The manufacturing industry in Mexico is one of the main engines of the country's economy, representing 18.6% of the national GDP and employing many people in the sector. Despite this, small and medium-sized enterprises (SMEs) in this sector face significant challenges to remain competitive: access and investment in appropriate technology.
According to official data from the Ministry of Economy, in December 2022, the number of companies or productive units related to the manufacturing sector in Mexico was 608,500. These companies contribute significantly to the country's GDP and are an essential source of employment for the population. However, manufacturing SMEs in Mexico face challenges to remain competitive, especially in the current context.
Much has been said about what the process of relocating production chains means for manufacturing companies. But not enough emphasis has been placed on small and medium-sized enterprises, whose opportunities are more significant, but so are their challenges.
Nearshoring, which refers to the relocation of production plants from Asia, is one of the phenomena that has affected the manufacturing sector in Mexico. According to the general director of the Center for Competitiveness of Mexico (CCMX), Juan Carlos Ostolaza, this represents an excellent opportunity for SMEs, which occupy 70% of the population and contribute 50% of the Mexican gross domestic product (GDP). A few months ago, Ostolaza publicly highlighted that, due to the pandemic, SMEs have had to accelerate their digitization process and access new markets. Now, they must join the production chain to stay competitive.
Sustainability as a requirement
The relocation process has made companies increasingly aware of the need to develop cleaner and more sustainable methods. In 2015, the United Nations (UN) approved a new international development agenda, the 2030 Agenda, composed of 17 Sustainable Development Goals and 169 targets.
This agenda warns of the need to take action to strengthen sustainable economic growth, well-paid employment, and broad industrialization. Given the context of low development and the relative abandonment of active industrialization policies for more than three decades, this international strategic framework is essential for Mexico.
On the other hand, the need to develop cleaner and more sustainable processes also triggers manufacturing SMEs in Mexico to invest in technology. Otherwise, you could not comply with aspects such as better use of energy, use of scrap from its proper collection and revaluation, reduction of emissions, and use of polluting fats, thus compliance with local and international standards and regulations.
Companies are responsible for developing more sustainable practices and processes; technology is a fundamental tool to achieve this. Investment in technology can help SMEs reduce their environmental impact, improve their energy efficiency, and reduce costs in the long run.
In Europe, for example, many large companies implement sustainability policies in their supply chains and require their suppliers to meet specific sustainability standards. Some of these policies include eliminating hazardous materials, reducing greenhouse gas emissions, promoting fair and safe labor practices, and promoting the circular economy and responsible waste management.
Supplier assessment tools and processes are being implemented to ensure your suppliers meet these standards, including audits and sustainability assessments. They are also establishing follow-up and monitoring mechanisms to ensure that suppliers continue to meet standards over time.
In addition, some companies are working collaboratively with their suppliers to improve their sustainability practices and capabilities, providing advice and training to address sustainability challenges. In this way, they encourage continuous improvement in their supply chains and create long-term value for their companies and society.
Another critical issue is the need for more technical labor in sectors such as metalworking, which is also demanding and requires better machinery and automation systems. Mexican companies face a significant challenge in filling the technology skills gap in the industry. Although the data varies, it is estimated that there will be a need for more engineers and technicians each year to meet the industry's demand.
Suitable Technology
Small and medium-sized companies must look for alternatives to stay competitive. Investment in technology is one of the best options to achieve this. The proper selection and use of technology improves the efficiency and quality of production processes and helps reduce costs and optimize resources.
Nearshoring can be a perfect window of opportunity to take that step towards technological reconversion and compliance with the demands of current manufacturing.
Companies, for example, may seek to specialize in high-demand areas, such as manufacturing electronic components, medical products, and high-tech devices. By focusing on these niches, companies can attract foreign companies looking for specialized, high-quality suppliers.
It is vital to have the certifications and quality standards that help them show their ability to meet customer expectations. This may include ISO 9001 certification for quality management or ISO 14001 certification for environmental management.
Another critical action for SMEs is to achieve strategic alliances with other companies, including foreign companies, to improve their position in the supply chain. This may include creating joint ventures or collaborating on specific projects.
The technology needed to do so with the right competitive level will depend on the sector in which the company operates. Companies will likely need to invest in technologies such as automation, robotics, and even artificial intelligence to improve their efficiency and reduce costs. Investing in information and communication technologies to improve supply chain management and logistics can also be essential.
With the upcoming international events such as FABTECH Mexico in 2023, manufacturing SMEs face a perfect opportunity to learn about the technologies of machinery, tools, equipment and peripheral processes, and state-of-the-art automation.
While it is clear that in FABTECH Mexico 2023, there will be an orientation toward trends in technology for production, in recent years, it has welcomed more excellent depth topics related to analytics, robotics, and Industry 4.0 technologies. Despite the regionalization of production chains, the market is increasingly globalized. Investment in technology is essential for manufacturing SMEs in Mexico to remain competitive in an increasingly demanding market. The need to develop more sustainable processes and the lack of technified labor are just some of the reasons that make it necessary for even the smallest companies to invest in technology.