fails in this move and this transition for you?
• 28:57
  Speaker 2: Or is everything going smoothly about as well as can
• 29:01
  Speaker 2: be expected, like overall up or down?
• 29:07
  Speaker 3: You know, nothing is As my mother likes to say,
• 29:09
  Speaker 3: nothing is easy. And if you think it's easy, you
• 29:11
  Speaker 3: don't understand the problem.
• 29:14
  Speaker 4: That sounds like a logistics saying that needs to happen.
• 29:18
  Speaker 3: You know. I won't say it's being particularly or has
• 29:21
  Speaker 3: been especially smooth, but you have to anticipate that there's
• 29:26
  Speaker 3: going to be these issues. I think the amount of
• 29:29
  Speaker 3: handholding we've had to do with the local authorities in
• 29:33
  Speaker 3: Mexico is more than we would have anticipated. Sometimes it's
• 29:38
  Speaker 3: the left hand doesn't know what the right hand is doing,
• 29:41
  Speaker 3: and the right hand doesn't really care what the left
• 29:43
  Speaker 3: hand is doing, so your job is to kind of
• 29:48
  Speaker 3: bind them together and press the reset button or a
• 29:52
  Speaker 3: lot of follow up. And that's just kind of a
• 29:54
  Speaker 3: general observation from our own standpoint. Locally, we probably didn't
• 30:01
  Speaker 3: start some of our civil works fast enough. We probably
• 30:05
  Speaker 3: didn't appoint a general contractor fast enough for some of
• 30:10
  Speaker 3: our large machines. So our large high pressure die cast
• 30:14
  Speaker 3: machines have to be berthed into the floor of the plant,
• 30:20
  Speaker 3: and I give ourselves a slap of the wrist for
• 30:23
  Speaker 3: not starting that any sooner than we probably should have.
• 30:26
  Speaker 3: And on top of that as well, the contractors didn't
• 30:28
  Speaker 3: start fast enough either, But that is now being solved
• 30:32
  Speaker 3: and I think we're almost completed now on certain grooves
• 30:36
  Speaker 3: and civil works that we have to get done inside
• 30:38
  Speaker 3: the building.
• 30:39
  Speaker 4: Wonderful.
• 30:40
  Speaker 2: So when do you anticipate being able to go live
• 30:43
  Speaker 2: full operations?
• 30:45
  Speaker 3: So we had another meeting with People's Gas yesterday morning,
• 30:51
  Speaker 3: and the gas is also take about ten weeks from
• 30:55
  Speaker 3: when it kicks off, which is going to be next week.
• 30:58
  Speaker 3: So once we have the gas us in we can
• 31:01
  Speaker 3: then hook that up to what's the foundry and also
• 31:05
  Speaker 3: the coding lines, so that'll be October. So we hope
• 31:08
  Speaker 3: to be in soft production somewhere in the middle of
• 31:12
  Speaker 3: quarter four. And in automotive portance, we have what's called
• 31:16
  Speaker 3: a PA pop PPAP. We need to do a level
• 31:20
  Speaker 3: three p POP sub mission to our customers in order
• 31:23
  Speaker 3: to get started production. We hope to be a comption
• 31:26
  Speaker 3: up by mid to late quarter four.
• 31:28
  Speaker 2: Fantastic, Well, it sounds like you have a lot more
• 31:31
  Speaker 2: work to do, Yes.
• 31:33
  Speaker 4: To close this out.
• 31:34
  Speaker 2: What would be your biggest piece of advice to any
• 31:38
  Speaker 2: company that is considering a move to nearshore to the Americas,
• 31:45
  Speaker 2: whether it's US, Mexico, South America, if they're coming from
• 31:49
  Speaker 2: China and moving their production to the Americas, what's the
• 31:53
  Speaker 2: most important thing you feel they need to know.
• 31:57
  Speaker 3: I feel they need to know what that they're going
• 32:00
  Speaker 3: to work with a contract manufacturer or whether they're going
• 32:04
  Speaker 3: to actually do everything themselves. So one cave at and
• 32:08
  Speaker 3: one lesson I'd like to give to your listeners is
• 32:12
  Speaker 3: that you're not going to find as many vertically integrated
• 32:17
  Speaker 3: plants in Mexico for what you need than you would
• 32:20
  Speaker 3: in China. So for example, and I know and everyone
• 32:22
  Speaker 3: you can see is right now, but I'm holding up
• 32:24
  Speaker 3: a fabricated part in my hand. Here in China, you
• 32:28
  Speaker 3: could go to hundreds of different factories and you could
• 32:31
  Speaker 3: get the stamping done, the bending done, the machining done,
• 32:35
  Speaker 3: and the coding done, all with one factory. In Mexico,
• 32:40
  Speaker 3: you may need to go to three different factories. You
• 32:42
  Speaker 3: may need to go to one guy to do the
• 32:44
  Speaker 3: forming and the blanket and the forming another guy to
• 32:47
  Speaker 3: do the machining and then the third guy to do
• 32:49
  Speaker 3: your painting. People don't want that. We have what's called
• 32:53
  Speaker 3: in the industry the coat of arms, where people start
• 32:57
  Speaker 3: blaming each other for certain defects that were calls in
• 33:01
  Speaker 3: the process, and the customer has to you know, is
• 33:04
  Speaker 3: left there with the problem they have to solve themselves.
• 33:07
  Speaker 3: So you need to determine what are you going to do.
• 33:08
  Speaker 3: Are you going to do everything in house or are
• 33:10
  Speaker 3: you going to third party some of your manufacturing. That's
• 33:13
  Speaker 3: your biggest quandary to get started. My suggestion obviously work
• 33:18
  Speaker 3: with a great contract manufacturer like Fabcast, but if not,
• 33:23
  Speaker 3: you probably need to look at setting up your own
• 33:25
  Speaker 3: vertically integrated operation and relying as least people as possible.
• 33:30
  Speaker 4: So shameless plug about that. No, no, no, no, no worries.
• 33:36
  Speaker 2: All right, Well, Jonathan, thank you so much for joining
• 33:40
  Speaker 2: us on the show today. We might have to have
• 33:42
  Speaker 2: you come back because all we've talked about is podcast.
• 33:44
  Speaker 2: We haven't even touched on the Irish whiskey.
• 33:48
  Speaker 3: Oh absolutely, I'd love to tell you more about.
• 33:50
  Speaker 2: That, and that in and of itself is a tragedy
• 33:55
  Speaker 2: because for our listeners there there is the re imaginer yes.
• 34:02
  Speaker 3: I like reimaginer. Yeah, so my close friend and my
• 34:06
  Speaker 3: family we re refounded an old family whiskey which has
• 34:11
  Speaker 3: been in our family for six generations and hopefully a
• 34:15
  Speaker 3: seventh when my son comes of age. But it's called
• 34:18
  Speaker 3: Egan's Whiskey, and we are bonders, blenders and bottlers of
• 34:24
  Speaker 3: Irish whiskey, and we are available in Total Wine and
• 34:27
  Speaker 3: More in the US.
• 34:29
  Speaker 2: That's the only place I've found it.
• 34:32
  Speaker 3: It's an award winning whiskey and you got you gotta
• 34:35
  Speaker 3: taste it at some point. Please do thank you for
• 34:38
  Speaker 3: the mention.
• 34:39
  Speaker 2: I do enjoy whiskey, so I did look it up
• 34:42
  Speaker 2: and I was glad that Total Wine and War in
• 34:45
  Speaker 2: the US does carry it. But for any of our
• 34:48
  Speaker 2: listeners that would would like to hear more about that,
• 34:50
  Speaker 2: please reach out to me and tell me if you'd
• 34:52
  Speaker 2: like to hear the.
• 34:53
  Speaker 4: Egan Irish whiskey story.
• 34:55
  Speaker 2: And we will have Jonathan back on for yet a
• 34:57
  Speaker 2: third episode. So thank you so much, Thank you so much, Evian.
• 35:04
  Speaker 2: That brings us to the end of this episode. If
• 35:07
  Speaker 2: you have a suggestion or a topic that you would
• 35:10
  Speaker 2: like us to cover on speaking of supply chain, or
• 35:12
  Speaker 2: you'd like to be a guest on the show. Please
• 35:14
  Speaker 2: reach out to me at podcast at mebok dot com.
• 35:17
  Speaker 2: We'd love to hear from you. As always, thank you
• 35:20
  Speaker 2: for listening to Speaking of Supply Chain. If you've enjoyed
• 35:22
  Speaker 2: the show, rate and review us on whatever podcast platform
• 35:26
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• 35:29
  Speaker 3: Thank you so much.
• 35:30
  Speaker 1: Evian Meeboch Consulting is one of the largest and most
• 35:38
  Speaker 1: globally recognized supply chain consulting, engineering and advisory firms. For
• 35:43
  Speaker 1: nearly fifty years, we've helped clients achieve supply chain excellence
• 35:47
  Speaker 1: and sustainable competitive advantage across the entire spectrum of the
• 35:51
  Speaker 1: supply chain by delivering improvements and innovation strategically, tactically, and digitally.
• 35:57
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