Background
- EWA was engaged to develop and implement a Mexican supply chain footprint strategy
- (identify and qualify local suppliers, evaluate options for assembly operations, identify 3rd party logistics providers, negotiate tax incentives, hire local senior management and evaluate existing DCs)
Approach
Step 1: Define Project Objectives and Requirements
- Align on opportunities, volume requirements, cost targets
Step 2: Deploy Formal Process & Develop Core Elements for Analysis
- Identify Products to be outsourced – one product was 48% supplied from China to US
- 80% of component spend can be supplied from Mexico
- Labor & Logistics savings favored Product Assembly in Mexico – faster than In-House
Step 3: ID Potential Suppliers and Obtain Analytical Data
- Identified component suppliers within Mexico
- Interviews and factory visits to develop supplier “short list”
- Suppliers provided detailed proposals with pricing, QC control plans, price breaks for increased volumes, samples for performance testing
- Same process for identifying & qualifying Assembly and Packaging contractors
Step 4: Hands-On Implementation
- Negotiations conducted with suppliers to finalize
- Cost, payment terms, projected productivity improvements, forecasting lead times
- Sharing of productivity/volume benefits, Inventory stocking requirements
- Negotiations conducted with contractors to finalize cost and value-added services:
- Provide incoming QA inspection and manage supplier returns
- Monitor and expedite deliveries from suppliers
- Assemble and Package product & shipment to customers or distribution centers
Results (Outsourced Product Line)
- Cost Reduction
- Reduced inventory vs China ($21MM cash) and shorter lead times, better cash flow
- Cost reduced 5% ($6MM) vs sourcing from USA, with potential for additional reductions
- Eliminated tariff impact
- Other Benefits
- Quick set-up
- Low cost to implement
- Good access to suppliers for USA-based QA and technical staff
- Good quality outsourced assembly and packaging
- Elimination of 2 DC’s from proximity to Western USA customers
- Stable trade environment