Texas - México Trade Corridor Consortium

The Texas A&M Global Manufacturing and Distribution Research Initiative has established a Research Consortium to conduct research and develop solutions for Global Supply Chain Throughput in the México - Central America - Texas region. The consortium will focus on increasing throughput, decreasing time and cost, to optimize distribution and manufacturing operations in the region. This consortium will bring together manufacturers, distributors, logistics providers, and government entities to partner to understand how to optimize opportunities as the region grows and evolves.

What is a Research Consortium?

A Research Consortium is a collaboration of two or more companies, associations, universities or government agencies to conduct research with the objective of developing solutions to a problem or a challenge common to everyone by pooling their resources for achieving a common goal.

Many times companies cannot afford to invest in research and development due to high cost and/or lack of knowledge or resources required to conduct the research. Research Consortiums are an economical path to low cost, high quality research and development that is essential to the growth of the company.

This Research Consortium will be beneficial to:

• Distributors and Manufacturers who supply through Distribution.
• Technology Providers who serve Wholesale Distributors and Manufacturers.

The benefit to the consortium members include the opportunity to actively participate in this ground-breaking research to determine the challenges and opportunities associated with streamlining ?throughput? in the region by bringing together solutions and services that add value to customers in the Supply Chain. Member organizations will shape the results through their involvement and benefit by understanding the future business and public resources needed to optimize regional success. In depth research results will be given to consortium members for planning purposes and government entities to encourage economic development for the region. Broader findings will shared with the public through colloquia and press releases to encourage support for regional development.

In addition to the body of knowledge resulting from this research, the tangible outcomes will include:

• Analysis of true logistics versus labor costs to determine which market to operate in at what level.
• Analysis of government and other incentives within México, Central America, and Texas. What they are, how to access them, how they impact location decisions, impact on labor versus logistics equation.
• Human resources analysis for available skills, economic impact of training, loyalty factors, development of industry clusters, value of human resource development needs in labor versus logistics equation.
• Supplier base development: where suppliers are, what their ROI requirements are, how to develop agreements and alliances, value of supplier base in labor versus the labor/logistics cost equation.
• Technology analysis of the supplier base and the region.
• Market analysis: what can be sold locally, how to support other levels of the supply chain, market needs, sales strategies.
• Economic Impact of the logistics corridor on the region.
• Understanding for government, logistics, and other infrastructure providers for how to best support business interests in the region.

• Market opportunities to serve manufacturing base in México, Central America and Texas, impact on location decisions.
• Comparison of alternative supply chain configurations with respect to technology.
• Analysis of government and other incentives within the region. What they are, how to access them, how they impact location decisions.
• Human resources analysis for available skills, economic impact of training, loyalty factors, development of industry clusters, value of human resource development needs in location decisions.
• Analysis of growth industries to serve in the region. What industries are likely to be attracted to the region as the manufacturing base continues to expand.
• Sourcing opportunities for distribution and manufacturing. How to identify and establish alignment with supply chain partners in the region.

• Understanding of the optimal configuration of assets and infrastructure to enable the growth of regional manufacturing and distribution.
• Market analysis of growth industries to serve in the region. The types of industries and their present and future logistics needs. How to enable growth of desirable customers.
• Marketing materials on why this region and its support systems are optimal for regional manufacturers and their distributor partners.
• Design of manufacturing and distribution processes in collaboration with customers.

• Market analysis of growth industries and their impact on regional infrastructure needs.
• Marketing materials on why this region and its support systems are optimal for regional manufacturers and their distributor partners.
• Technical evaluation of regional infrastructure (e.g., utilities and communications).
• Understanding for government, logistics, and other infrastructure providers for how to best support business in the region. Business argument supporting infrastructure improvements.

Globalization to date has been largely driven by western firms outsourcing their manufacturing to Asia. While this process still has considerable growth opportunities, the long term viability of shipping products across the Pacific Ocean is questionable given the high logistics costs and rising wages in Asian markets. Ultimately, global firms will cede control of local markets to their local specialists. Each market area will be responsible for its own decision making and not take direction from Houston, Stuttgart, London, etc. This autonomy will be critical for the agility necessary to be successful in local markets.

A further result of this new Global firm and its concentration on local needs will be the rise of manufacturing centers closer to the customer that minimize transportation costs and lead times. This Regional Manufacturing process is already well under way with many such centers already started that tend to begin with a particular industry theme. Northern Italy focused on products manufactured by artisans and fashion industries centered on Milan. The area around the Bohai Gulf in China is another powerful region. In the US, the Detroit area was the first major region for automobile manufacture and, more recently, the Carolinas have seen a burst of activity.

Due to the North American Free Trade Agreement (NAFTA), Northern México has seen a major regional manufacturing center open as well. The Maquiladoras are now well known and a significant contributor to the Mexican economy. Unfortunately, NAFTA is often criticized as bad for the American economy due to job losses in the American Rust Belt to México. The logic that NAFTA costs Americans jobs is flawed for two reasons. First, many of those jobs would have been lost to Asia or other locations if NAFTA had never been launched. It is important to note that jobs lost to Asia offer no benefit to the US since most Asian markets do not buy American goods at the rate Mexicans do.

In terms of total trade dollars between countries, China buying from the US accounts for less than 15% of the trade between the two. México buys 35% and the relationship is far more mature. As wealth increases in México and their exports to the rest of the world continue to increase, the imbalance will likely tilt more in favor of the US. The maquilas buy products from American firms to complete their production. This symbiotic relationship is not possible with the Pacific Ocean in between. Chinese manufacturers only look for technology they do not have to build their plants. Eventually, what China buys from the US will be reduced further. Products that are produced in México are also more likely to go through next level manufacturing in the US than those in China. The additional value-add products can then be exported. Chinese products are more likely to go to Europe or some other final market for their next stage of production.

The second reason is more significant. Southern California and Arizona have seen a boom in manufacturing activity with firms that support Mexican Maquilas or firms that serve as the next level of manufacturing in the US. South Texas may be poised for the same with the location of Toyota in San Antonio as a strong example of what could happen. Toyota recognized that three of the largest cities in the US are in Texas and that other major markets are nearby as well (Oklahoma and Louisiana). Cars are a difficult product to ship so proximity to customers is important. Additionally, raw materials and subassemblies are also expensive to ship so proximity to suppliers is also a priority. Toyota saw the Maquila region as a major opportunity for supplies. The conditions that attracted Toyota should lead to, at a minimum, an automotive final assembly manufacturing boom in South Texas supported by a raw materials and subassembly growth in Northeast México. If marketed correctly, the region could attract other industries (electronics, aerospace, to name a couple) as well. The NAFTA vision could finally be realized with both countries experiencing rapid job growth. As the Asian markets lose manufacturing back to the regional powerhouses, Northeast México and South Texas stand to benefit tremendously. Chinese and other Asian manufacturers have taken notice and started opening facilities in México as well. Not just to serve the US market, many are directed at México and will require materials from American firms.

This regional manufacturing center needs logistical support to be successful. That support requires state and local government to establish infrastructure, logistic providers to deploy resources (warehousing, transportation, etc.), and the federal government to streamline cross border trade. Inbound capacity is being added by Méxican ports in Lazaro Cardenas, Altamira, among others as well as expansion of rail and road transportation by México and Texas. Still, much remains to be done. These government entities need a strong financial argument to invest in infrastructure and process improvements, however.

There is a need to study the Critical Success Factors (CSF) as well as solutions for Global Supply Chain Throughput to make the México-Texas logistics corridor the prefect trade corridor of the future. An additional need is to build the story (marketing) of why the México-Texas Trade Corridor is the place to establish manufacturing operations and ship product through to the Southwest United States.

Objectives

The key objective of this consortium is to bring together groups of companies (manufacturers and shippers), logistics providers, government and economic development entities to study:

• Changing customer needs and how to optimize Global Supply Chain Throughput from worldwide sources through Mexican value add to American final assembly processes in Texas.
• The Critical Success Factors for the region and firms to be successful as the most efficient and cost-effective Global Supply Chain Throughput leader. The region?s logistics / transportation needs to support firms in the region.
• How to collaborate as a region and not as individual ports / cities to make this region successful.
• Determine what industries can be best supported by the region from a logistics, human resources, raw materials, and general supply chain perspective.
• Return on Investment (ROI) for local communities in terms of job growth and income.
• Analysis of true logistics versus labor costs to determine which market to operate in at what level. The research will determine the cost structure equation to determine where to locate (Asia, Central America, México, Texas) based on labor versus logistics costs and how changes in business conditions (currency rates, supplier base, training needs, government incentives, etc.) will affect that decision.
• Analysis of government and other incentives within the region. What they are and how to access them.
• Human resources analysis for available skills, economic impact of training, loyalty factors, development of industry clusters, as well as human resource development needs.
• Supplier base development: where suppliers are, what their ROI requirements are, how to develop agreements and alliances, value of supplier base in labor versus the labor/logistics cost equation.
• Market analysis: what can be sold locally, how to support other levels of the supply chain, market needs, sales strategies, present and future logistics needs.
• Market opportunities to serve manufacturing base in México, Central America and Texas, impact on location decisions.
• Understanding of the optimal configuration of assets and infrastructure to enable the growth of regional manufacturing and distribution.
• Marketing materials, to be used in justifying infrastructure development and attracting new investment, on why this region and its support systems are optimal for regional manufacturers and their distributor partners.
• Design of manufacturing and distribution processes in collaboration with customers.
• Market analysis of growth industries and their impact on regional infrastructure needs.
• Understanding for government, logistics, and other infrastructure providers for how to best support business in the region. Business argument supporting infrastructure improvements.

Solution Approach

The research methodology will be to:

• Initial research to establish baseline materials and first level deliverables.
• Conduct the first consortium workshop to bring together all members to discuss and understand customer needs, challenges, information / data needed to address the challenges and possible solutions.
• Conduct ad-hoc research on the region?s ports, transportation routes, railway lines, key cities, maquila industries and their capacities.
• Understand the needs of exporters from Asia and Europe, importers in México and US.
• Conduct second consortium to discuss the customer needs assessment and potential solutions for the region.
• Study end-customers and the impact of Global Supply Chain Throughput on their operations.
• Convert end customer needs to measurable strategies and actions for communities and development groups.
• Determine the Critical Success Factors (CSF) required for the region to compete and be successful as a logistics corridor of the future.
• Conduct third consortium to discuss strategies, tactical plans, and measurements (milestones) for optimizing throughput for the region and a roadmap for firms to optimize their regional strategies.
• Determine which industries are the best fit for the region.
• Develop marketing strategies, plans, and materials for economic development.
• Develop strategies and procedures for firms interested in locating and operating in the region.
• Determine the areas that need more in-depth and focused study and how this can be presented to the states of Texas, Nuevo León, Coahuila, Tamaulipas, San Luis Potosí, Querétaro, Guanajuato, Aguascalientes, Jalisco, Michoacán, Zacatecas and Colima.
• Conduct final consortium meeting reporting and delivering all findings.

Methodology

A Texas A&M led research team will perform ad-hoc research and collect data on the region's ports, transportation routes, railway lines, key cities, maquila industries and their capacities. The team will collaborate with consortium members on the collection and validation of data.

The consortium workshops will provide an avenue for discussion of potential areas to study and solutions/ideas to determine and validate. The manufacturers, distributors, and logistics and infrastructure providers will be able to provide the needs of the customer from a time, cost and efficiency standpoint. The government and economic entities would be able to provide information on how the investments and plans could affect the trade and economic impact of the region.

The Texas A&M research team will study Global Supply Chain Throughput to determine the how the Mexican and US importers and customers work with Asian and European manufactures on improving the supply chain. Ad hoc, empirical, and analytical research models will be built and combined with logistical and economic development strategies.

The consortium members will be able shape this ground breaking research study this important challenge facing the region. This study will seek to impact the region?s economic and logistical growth at a time of growth of ports, transportation infrastructure and Maquila industrial capacity in México.

• Industry partners will bring input to impact study findings and receive strategies for optimal deployment of resources in the region with a roadmap for implementation. New customer markets and growth will be supported and mapped by the research findings. Specific analysis on location decisions and simulations will assist in making resource deployment decisions.
• Communities and state and federal agencies will receive a plan for optimal deployment of resources for maximizing throughput and a marketing plan for drawing industry to the region.

Consortium Structure and Fees

The membership fee for the consortium is US $25,000. The consortium has submitted to Federal programs for matching funds. Consortium members will receive all findings created from all sources.

For more information or to join the research consortium please contact:

Leonard and Valerie Bruce Chair,

Director, Industrial Distribution Program,

Director, Thomas and Joan Read Center for Distribution Research and Education,

Director, Global Supply Chain Laboratory.

3367 TAMU, Texas A&M University

College Station, TX 77843-3367

Office: (979) 845-1463

Mobile: (979) 571-5513

Fax: (979) 845-4980

E-Mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Director of Advanced Technologies

Phone: +(52) 22-2229-2645

Mobile: +(52) 1-22-2215-1903

E-Mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Parque de Investigación e Innovación Tecnológica,

Alianza Sur No. 203, Autopista al Aeropuerto Km. 10,

Apodaca, Nuevo León. México C.P. 66600

Conference Agenda

(PDF 164 kb)

Program Benefits and Details

(PDF 1.12 mb)

White Paper: North American Regional Manufacturing

(PDF 144 kb)

Mexico or China - MDM Article

(PDF 468 kb)

Bringing Manufacturing Back Home - MEXICONOW Article

(PDF 875 kb)