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Mexico-based suppliers gaining ground in global manufacturing

Borderlands is a weekly rundown of developments in the world of United States-Mexico cross-border trucking and trade. This week: Mexico-based suppliers are gaining ground in global manufacturing; John Deere is transferring some U.S. operations to Mexico; Texas officials have established a joint Gulf Coast operations center; and a trucker is charged for allegedly attempting to smuggle $18 million worth of meth. 

Mexico-based suppliers gaining ground in global manufacturing 

While China and other Asian countries remain an important component of the global supply chain, procurement bids to suppliers in Mexico are surging, said Jim Bureau, CEO of Jaggaer, a U.S.-based technology provider of cloud-based business automation software.

“In the U.S. we’ve seen from 2020 to 2021 a drop in sourcing from Asia-Pacific by about 30% and an increase in Latin America by about 150%, which is pretty significant,” Bureau told FreightWaves. 

North Carolina-based Jaggaer provides automated procurement solutions for 1,700 global customers, including manufacturers like Siemens and Hitachi.

Bureau said Jaggaer’s manufacturing clients aren’t necessarily abandoning Asian suppliers completely but adding more Mexico-based suppliers to their customer base to diversify their supply chains.

“What our customers are doing is they’re adding suppliers to the mix, which kind of complicates things because you then end up with having to manage a bigger broader supply base,” Bureau said. “But if you look at how these folks are managing things now, there’s so many moving parts with the supply chain. Companies are also trying to manage responsible sourcing and nearshoring to stave off disruptions.”

Germany-based Siemens recently announced plans to build a $35 million electrical components plant in Nuevo León, Mexico. The products will be exported to Siemens customers in North America and Europe. Nuevo León is just outside Monterrey, Mexico, about 139 miles from the U.S.-Mexico border.

Siemens has facilities in more than 200 countries, including 10 in Mexico. Its customers include aerospace manufacturer Raytheon and truck maker Navistar, which recently opened a major plant in San Antonio.

Bureau said the move to seek more suppliers in Mexico is being caused by higher shipping costs from Asia, as well as longer wait times for goods. Several COVID-related lockdowns in China in recent months caused more global delays and route adjustments.

“Even once you procure the goods you have got to be able to get it from point A to point B,” Bureau said. “It costs me twice as much and takes twice as long to get it from Asia-Pacific right now.”

As of Friday, the cost to move a loaded container from China to the U.S. West Coast (FBXD.CNAW) had a spot rate of $9,573.72, a 55% year-over-year increase compared to the same period in 2021, according to the Freightos Baltic Index (FBXD.CNAW). Asia-West Coast freight rates have dropped dramatically since May 3, when spot rates were $16,365.74. 

Chart (FBXD.CNAW): FreightWaves SONAR. To learn more about FreightWaves SONAR, click here.

With manufacturers diversifying their logistics chains with suppliers in both Asia and Latin America, maintaining quality control, managing inventory and risk control can become more challenging, Bureau said.

“The reason why you have one or two key suppliers is because you can have a real-time vendor-managed inventory, you can have quality assurance programs — duplicating that with suppliers in more than one country is not an easy task,” Bureau said.

“So what Jaggaer does is big picture, we connect buyers and sellers through what we refer to as a self-guided B2B commerce model, and by self-guided what we try to do where we can is to put up parameters that allow machine learning or artificial intelligence to augment sourcing events, to augment purchasing and vendor-managed inventory.” 

John Deere transferring some US operations to Mexico

John Deere will relocate its tractor cab assembly from Waterloo, Iowa, to Ramos Arizpe, Mexico, by 2024, the company recently announced. 

The decision to move operations was driven by labor market costs, John Deere officials said. 

“John Deere’s plan to bring new product programs to our operations in Waterloo, Iowa, makes it necessary to consolidate the manufacturing of cabs from [Waterloo] to [Ramos Arizpe]. The decision to move cab production ensures the company can balance workforce needs within the tight labor market, while also ensuring Waterloo can open up floor space to manufacture new products,” the company said in a statement emailed to media.

The Waterloo plant employs about 1,500 people, including 1,100 production workers. It’s not clear how many jobs will be affected by moving the production line to Mexico.

Production workers at the Waterloo plant can earn about $22 an hour to $33, according to  United Auto Workers Local 838, which represents about 3,000 workers in the Waterloo area. 

Moline, Illinois-based John Deere (NYSE: DE) is a global farm and construction equipment manufacturer. The company has more than 100 factories around the world in 30 countries.

Texas officials establish joint Gulf Coast operations center

Texas officials recently announced the creation of the Joint Intelligence and Operations Coordination Center (JIOCC) in Houston aimed at creating unified responses to disasters and crime prevention initiatives along the Gulf Coast.

The JIOCC will be a joint control center coordinating operations between the U.S. Coast Guard’s Houston-Galveston sector; Homeland Security Investigations Houston (HSI), U.S. Customs and Border Protection; and the Houston and Transportation Security Administration (TSA).

“By bringing together and leveraging each agency’s unique strengths, authorities and capabilities, we are better positioned to protect the ports and waterways of southeast Texas and southwest Louisiana,” said Coast Guard Capt. Jason Smith in a release.

The center will be staffed with personnel from the Coast Guard, HSI, CBP and TSA. JIOCC staff will include a full-time counterdrug analyst from the Texas National Guard whose focus will be providing analytical support to HSI components.

The JIOCC will also serve as an event command post in the event of a natural disaster or other emergencies.

Trucker charged for allegedly attempting to smuggle $18M worth of meth 

A 33-year-old truck driver has been charged with allegedly attempting to import more than 881 pounds of methamphetamine, according to Texas authorities.

A federal grand jury in Laredo, Texas, recently indicted Luis Alberto Garza Cisneros on two counts, according to a release from the U.S. Attorney’s Office Southern District of Texas.

Authorities said Cisneros, a Mexican national, attempted to enter the U.S. from Mexico driving a tractor-trailer hauling stainless steel scrap on May 6. Officers at Laredo’s World Trade Bridge  reportedly discovered methamphetamines in 24 5-gallon buckets inside of the tractor’s diesel tanks.

The drugs have an estimated street value of $18 million, officials said. 

If convicted, Cisneros faces up to life in prison and a possible $10 million maximum fine. No trial date has been set.

Watch: FreightWaves’ carrier update for June 10.

Click for more FreightWaves articles by Noi Mahoney.

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