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Manufacturing in Mexico Conference. Near-Shoring - Maquiladoras - Site Selection. Las Vegas, Nevada. May 19-20, 2011. Bellagio. Cover. Mexico. and. Globalization of Aerospace Industry. Manufacturing in. Mexico Conference. Las Vegas. May 19 th , 2011. Section 1 – Globalization.
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ManufacturinginMexicoConference Near-Shoring-Maquiladoras-SiteSelection LasVegas,Nevada May19-20,2011 Bellagio
Cover Mexico and GlobalizationofAerospaceIndustry Manufacturingin MexicoConference LasVegas May19th,2011
Section1–Globalization Aerospacebusinesspracticesinevolution RelevancyofMexicoinAerospace TheDecisionofOffshoring
Aerospaceisembracingnewrealities PaceofchangesweighsonAerospace Socio-economics Demographical Market Competition Bestpractices AmatterofIndustrysurvival Technologies Challengingtheestablishedorder: TraditionalAerospaceplayers ProtectionismaroundAerospace Waysofdoingthings
TheTransformationofoursourcingpractices Traditional Purchasing Competitive Purchasing Strategic Sourcing Develop partnerships withlarge suppliers Getting suppliers involvedin studies Subcontract complete systems Reductioninnumber ofsuppliers Outsourcing manufacturing Risksharing TheOEMsimposeprofoundchangesonSuppliers Source:NorthropGrumman&BusinessWeek
AnewmodelofcollaborationbetweenPrimes&Suppliers Targetareafor QualifyingSuppliers Performance ation er op Co ContributiontoOEMbusinessinterests Source:EADSGSN-May2007
GlobalizationoftheSupplyChain “OEMsarereconstructingtheirValueChainby positioningeachlinkattheplaceintheworldthat willminimizeCOSTandmaximizeRETURN” Source: ConferenceBoardofCanada,Sept2008 AtpresentationtoAerospaceIndustriesAssociationofCanada MajorValueChain Investments by121OEMs 1990-2009* Source:AeroStrategy,September2009 *AsofAugust2009
Newbattlegroundsforcompetitiveness-Example FrenchAerospace–StrongdeploymentinMoroccoandTunisia For •Thelanguage •Itscosts •Itsproximity •Itslogistics •Easeforsuppliers Investmentsin •Newcapabilities •Newinfrastructures •Training
Section1–Globalization Aerospacebusinesspracticesinevolution RelevancyofMexicoinAerospace TheDecisionofOffshoring
ThePrecursors–before2005 Westartedtoseeanincreasingnumberofaerospacecompanies establishinginMexico(60-100)intheearlyofdecade2000 Thevastmajorityweresmallermanufacturinginvestments ThemajoritywereU.S.investments Evenbignamesstartedverymodestly 2001–25employees LABINAL 1998–AcquisitionofAerotec 1986–40employees
TheBeginningofOrganizedAerospaceinMexico-2005 Bombardier’sannounceditsMexicoinvestmentinOctober2005 TheycamewithaLong-TermStrategicview DecidedtosetupinMexicoasatanyotherBombardierplant FortheeventualassemblyofairplanesinMexico Forthousandsofjobs WithaSupplierStrategyinmind Theywereinstrumentalin CreationofaNationalAerospace School DevelopmentofaSupplierPark BASA
SurgeofFrenchAerospaceinMexico Late2007andearly2008havebeendifficultforEuropeanaerospace TheexchangerateoftheBritishPoundandEuroagainsttheUSDollar reachedrecordhighs ThePrimessuchasRolls-Royce,EADS,SAFRANsuffereddeeplythe imbalancebetweentheirproductioncostinlocalcurrencyrelativetothe portionoftheirrevenuemadeinUSD. Mexicothembecameastrategicplatformto •Diminishcosts •Edgingthecurrencyeffect–MexicoisaUSDzone •PenetratingstrategicallytheNorthAmericanaerospacemarket ForFrance,forinstance,Mexicobecamesuchanimportantplatform thatitreceivedthehighestlevelofattention Mexicowasdeclareda“PôledeCompétitivité”fortheFrenchAerospace TheFrenchandMexicanGovernmentsestablishedaBilateralHigh-Level Committeetostudycollaborationinitiativesintheareasof: •Aerospaceeducation •Supporttoinvestmentsanddevelopmentofsuppliers
TheFrenchAerospaceisdevelopingastrongpresence Thereisarapiddeployment ofFrenchaerospace companiesinMexico Forinstance,SAFRANisthe largestaerospaceemployer inMexicowithover3000 employeesin6plants. Sourcing • • • EADShasopenedaGlobalsourcingoffice FrenchprimesareholdingsuppliersconferencesinMexico MexicanlocalcompaniesareassistedbyFrenchcompaniestoqualifyfortheirwork AerospaceTradeEducation Franceisgivingitssupporttoseveralaerospacetraininginitiatives: Anaerospacecampuswithacapacityof600to70studentswasannouncedlastJulyby SAFRAN Eurocopterhasdevelopedseveralpartnershipwithlocaltradeschoolsanduniversitiesin supporttothetrainingofitsworkforce
Significantgrowthsince MexicoisstrategicaswellfortheUKAerospace AsanOffshoreManufacturingLocation AsaStrategicSourcingLocation ADShasconductedseveralmissionsinMexico,includingarecentoneinBajaCalifornia UKTIinMexicoisactivelysupportingUKaerospacedevelopmentactivitiesthecountry CanadaandtheUnitedStatesseeastheirstrategiclow-costpartner withintheframeworkofanintegratedNorthAmericaneconomy
Mexicoisbuildingitsaerospacebackbone Mexicohasmadesignificantstrivesinthelast5years Assettheessentialsbodiesrequiredforstructuringtheindustrysuchas theMexicanAerospaceIndustryAssociation IsgettingmoreCOHERENTandSTRATEGICinitsdeployment Isharmonizingitslawandrulesofaviationwithothercountries Isinvestingandcooperatinginthedevelopmentofaerospaceeducation Issupportinginitiativesinsupportofaerospacecertificationofsuppliers Isreviewingwaystoprovidebettergovernmentsupporttotheindustry
AerospaceIndustryinMexico 37.5 1,200 7,500 310 1,100 31.0 21.0 250 190 900 5,000 150 110 16.5 12.5 7.5 3,400 2,700 1,300 450 250 200 65 270 200120042007200820102012E TotalNumberofPlants 200120042007200820102012E TotalEmployment (inthousand) 200120042007200820102012E AnnualInvestment (US$Million) 200120042007200820102012E AnnualExport (US$Million) Source:MexicoNowResearch
MainAerospaceClusters BajaCalifornia •Mexicali •Tijuana
MainAerospaceClusters Sonora •Nogales •Guaymas
MainAerospaceClusters Chihuahua •Chihuahua •Cd.Juarez
MainAerospaceClusters NuevoLeon •Monterrey
MainAerospaceClusters Queretaro •Queretaro
Mexicoisbuildingitsaerospacebackbone AerospaceTradeProgramsavailablefromTECHNICALCOLLEGES LONGPROGRAMS 6monthsto18monthsprograms Withfreeinternshipincompanies SHORTCOURSES Metrology NDT QualityStandard Chihuahua AircraftStructureassembly ElectricalHarnessassembly Composites BasicMachining AdvancedCNCMachining SheetMetal/Fabrication AircraftMaintenance
FUTURE–ExpansionofAerospaceinMexico …roomtogrow Established Imminent NextPhase Phase 2ndNext
Section1–Globalization Aerospacebusinesspracticesinevolution RelevancyofMexicoinAerospace OffshoringtoMexicoasOneoption
Aerospacesupplychainundergreatpressure Long-termgrowthmeansembracingOEMs/Tier-1strategies&priorities Businessmodel Globalization Costreduction ProcessimprovementsinitiativessuchSixSigma,LeanManufacturing, ValueEngineeringandotherswillnotbesufficienttorespondtoentire requirementsofcostreductionandtoremaincompetitive Canprocessimprovementsguaranteeforlong-termsurvival? Canprocessimprovementscanrealisticallyprovideanet20%-30%cost improvement? MarketcompetitiongrowsinLowCostEconomies,eitherthrough MytraditionalcompetitorstakingtheopportunityofGlobalization NewSuppliersbeinggroomedabroadbytheOEM’s IsStatusQuoanoption?
Offshoringasoneofthestrategies Itisonemoreoptioninour“CardDeck”ofManufacturing Strategies Mustnotbetheuniquestrategy Itoffersaparadigmshift.Thereoffersthepossibilitytoreplicate thebestofwhatwearebutinalowercoststructure. Withoutcompromiseonthecontent,complexityandpractices Offersopportunitiestocreatevalue-addedactivitiesathome Thewholecreatingincreasingoverallenterprisevalue ProbablynomoreeffortsthanmanyotherImprovement/COST Savinginitiativesavailabletoyou
MexicoasanewmarketforAerospace? Mexico,bylarge,isnotanetsourceofnewAerospacebusiness. Thevolumeofworldwideaerospaceworkissetbythenumberofcommercial, business,rotaryaircraftinproductionandthemilitaryspending. TheproductionofaerospacegoodsofMexicoisageographicalredistribution ofanexistingmarket. AretheresomepocketsofnewopportunitiesinaerospaceinMexico? Certainly,butitremainsmarginal MoreMROworkastheMexicanfleetofaircraftisgrowingmorerapidlythan theaverage Moreairport-relatedservicesandequipmentastheairportinfrastructuresof Mexicoaregettingbeef-up Mexicomustbeseenasaplatform -Forglobalcompetitiveness -ToreachtheU.S./Canadianmarkets
Isitwithinmyreach? Iamonlyarelativelysmallsupplier! LimitedFinancialResources LimitedHumanResourcestoapplyagainstproject Managementattentionisspreadout Iamriskadverse–alotofunknown ManagingatDistance Shouldbeacomplexundertaking CanIrealisticallyconsideranOffshoreoperation? ANSWER:DefinitelyYESunderpropersetting, underproperguidance
Thanksforyourattention AeroShoresisaConsultingandServicesfirmdedicatedatthe successfullaunchofmanufacturinginvestmentsinMexico Ourvaluesresidesin ourstrategicthinking ourexpertiseinmanufacturing ourhands-onexperienceatimplementations ourknowledgeofMexico Yourcontact: LucBeaudoin–Principal Tel:+1(514)667-1534 Cell:+1(514)916-1720 Luc.Beaudoin@AeroShores.com www.AeroShores.com
ManufacturinginMexicoConference Near-Shoring-Maquiladoras-SiteSelection LasVegas,Nevada May19-20,2011 Bellagio