The Three Pillars that Define the Challenges of Manufacturing in Mexico
The challenges of manufacturing in Mexico in 2022 and beyond will be centered on three pillars. They are connectivity, sustainable energy, and generational change.
The irreversible changes we are experiencing today already have a gestation period attached to them and are creating new challenges related to manufacturing in Mexico and trends in the global manufacturing industry as a whole.
Some people have not yet realized that today we are witnessing a historical and permanent change in our lifestyle, our way of working, and in prevalent business models. This is an opinion that was recently expressed by Luis López, Business Consultant and Team Manager of QAD Latin America.
The specialist with more than 20 years of experience in supply chains pointed out that the Covid-19 pandemic brought multiple problems in the distribution of goods and the supply of inputs that are used in production. This state of affairs added to the challenges of manufacturing in Mexico.
Pillars that will define the challenges of manufacturing
In the webinar Challenges and Trends in Manufacturing in 2022, he highlighted that three main questions that have been on the collective minds of all those who saw their worldwide manufacturing processes affected:
- Why is this happening?
- What else can come to occur?
- How do I protect myself?
“Prices rose, ships stopped moving, sales were canceled, we were not paid on time… many strange things have happened during this time, and there are three great pillars of change that will be with us going into the foreseeable future,” he explained.
These three pillars are the ones that will drive the challenges of manufacturing in Mexico:
- Electrification and connectivity
- sustainable economy
- generational difference
He pointed out that these three points will generate great modifications throughout the remainder of the present century. To illustrate this idea, he highlighted the current state of the automotive industry in Mexico as an example.
“Each vehicle sold in the world today will require 30% fewer components and less labor than it currently does. This will lead the automotive and transportation industry to hire fewer suppliers, which will have serious negative implications for the Mexican labor market,” he explained.
He stressed the fact that the need for 30% fewer components to manufacture automobiles will cause unemployment.
“A recent study indicates that in Germany, the United States, and Mexico alone, more than 250 thousand people will lose their jobs producing internal combustion engines by 2030. And we might think that it does not affect us because we do not sell cars, but those cars need steering wheels, wire harnesses, seats, tires, and wheels, among other things. And in the manufacture of these products, there are many companies with a presence in Mexico that are involved”, he stressed.
The case of the lack of chips
To better exemplify the shortages that lie ahead and how they relate to the challenges of manufacturing in Mexico, he focused on the global shortage of microprocessors.
“The lack of chips is due to our demands as consumers. We want a new cell phone, an LED screen, a security camera, a Bluetooth speaker, and digital technologies that are now commonplace features found in new automobiles, etc. More and more microprocessors are used required to manufacture these in-demand products,” he said.
He explained that previously the assembly of a passenger vehicle required an average of 400 chips employed in the production process. Now car manufacturing routinely uses more than 1,500 of these devices.
The use of sustainable energy to address the challenges of manufacturing in Mexico
On the subject of clean energy, Luis López predicted an eventual collapse of fossil fuels because, eventually, clean energy will become cheaper.
“This transition is going to cause secondary effects in many companies. This will happen first in advanced economy countries and will eventually spread to the rest of the world. For example, the coal industry will collapse at different times in various countries. But in a globalized world like ours, the decline of fossil fuel-based industries will represent a significant problem for the world economy,” he stated.
He added that when fossil fuels are no longer produced, higher costs will begin to affect the adhesives industry. In addition to this, costs related to the production of basic chemicals will rise, and the process will continue to eventually reach a myriad of industries.
“We consumers are gradually winning the fights for sustainability and are reducing our collective carbon footprint to conduct the battle against climate change. We will continue to see governments worldwide force companies to use alternative packaging products and different, more environmentally friendly production processes, etc., “he said.
The growing trend towards the use of green technologies in Mexico and around the world will affect the way individuals consume and, therefore, the way companies produce and distribute their goods. Developing these new technologies and patterns of consumption are central to successfully meeting the challenges of manufacturing in Mexico.
The third pillar or trend is the generational difference.
Today’s production and consumption systems were created by baby boomers and generation X, López stressed.
“Markets, industries, logistics, consumption, and marketing chains have been designed by them. But now, those systems are being questioned and revolutionized by millennials and generation Z. These populations have motivations that are different from the ones that drove their forebears,” he remarked.
The specialist commented that it is a natural process and it is normal for it to happen.
“Production cycles for manufacturing in Mexico are now shorter, and consumers expect articles and designs to be more striking. In addition to this consideration, we must take into account the fact that changes in preferences are more constant, and the buyer now wants more variety in product availability,” he pointed out.
He explained that the coming trends would be more local and cultural.
“We no longer only talk about home deliveries, which depend on each place where it occurs, but also about the types of manufacturing in Mexico. Consumers will increasingly seek personalized products, and these customers are increasingly demanding that they be delivered today. The companies that succeed will be able to meet these challenges,” he concluded.
Risks for the manufacturing industry in Mexico
López stressed that, unfortunately, all these changes in logistics, designs, and processes represent risks for manufacturing quality in Mexico.
Faced with this situation, he recommended to companies an ideal countermeasure for the challenges that lie ahead for production-based industries: digitization. Increased digitization will enable organizations to meet the challenges of manufacturing in Mexico.
“We have to redesign the supply chain and start from scratch. Manufacturers must not make purchases and create expensive inventories without thinking. Companies must take great care to define how much they should buy and from whom they should make their purchases. The technology already exists that enables companies to determine their best options for doing business,” he said.
He concluded his thoughts by inviting logistics leaders to invest in technology, as it is “one of the weapons that can help companies successfully navigate the challenges of manufacturing in Mexico.” He concluded by noting that companies will “not always be able to accurately predict variability in demand, but, through careful analysis, will be able to save costs by making smarter purchases.”
Contact us, and our Mexico specialists will discuss with you your challenges or questions about manufacturing in Mexico.