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Mexican factories are gaining ground in supply chain restructuring

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New data suggests Mexican suppliers are gaining ground as manufacturers readjust their supply chains amid mounting global disruptions.

According to procurement software company Jaggaer, major American manufacturers requested six times as many Mexico-based suppliers for chemicals, products and construction materials and other goods last year as they did in 2020. At the same time, the number of suppliers in China who received procurement offers in 2021 down 9%, Jaggaer said, based on data from its 30 largest U.S. manufacturing customers with average annual sales of over $30 billion.

Pressure on suppliers in Mexico comes as more companies say they are realigning their supply chains, adding suppliers and bringing some production closer to end users. Efforts aim to strengthen resilience and reliability after a series of shocks to supply networks caused by Covid-19 outbreaks, port shortages, extreme weather conditions and geopolitical conflicts.

“If you’re a manufacturer and you used to have strategic relationships with one or two suppliers that produce the same commodity or a similar commodity, we now see that same manufacturer has relationships with three or four different suppliers,” said Jim Bureau, managing director of Jaggaer of Morrisville, NC.

The added suppliers tend to be closer to the buyer and its customers, he said. The company saw a 514% increase in Mexican suppliers receiving bids from its major U.S. buyers and a 155% increase in Latin American suppliers receiving bids over the same period from 2020-2021.

At the same time, the company found that these manufacturers demanded goods from 26% fewer suppliers in the Asia-Pacific region.

A separate survey of 2,000 US and UK business leaders by London-based procurement and supply chain consultancy Proxima Group found that 15% have moved production closer to their home countries or sourced from suppliers in nearby regions, and 26% are considering doing so.

Companies are trying to build redundancy into their supply chains, said Tom Stringer, who heads the site selection practice at Chicago-based consulting firm BDO USA LLP.

“This ability to switch from one supplier to two to three or four suppliers for different items to make sure they’re on the shelf and available for the consumer,” he said, “that’s a big issue that’s being addressed. “

write to Lydia O’Neal at lydia.oneal@wsj.com

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Appeared in the April 2, 2022 print edition as US Companies Shift to Mexican Suppliers.

https://www.wsj.com/articles/mexican-factories-gain-in-supply-chain-revamps-11648831914?mod=pls_whats_news_us_business_f Mexican factories are gaining ground in supply chain restructuring

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