SUPPLY CHAIN SERVICES:

GLOBAL EXPANSION (MEXICO)

SUPPLY CHAIN SERVICES: GLOBAL EXPANSION

BACKGROUND

EWA was engaged to develop and implement a Mexican supply chain footprint strategy, to 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.

SUPPLY CHAIN SERVICES: GLOBAL EXPANSION

APPROACH

Define Project Objectives and Requirements

- Align on opportunities, volume requirements, cost targets

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

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

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

SUPPLY CHAIN SERVICES: GLOBAL EXPANSION

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