Selling to the manufacturing industry in Mexico
Mexico Representation president, Ed Juline, talks to Tecma about selling to the manufacturing industry in Mexico.
Tecma Group of Companies:
Welcome to another installment of Tecma Talk podcasts. These are audio programs in which we speak to individuals that are experts, both within the Tecma Group and those that are external to the company. Today, we have an individual with us that is the president of a company called Mexico Representation. His name is Ed Juline. We’ll be speaking about selling into the manufacturing industry in Mexico. Hello, Ed. How are you today?
Hello. Good afternoon.
Tecma Group of Companies:
Ed, if you could, please contextualize a little bit about where we are going with this, by providing the listeners with some information on your personal background, as well as inform them with respect to what it is that your business does.
Ed Juline:
Sure. I spent about ten years in the manufacturing industry working for companies like Toyota and IBM, when IBM decided to move its manufacturing down to Guadalajara. I raised my hand. I said, “I speak Spanish, which I thought that I did. I got to the airport, and it turned out that I really didn’t as well as I had thought. After a year long assignment with IBM ended, they gave me a severance and I ended up staying for thirteen years. About half way through that, I decided to get out of manufacturing amd I moved into sales. I worked in sales for one company, and that one company turned into about thirteen companies. Mexico Representation, a manufacturers rep company, was created.
Tecma Group of Companies:
Essentially, you are a manufacturers rep with whom companies can contract with you, I assume, to sell into the manufacturing industry in Mexico. Very briefly, can you give the listeners a broad overview of the kind of things that you represent?
Ed Juline:
Sure. When I started selling for one company, in particular, they had a very technical, highly engineered product that no Mexican supplier offers. As a matter of fact, there are only two suppliers in the world that offer that type of product. That’s what I think US companies, Japanese companies, and European companies are still really good at. There are these really unique ingredients, or components, that go into a final product. For instance, although the IPad is assembled in China, there are many components that are put into it that come from high tech manufacturers in the US and in Europe. So we decided to concentrate on the high value, highly engineered products that are still needed in Mexico, but those companies are struggling and suffering with selling into the manufacturing industry in Mexico. This is because, although it is a country that is right next to the US, there still sometimes seem to be a huge distance when it comes to culture and language, and such.
Tecma Group of Companies:
Given those differences, you have been selling to the manufacturing industry in Mexico for quite some years now. This leads one to believe that you have had some degree of success in doing so. What are the keys to getting the job done in this respect, as opposed to in the US, Canada or anywhere else for that matter?
Ed Juline:
There are a bunch of different things. Some of the keys to selling into the manufacturing industry in Mexico are:
- You have to be flexible
- You have to be able negotiate.
- You have to be quick to action.
- You have to deal with last minute urgencies.
An example of the last item is that a company comes in with a PO and requires that the product ship by 5pm on the same day. Another example is that of a company saying that the shipment is at the border, but the invoice is all wrong. We have to take five percent off of the invoice, then I’ll give it to you on the next one. That kind of thing just seems to happen all the time, so you have to be much more flexible.
You have to invest in the intangibles. This includes in investing in loyalty, support, having your channel partners. These are more important when selling into the manufacturing industry in Mexico than your normal opportunity in the US and Canada. Sales in the US and Canada can often be very logic based. You present your product. The buyer tells you if they need it or not. You present a price. You present a logic, and, then, they decide to buy it or not.
In Mexico, there is a saying that goes “Mas vale malo por conocido, que bueno por conocer.” The translation of this is “The devil that you know is better than the devil that you don’t.” Trust and loyalty are one hundred times more important in Mexico, than they are in other markets.
The third key to selling to the manufacturing industry in Mexico is not to give up. It will always take longer. We kind of have an eighteen month rule. If you do get a purchase order within eighteen months of your original contact with the company, you have to go directly to church and pray to God. This is because it had to be some kind of miracle. Patience and persistence, patience and persistence and more patience and persistence are required.
Tecma Group of Companies:
Those are keys to selling into the manufacturing industry in Mexico. In a general sense, if you get down into the specific area in which you focus, what are the differences in selling technical and engineered products in Mexico versus in the US and in Canada?
Ed Juline:
A couple of the differences are that, you have to look at the three different types of buyers that you are going to encounter in Mexico. The first type of buyer is one that is just executing orders as mandated by some bill of materials that that company is given. Those kind of buyers are not going to help you very much. The second type of buyer is one that is tasked with finding local Mexican suppliers. When you show up saying ” I sell this thing,” whether its stampings or castings or plastics, or whatever it is, they are going to be very excited until they find out that your supplier is in the US, but, often, they are going to realize that there is no Mexican supplier for that thing. Then they are going to point you to the person that actually controls that decision. The third type of buyer, which is growing in quantity, is the type of buyer that really has control of the bill of materials and the project, and says, “hey, I want the best supplier possible.” “I don’t necessarily care if it is a Mexican supplier or a Chinese supplier or a Turkish Supplier. I really just need to get the best landed cost.”
Once you determine the type of buyer that you are dealing with, you are going to be in a much more successful positon to actually execute the sales cycle.
Tecma Group of Companies:
Those are very good bits of advice for people that are looking to sell those kinds of products. You have had more than a dozen years of experience, as you have mentioned, working in these areas, but, when you look at Mexico, and you look at its weaknesses and strengths what would you consider these to be in term of environment in which you are active?
Ed Juline:
It is a very “niche” market. The one area that Mexico is very strong in is plastics. Why and how this is the case would require a lot of research to try and figure out. There is a trade show that happens every eighteen months that is called PlastImagen. It is one of the biggest plastics shows in the world. You get a very strong plastics market in Mexico to the point where plastics are actually exported from Mexico. There is a shoe manufacturing center in Leon, where pretty much most of the shoes that are sold in Latin America, Mexico, and, even the US are made in this shoe manufacturing center in Leon. This is just an area of expertise that goes back a long time. There is a lot of contract manufacturing in Mexico. It’s kind of random as far as what areas of expertise these contract manufacturers have, but it also comes and goes with the tide. For instance, if there is a need for solar panels, Mexico is pretty quick to jump on this kind of thing until, maybe, China catches on to it later.
The auto, aerospace and appliance industries are really growing in Mexico because they produce types of items that just can’t be shipped easily from China, or have other kind of security or intellectual property controls. I am jumping around a little bit, but its really a case of knowing which industries Mexico is strong in and which it may be weak in, and you may need to go to China. The most general conclusion that you can make is that high volume and low complexity is going to come from China. As you move along the curve towards more reasonable volumes, and maybe some more complexity, Mexico becomes much more of a feasible player.
Tecma Group of Companies:
You mentioned something that is very interesting in the context of things that we’ve seen from Tecma’s perspective over the last few years. A lot of manufacturing that is coming from China for which people are finding a way of getting done in Mexico work that the buying parties are looking to get done on a subcontract basis. Although, like you say, Mexico is quick to respond, I don’t believe that Mexico has the same wide base of subcontract manufacture capability that China does. Would that be in line with your experience, or have you seen something different?
Ed Juline:
We have seen similar things. In 2011, we were contacted by a US housewares brand to look at sourcing their high end brooms, brushes and mops in Mexico. We had never done that kind of sourcing work before, and found a plastics molder that does brooms, brushes and mops and we made the marriage. Those two companies became successful together. Then, in somewhat quick succession, we started getting contacted by more and more companies in 2012 that said, “I’ve got to get out of China.” They alway gave me a punch list of three or four reasons out of ten such as rising Chinese wages and logistic costs, and lead time and transit issues. There were supplier continuity concerns and intellectual property concerns. They always picked three or four reasons off the list, and said that “these are the reasons why I need to get out of China.” At the end of the day, however, nobody was willing to pay double. It was very infrequent that we were able to find equal pricing in Mexico for a product that was already being made and sourced in China. Another sample was a barbecue maker in the US that said that “we have to get out of China for reasons 1,3 and 7.” We went and sourced the product with three different metal stampers and assemblers, and they were not even able to come within twenty percent of the cost of materials. In other words, the China price was twenty percent lower than the cost of materials in Mexico. Everybody is eager to get out of China. Nobody is saying that “I really want to do business in China,’ but nobody is willing to pay the premium of what it would cost to have subcontracting work done in Mexico. Therefore, it is necessary to take a shot at it to see if Mexico is the right market for you. In my very loose estimation, one out of twenty times it is.
Tecma Group of Companies:
Considering the fact that you have been in a lot of different places in Mexico, and you see that the number of companies that are looking for contract manufacturing is more than cases of plants actually being moved from China to Mexico, despite this, in the case of a company endeavoring to move its operations to Mexico from China what are some of the things that should be taken into account?
Ed Juline:
Forgive me if I made it seem that companies always only looking to contract manufacture in Mexico. That is just what my company attracts. Tecma is where I send companies that are looking to move their facilities. If somebody calls and says, “I have got to move my facility out of China and get it into Mexico, that is when I send it to you guys.’
Tecma Group of Companies:
It does happen. It’s just not as often as we would like.
Ed Juline:
It is usually one the side of companies wanting to set up additional operations in Mexico more than saying that “I want to shut down US and move to Mexico, or I want to shut down China and move to Mexico.” The case is most likely that the Mexican market is 140 million people, and I can export from Mexico to the rest of Latin America without dealing with a lot of tariffs and trade barriers. Companies realize that they should have a Mexico presence more as a regional supply strategy than anything else.
Back to your question regarding what a company should take into account when considering the option of establishing operations in Mexico; I am going to make light of the question, because I think that it is very important that in the thirteen or fourteen years that I have been in Mexico, I have seen ten times as many companies fail when they come to Mexico as succeed. The first factor that brings about success is that if you are somewhat under one hundred employees, or maybe, even, under fifty, you should be looking at shelter operations in Mexico. Contracting with a shelter company is the easy way of entering the market. Let someone else take care of all non-manufacturing functions for you, so that you are not burdened with the details of Mexican tax laws, Mexican employment laws, and issues having to do with white unions and all the different issues that come up in Mexico that you don’t need to be dealing with on your own. The second two things which are going to sound funny, but are important, are (1) you need to put your plant somewhere to which people will not mind traveling to. If you choose right across the border, that usually seems to work for people. They can live on the US side of the border and come into work every day. If you are in Queretaro, or Guadalajara, or one of the cities that are a little bit more favorable to live, this seems to create a situation in which US citizens that have to visit alot don’t mind coming to help.
The second thing is to pick two or three people that are going to leave your current facility in the US, and go live there for a couple of years. The companies that just say, “OK, we’re starting up this facility. Here is our Mexican team, and good luck, don’t seem to be as successful as the ones that dedicate a couple old timers to going and really living there in order to teach company culture.
Tecma Group of Companies:
That seems like good advice. One of the things that has been noticeable, and you probably have seen the same thing, is that, if you were to go back twenty years or further, you would typically see that eighty percent of plant managers were either US nationals that went down to run them, or nationals from whatever country that the firm happened to be based in. Over the last twenty years, however, the Mexican education system has become very very good at pumping out talent and, essentially, you see a flip in those numbers. Mexico, and I think that you’d corroborate this point, has been very impressive over the years in its ability to upgrade the educational system to meet the needs of the industry that has invested within its borders.
Ed Juline:
Absolutely. The companies that have survived, and have persevered, do not have someone there anymore. To clarify my earlier point, have someone there for the first year or two. It is the company culture part that you need to be teaching. It’s not necessarily saying that the person in charge needs to be a foreigner, but you need to have a couple of people on the ground that know how your copany works, how your processes work, and how to fix things. The Mexican nationals are going to pick up on it. They are going to learn and they are going to even end up, in some cases, being better than even your US operation. You look at a company like Continental, or, even, IBM, where I worked, there used to be dozens of foreigners running around the operations. Now you wouldn’t even find one. It is a process of evolution. My point was more that, when you do start up, you need to be present. You just can’t count on a different country and a different culture to do things the way that you do them.
Tecma Group of Companies:
So what you are saying is that company culture is not something that you can deliver long distance, and expect it to take root in another place?
Ed Juline:
That was my point.
Tecma Group of Companies:
It is a good one to take into account. This has been a good discussion, albeit one that has scratched the surface of topic, mainly, of selling to the manufacturing industry in Mexico. A lot of people that would like to get involved in doing this, but do not know how to take the first step. You might be a person that they might want to speak to with regard to doing just that. How would people in this position get a hold of you?
Ed Juline:
They can go to our website, www.mexicorepresentation.com. I can be contacted at ejuline@mexicorepresentation.com, or by telephone at 956-242-7424.
