by That depends on levels of commitment from buyers and manufacturers and if they’re willing to work together for the long haul
In recent weeks — probably more like recent months — a lot of people in the industry have been asking my opinion about sourcing from Mexico. That’s flattering since I’ve only been there a few times, once to the Guadalajara show in early 2018 plus several trips to various factories over the past decade. While I haven’t been traveling there on a regular basis, especially during the pandemic, these visits have given me a window into some of the types of products and manufacturing capabilities in Mexico’s wheelhouse. All this is of major interest to importers and retailers alike looking to avoid some of the headaches they’ve experienced of late from Asia.
Obviously, transportation costs are much less, given the expense involved in securing and flowing containers from Vietnam and Malaysia, not to mention China and Indonesia. Lead times are also much less, with goods shipping in a matter of days across the border versus a few weeks on the Pacific.
Yet when people ask about Mexico, it’s not as much about transit times and expense as it is available capacity. The answer depends on what you’re looking for. Certainly there are plenty of upholstery and case goods plants throughout the country as evidenced by the amount of shipments to the U.S. market that have consistently placed Mexico within the top five or six most important global resources. But many of the factories, including case goods producers, I’ve been to have much smaller footprints and thus less capacity than many of the plants I’ve been to in Asia. Nonetheless, I’ve tried to pass some of these contacts along as well as the names of sources that can help match importers with certain factories.
I also always try to note that it’s been a couple of years since my last factory visits, which occurred right before the pandemic shut down most travel in early 2020. So while passing along contacts from case goods and upholstery manufacturers, I always try to suggest companies visit the country in person to see the capabilities first hand. Many have made the trip in the past several months or longer including visits to the most recent show in Guadalajara, which we hear was buzzing with buyers from the U.S.
As with any sourcing expedition, it takes time and effort to line up the right resources. Even companies that have sourced there for years — from the lower middle to the upper price points — will tell you they experience challenges, whether its executing a finish on a wood collection or finding the right comfort level for seating in their upholstery lines. At best, sources say, it’s all about trial and error just like with any product development process. That said, sources note, it’s critical to have good people on the ground you can trust to make sure quality control meets the expectations of the U.S. market. Thus, another obvious that’s no different from sourcing in Asia.
Some of those who have traveled to Mexico more recently have said that they have had to rethink and refine their product lines, offering something different than they initially envisioned due to the lackluster response from their customers who’ve seen and tested the product at markets. In some cases, for example, they may have more success with a dining room or occasional group than a bedroom group based on changes or refinements that retailers have suggested to the samples they’ve seen.
In other cases, a factory simply may not have the capacity to build what’s needed as many plant owners or operators don’t have access to land or financing to expand their facilities. This is obviously a major challenge for customers looking to find similar capacity they’ve had in China or Vietnam. Many Mexico plants simply aren’t there quite yet.
And it’s not clear that those with the ability to expand are willing to take a chance in order to serve customers they don’t know, including retailers who can be pretty demanding when it comes to getting what they want. Factories in Asia are perhaps more eager to meet such demands as they are competing aggressively with one another for that business. But there’s a difference in the Mexico culture that may not be as open to dealing with certain personalities in the U.S. market. For example, an observer at the recently concluded Guadalajara show said that some retailers coming in with extremely high expectations likely left with their hat in hand.
“When you come in hard with a hammer, it doesn’t work with Mexico,” the source said.
The same source noted that some factories that have done business with the U.S. market in years past are now skittish as some customers abandoned them for Asia once that opportunity arose. In other words, Mexican producers don’t want to make the same mistake twice. If anything, they are looking at the market long-term when some customers in the U.S. might instead be looking at Mexico as a short-term fix. And many Mexican producers likely can sense that right away even based on brief interactions with prospective customers during a show.
“As long as you show you are sticking with them through the hard times and are in it for the long haul, they are receptive to staying with you,” the source noted.
Another opportunity that exists in the market is to invest directly in one’s own manufacturing as we have seen of late with Manwah and Kuka. These two upholstery manufacturers are either building new plants from the ground up or, in Kuka’s case, expanding existing ones to get the large-scale capacity they need to serve the market long-term. The model is similar in nature to investments companies like La-Z-Boy, Flexsteel and Palliser have made over the years, which assumes that Mexico will be a major part of their global infrastructure moving forward.
So the opportunities appear as diverse as the number of manufacturers in Mexico. But a message of caution would be to look at the country not just as a short term-fix but rather a long-term partner that can serve different segments of your business. Anything less would likely fall flat with manufacturing partners and also fall short in developing another resource in one’s global sourcing platform that is as much about speed to market as it is finding the cheapest price.
The price strategy appears to have long since left the station no thanks to high container and shipping costs. Thus Mexico appears to have a major opportunity moving forward. We can only hope that both manufacturers and their customers approach it for the long haul as there appear to be too many benefits to ignore on both sides of the border.
