Developing a Nearshoring Strategy: Sourcing From Mexico, Not China

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german dominguez mexico metal sourcing expertWe recently caught up with Mexico sourcing expert German Dominguez to get the latest perspectives on nearshoring operations to Mexico. German will speak on Day 2 of our upcoming commodity conference, Commodity/PROcurement EDGE.

MetalMiner: What is the most important thing a US-based buyer should know about sourcing from Mexico as opposed to China?

German Dominguez: There is a sort of “rite of passage” that a US-based buyer would have to go through to effectively start sourcing from Mexico. Assuming they have been sourcing from China and they now want to start sourcing from Mexico, the first thing they need to know is that there is a different psychology to successfully working with Mexican suppliers that is very different from sourcing in China.

A Whole Different Ballgame

The first psychological aspect that a buyer would have to change is their tendency to “compare” China’s supply base with Mexico’s on the same level. One has to go to the Mexican supply market with the commitment to make it work, whatever it takes. There has to be a commitment from the top that is cascaded down and ingrained within the organization at large. Sourcing in Mexico is a challenging and resource-intensive endeavor that requires strategy and flawless execution.

Let me talk a little bit about strategy. Strategy is a main requirement. Since there is only a fraction of the supply base available in Mexico that there is in China, the US metals buyer has to understand that in order to make the most of her time and effort, she needs to have a clear plan. When you send out a cold RFQ in Mexico, it is very unlikely that you will receive a response, let alone a bid. I’ve seen many buyers only getting this far and saying, “I never got anything back from Mexico!” And that is the end of their efforts. Since the process of sourcing in China is the path of least resistance, they end up going back to their comfort zone and avoiding the more tortuous road of sourcing in Mexico. In China, you can get by without a sourcing strategy, but in Mexico you cannot.

How to Manage Your Sourcing Expectations

The other aspect of sourcing in Mexico is managing expectations. The US-based metal buyer needs to understand that the cycle to successfully develop a qualified source in Mexico is a lengthy process and you have to be prepared mentally to cope with the nature of this. It is important to know that it’s impossible to change the culture of the Mexican supply base (i.e. like getting them to quote in one week, as in China), so you have to adapt and understand this beforehand to better work with the Mexico supplier in a fruitful partnership.

UP NEXT: Closing the cost gap with China.

Find out how total cost models help save you money – learn more at our conference from German, Harry Moser (Reshoring Initiative), and others:

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