DSI Presentation Case Study – U.S. – Mexico Supply Chain Blueprint

shutterstock_180746012Richard L. Wottrich, CEO and Senior Consultant, International Services
Atlanta USA

Richard Wottrich delivered the keynote speech on Wednesday, April 15, at the United States – Mexico Chamber of Commerce conference in Chicago USA. The event was held at the offices of Baker McKenzie and attended by over 200 leaders in the Manufacturing, Logistics and Supply Chain Industries from both Mexico and the U.S. The conference theme was “United States – Mexico Supply Chain Blueprint.”

Top executives from Caterpillar, Basin Industries, Landstar, KCS Railroad, Fletes México Carga Express, DHL Express, Whirlpool, Trek Bicycle, among others shared their experiences in locating significant manufacturing facilities in Mexico and the challenges of importing finished goods into the U.S.

Mexico is poised to become the number one exporter of autos into the U.S. this year, supplanting Japan and Canada. Mexico will ship 4.1 million units into the U.S. this year. Some industry pundits are predicting the death of automotive manufacturing in Canada within a decade.

Automotive companies have invested over $14 billion in plants in Mexico, not including Friday’s announcement by Ford of $2.5 billion for two New Mexican plants. Other new investments include Toyota at $1 billion, and Grupo Vidanta (tourism) at $1.5 billion,

Direct foreign investment in Mexico has risen from $42 billion (641 billion pesos) during the 2011-2012 period to $66 billion (1 trillion pesos) in 2013-2014, an increase of 36 percent.

In workshop sessions during the conference the number one concern voiced by virtually every participating executive was the lack of skilled workers. The problem is pronounced not just in Mexico, but also in the U.S. where public school systems are not addressing skilled labor programs. Additional  major issues include border clearance delays in the export of goods into the U.S., along with insufficient rail and truck capacity to move goods north.

The Wottrich presentation, “Panama Canal Doppleganger”, discussed the new expansion of the Panama Canal Third Set of Locks project, and the new proposed canal in Nicaragua. The Nicaraguan government and Chinese billionaire Wang Jing supposedly have launched work this past December 2014, on a proposed $50 billion, 173-mile long canal across the Central American nation – 3.6 times as long as the Panama Canal.

Both projects would accommodate the giant New Panamax container ships and LNG tanker ships. The Panama Canal currently transits roughly three percent ($2.3 trillion) of global GNP, with 65 percent of that going to and from the U.S.  If both new canals are completed that figure can be expected to double to nearly $5 trillion – 6.7 percent of global GDP.

Mexico can be expected to become an even more important trade partner of the U.S. and grow rapidly within the global export community. Mexico’s 2015 projected GDP is $1.367 trillion, with a growth rate of 3.5 percent. Exports are nearly $400 billion, ranking Mexico in the top 15 exporting nations in the world. Finally, recent historical moves by the Mexican government will open up its oil and gas reserves to major oil company development, accelerating growth across all industries in Mexico.

Richard L. Wottrich, Blog Author