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Manufacturing in Mexico can help balance intercompany supply and demand

Many manufacturers rely on intercompany suppliers.

Many companies choose to expand only certain aspects of their production processes to Mexico and ship those goods to other plants for assembly. For instance, automakers like Chrysler and Volkswagen have maquiladoras designated to manufacture specific engines. Intercompany supply chains can still become complicated when manufacturing in Mexico, as the balance between supply and demand must remain flexible. Delays in the internal supply chain can result in missed deadlines and the entire company can be impacted - especially if customers are waiting on products.

In an article for Industry Week, John Dyer, president of the JD&A-Process Innovation Company, gave an example of a U.S. intercompany supplier plant that received word from company leadership to expand its capacity, essentially throwing off the supply-demand balance. In his example, Dyer wrote that manufacturers can prevent bottleneck solutions from happening by anticipating future demand. If that demand is below the current capacity line, Dyer suggested manufacturers use the opportunity to utilize the additional capacity internally.

If suppliers are in the manufacturer's home country, it can be easier to adjust capacity - although it still may be difficult to accomplish. However, if parts of the intercompany supply chain are being produced in China or in a country not located in North America, determining manufacturing capacity and aligning supply with demand can become a significant challenge. Companies that aren't able to receive needed goods on time may end up bringing in an external supplier. Even worse, if businesses expand the offshore plant in anticipation of high demand and the quality of products worsen, they might have to cut off production. Manufacturing in Mexico keeps the suppliers close to the company's North American headquarters, creating greater production visibility and a shorter time to market to help prevent such issues from occurring.

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When:
18 – 20 October 2016

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