The “New” Mexico — Better than Ever

by Mark DeLong and Brad Hendrick

Reverse Logistics Magazine, May/June 2007

Second of a two-part series on near-shore outsourcing or “near-shoring,”

In the not too distant past, the label “Made in Japan” denoted cheap products that did not always adhere to high quality standards. Today, Japan has become a leader in the electronic and technical industries.

In much the same way, Mexico has struggled with a stamp of disapproval. Americans developed a stereotypical view of an inferior production and unmotivated workforce in Mexico. The 1990s proved to be a wake-up call to Mexico and the world. Mexico’s catastrophic financial woes led them to recreate themselves. Today, Mexico’s economy is thriving and its workforce is robust — in both large and small cities.

NationMaster.com rates Mexico’s economy as 12th out of 230 countries (just below Canada and Korea) and 14th in exports (20th in technical exports). Mexico has made a dramatic financial recovery and continues to make impressive improvements in education and literacy. In fact, it is becoming one of American companies’ favorite near-shore options for outsourcing.

U.S. companies have found great benefits in near-shore outsourcing with Mexico. Going south of the border rates well in all of the Five Cs of Outsourcing mentioned in Part 1 (RLMagazine Fall 2006) -- Culture, Convenience, Cost, Complexity and Customer Satisfaction. Mexico’s proximity allows for quick turnaround and delivery, offering transportation modes not available from countries located across an ocean.

In addition, Mexico’s culture is familiar to many Americans. Workers are increasingly bilingual, which is ideal for companies needing call centers that cater to both English- and Spanish-speaking customers. Mexican cities also provide for the complexities and strengths many corporations need: skilled workers and current technology. Mexico has a strong labor force and hosts such companies as Volkswagen, Lextronics, Flextronics, Celestica and General Electric.

As with all outsourcing decisions, one must consider several factors before finding the right solution. You must find a company that meets your requirements in several key areas to assure your partnership will be successful. We’ve made a list of these considerations; they include location, labor pool, wages, stability, border relations and technical confidence. If you make an incorrect decision in any one of these areas, you could see a substantial hit to your bottom line.

Unlike the Five Cs addressed in Part 1, making a mistake in any one of these areas can greatly affect your experience and, ultimately, your bottom line. Organizations should look carefully at each of the following:

Location — Companies that choose Mexico as an outsourcing partner usually do so because they depend on a quick turnaround of products. Repair centers, especially, depend on getting products back to the customer or store within a day or two. Companies need to be aware of all transportation options available to and from their outsourcing partner. Mexican companies may offer low labor costs but may be located in an area that adds time in transportation.

Labor Pool — Mexico’s labor pool is robust, with workers ranging from unskilled to being highly skilled, technically. Many of these workers (the percentage increases as the skill set increases) are bilingual. They are motivated and have a strong work ethic.

Wages — Here’s where companies tend to underestimate the cost of outsourcing to Mexico. The higher the skills needed for laborers, the nearer the wages compare to those paid in the U.S. If your company needs high-skilled labor, the wages you pay may not create the savings you may be expecting. The disparity in labor costs occurs mainly when relying on lower-skilled workers.

Stability — As Mexico’s economy improves, many new companies continue to spring up. It is important to make sure that the company you choose (or the management of that company) has a proven track record. This is true in almost all areas of business, from management to border relations.

Border Crossing — Getting your product across the border can be tricky and/or time consuming unless the company you work with has a positive relationship with customs on both sides of the border. Stops by inspectors can add hours or even days to your transportation process.

Technical Confidence — Depending on the needs of your company, ensure that the outsourcing company you choose has a proven track record in technology. The labor pool is rich with workers at all skill levels, but you need to know the company you hire is set up to meet your needs. Some outsourcing companies take on several types of manufacturing and repairs in the same facility. Whether you make dog bones or are doing sophisticated electronic repairs, be sure the company has what you need to get the job done quickly and efficiently.

Conclusion: It’s important to look at the big picture. Companies must take into account all costs when deciding where and how to outsource. Many businesses tend to believe that outsourcing to a foreign country automatically costs less. This can be true if the company you choose is reputable and lives up to the standards you set. Mexico’s thriving economy, strong educational systems and proximity make it a great candidate for near-shore outsourcing. Just make sure you do your homework.

Mark A. DeLong, Director-Technical Support Services at Arvato Services Inc., has over 25 years RL experience in the wireless industry. He has extensive experience with wireless carriers such as McCaw Communications, AT & T Wireless and T-Mobile. Mark has been with Arvato Services Inc. since 2005 as a consultant and employee, managing a technical services outsourcing project for a national wireless carrier.

Brad Hendrick has over 22 years RL related experience with companies including Nokia Mobile Phones, Solectron Global Services, Sprint PCS and most recently as President and CEO of Applied Resource Technologies. Brad has been with Arvato Services as Executive Director of Sales and Business Development for the Wireless Sector since 2005.

Reverse Logistics Magazine, May/June 2007