The maquiladora industry is booming along the U.S. Mexico border.  As organizations strive to reduce operational expenses and improve productivity, the inexpensive labor market in Mexico, along with favorable trade regulations, make maquiladoras an attractive option. 

   However, this industry brings with it a unique set of challenges and obstacles for purchasing agents. Many are turning to new technologies to help with these challenges, but technology is only half of the solution. Total e-procurement solutions are finding a unique fit with maquiladoras, offering technology and a buyer-supplier relationship that more closely resembles a partnership.

About the maquiladora market

   Maquiladoras originated in the 1960s, but boomed throughout the ‘90s with the introduction of NAFTA. Multinational companies like Ford, Chrysler, Samsung, Sony, Sara Lee, Sanyo and Fisher Price produce products in maquiladoras—most for export to the United States . Employment in maquiladoras now stands at over one million people.

   The U.S.- Mexico Trade and Maquiladora Industry Review, published by Cross-border Business Associates, stated the primary incentive for organizations to operate a maquiladora in Mexico stems from the desire to remain price competitive against Asia and European-manufactured products. Many maquiladoras are operated as world-class facilities with ISO 9000 and ISO 1400 certification standards equal to or exceeding those in the United States . This constant quest to gain efficiencies, reduce operational costs and increase productivity is paramount to this competitive and growing market. Maquiladoras are looking to improve their procurement processes as a method of maintaining their competitive edge, and indirect materials offer a substantial opportunity.

Indirect materials purchasing within maquiladoras

   Indirect materials are substantially different than direct materials in a variety of ways.  MRO (maintenance, repair and operations) materials are mostly repetitive, generic, high transaction items with low unit costs.  In fact, purchasing agents can spend as much as 80 percent of their time sourcing and purchasing these items that only account for 20 percent of the overall budget. Up to 60 percent of the orders may be spot buys requiring research on sources of supply, evaluation of alternatives and the final purchase. The MRO purchasing process usually involves a large number of buyers, sometimes every employee in the organization, and covers numerous commodities.

   Little attention has been paid until recently to the strategies and procedures of indirect, or MRO materials purchasing within maquiladoras. As companies in the United States shift their attention to reducing the total cost of procurement for MRO items, purchasing professionals in maquiladoras have acknowledged the added challenges they face. Identifying a local supplier or importing products from U.S. suppliers both involve significant time and research while logistics response time considerations and warehouse capabilities further complicate the matter. Finding a way to incorporate purchasing technology given these unique circumstances presents an obstacle for the maquiladora purchasing staff. A multi-faceted solution is required to address not only the challenges of indirect materials purchasing, but the added constraints within the maquiladora industry.

   Companies like the Rockford, Ill.-based SupplyCore are responding to these needs by offering total e-procurement solutions that couple a different type of buyer-supplier relationship with technology. This relationship is closer to a partnership and seeks to optimize the purchasing process for both the buyer and the supplier.

   With SupplyCore, maquiladoras drastically reduce the number of supplier relationships they maintain and purchase their indirect materials from this one source. Considering that an organization can pay as much as $3,500 annually to maintain just one supplier relationship, reducing hundreds of supplier relationships for MRO materials to just one can save millions of dollars annually. Not only are the expenses of maintaining suppliers reduced, but the hassles of identifying new sources of supply and maintaining, controlling and evaluating supplier performance are minimized.

   In exchange for a more stable and predictable relationship, SupplyCore accepts responsibility to provide a broad range of products to the buyer. Frequent site visits for training and technical support enhance the partnership as buyers take advantage of the additional services and reliability offered. Through this relationship, maquiladoras also benefit from an MRO spend leverage throughout their organization and SupplyCore’s existing client base. With SupplyCore as the one source for all MRO items, the maquiladora purchasing staff is able to focus on more strategic, direct materials issues.

The technology

   For many maquiladoras the MRO materials purchasing process is cumbersome and paper-laden. The impact e-procurement has on the process can result in huge savings. The other half of the total solution offered by SupplyCore is a web-based purchasing system free from upfront costs and lengthy implementation timelines. Unlike software solutions, an Internet alternative allows maquiladoras to immediately benefit with enhanced speed and quality of the purchasing communication process.

   Online catalogs and ordering capabilities simplify the searching and ordering process for MRO items.  By using advanced searching capabilities, most buyers can quickly and easily locate and purchase the items they need. Submitting orders electronically reduces the risk of human error while creating an electronic record of the transaction for future reference.  Automatic approval hierarchies and standard workflows mimic the structure of the organization and reduce the time-lag associated with centralized controls, especially for maquiladoras with multiple locations.

Benefits

   Solutions like the one offered by SupplyCore have a variety of benefits for maquiladoras. Not only do these solutions offer the technology to streamline the purchasing process, they create a partnership between the buyer and supplier that improves the service by providing technology, buying power and information exchange. These benefits allow maquiladoras to gain efficiencies, reduce operational costs and increase productivity which is paramount to this competitive and growing market.

   Using the web-based procurement systems, maquiladoras incorporate state-of-the-art procurement technology into their operations. The ability to access online catalogs, online order processing and tracking and automated workflows reduce the amount of time purchasing agents spend sourcing and procuring MRO materials.

   Having just one supplier for all their MRO needs allows maquiladoras to benefit from a MRO spend leveraged.  Organizations can standardize the MRO products they purchase and improve pricing as all departments and locations aggregate their spending. As multiple maquiladoras adopt the system, a buying group is created to further leverage the MRO spend not only across individual organizations, but also across the entire buying group.

   With just one supplier capturing MRO purchasing information, maquiladoras also have the ability to track and control their purchasing dollars.  The web-based system provides instant access to online reports that analyze total purchase dollars over given time periods; order status reports and commodity spend information.

Making it work

   Transitioning to a total solution can seem like a big step. Moving from multiple suppliers to very few, fundamentally changes the MRO procurement process.  With this fundamental change comes big savings in the form of costs and efficiency.

   “We have been providing this type of solution for organizations for over 15 years,” said Peter Provenzano, CEO of SupplyCore. “By tackling the procurement problem from a technological and strategic perspective, organizations see more dramatic, immediate impact on their operations.”

   Even though maquiladoras operate with different constraints than U.S.-based factories, the concept still applies.

   “When I approach purchasing managers at maquiladoras, the response is very positive,” states Luis Romero, International Business Manager for SupplyCore.  “Very often they are attempting to address these issues with multiple solutions.  We offer a true total solution, saving them time and money in the long run.”