Possible Shutdown of the Mexico/US Border Points to the Need for an Agile Supply Chain

In the wake of President Donald Trump’s issued ultimatums and threats to Mexico to shutter sections of the US-Mexico border, industry watchers warn of dire economic consequences, particularly for the automotive industry. In a continuous cross-border interchange of parts, partially completed components and finalized vehicles themselves, the sheer volume of materials for automotive alone has been estimated at $20 Billion a month. Observers close to the industry say that such a move would bring automobile production to a screeching halt. That’s because, according to the Center for Automotive Research in Michigan. "Mexico is a source of 37 percent of all imported auto parts to the U.S. Every vehicle has Mexican parts in it."

However unlikely such a devastating move would be, it bears some serious consideration. Unpacking the complexities of this rapid, real-time interplay reveals its subtle, delicate nuances, but also a stark view of the inherent risks of an inflexible supply chain. The situation, in fact, provides a strong argument for agile supply chain frameworks that can mitigate risk in the most extreme cases, but also inject a critical measure of dynamism that is sure to help make collaborative, interdependent manufacturing businesses more competitive.
 

Take a Seat

Let’s take a look at a specific piece of the Automotive supply chain puzzle to illustrate the point. When we buy a new car we don’t think of the vehicle as having done much traveling, but in fact, if we look at the tens of thousands of individualized components coming together in various orchestrated stages, the road traveled begins to stretch quite long. Let’s take the humble, at times not so humble, driver car seat as an example. From the metal substructure to the foam, fabric or leather upholstery to the many electronic levers and positioning motors, it’s a perfect marriage of form and function. When you think of all those elements, it might not be a surprise that the average seat (of which many are assembled in Mexico), may pass the border several times before completion. What’s more, and like many other autoparts, a large amount of component inventory is not maintained on site, thanks to ability of “Just in Time” (JiT|) manufacturing and production; a major breakthrough in the evolution of the supply chain.

Originally introduced by a certain lean Japanese car maker; you guessed it, Toyota, as the Toyota Production System (TPS), the framework quickly took off across the automotive industry. It’s no wonder. It not only dramatically improves the economics of many manufacturing activities by reducing the upfront costs of maintaining stock, but just as critically, it reduces the required space to store it. Of course, TPS wasn’t the only JiT game in town; other flavors, from Motorola’s Short-Cycle Manufacturing and IBM’s Continuous Flow Manufacturing were punching at the same weight class, just in a different industry. But let’s stick to cars.

Automotive provides a really great example of the strength of JiT but also its fragility in a delicate dance of 3rd and 4th party logistics partners and multiple collaborating manufacturers. Truly, the US president’s tweets on the subject of border closure are directly disproportional to the nuance and complexity of these supply chains.

Taking a deeper look at JiT we can see efficiency at work on multiple fronts, but those efficiencies are predicated upon the ability to predict requirements, orchestrate inventory availability in real time and seamlessly integrate each system and 3PL/4PL player all the way down the line. But when the line, in this case, the supply routes straddling the US-Mexico border, becomes uncertain, the beautiful synchronicity described above falls into jeopardy and what might consider an unacceptable risk.

So what’s the solution?
 

Getting Agile

When we look at the automotive industry, we can see a great deal of innovation (particularly in automation, robotics, AA. AI and IoT) but underlying these are often densely coded legacy systems that have been overwritten with layers of functionality that only sink them deeper into the status quo. In practical business terms, any change in the supply chain, be it a new partner a new plug-in, a new supply route or a closed border, and those systems that may have worked so well may no longer serve your core business, but rather jeopardize it. There’s a general sense since as early as Web 2.0 that the newer, lighter and more open, API driven pieces of software will always be superior to the old. It stands to reason. Silos are cages, they keep us trapped in the status quo. Technology stacks designed for the modern world give us freedom..

However unlikely an actual closure might be, the very thought of it is enough to consider ways to de-risk the supply chain, and the good news is there is a way. There’s been a lot of talk in the logistics trades about agile supply chain management, and supply chain management 4.0, but these lofty labels don’t do much to help the buyers of these systems understand the value. But here, in the cross hairs of real and sustained uncertainly about borders (whether Northern Ireland or Mexico) and trade wars etc. (be sure to read our in-depth article on that subject), we see a real opportunity for manufacturers of all stripes to mitigate operational risk by getting agile. Looking at these factors together suggests that the supply chain reboot that is already happening is particularly timely. We can see how agility would come into play to the great competitive advantage of those companies who have embraced it. After all, what better competitive advantage than being the only one still in business? How difficult would it be for a US automotive part manufacturer to shift its partner base from Mexico to Canada. Would it even be possible? With a flexible, agile Supply Chain Execution solution CE you are at least assured it is possible.

Certainly, this is not to suggest that the possibility of border closure is likely or even possible, but disruptions do happen. The moral of the story of is that in life as in business, there are those things that we can control, and those that we can’t. Logically then, any manner in which we can gain more control in a constantly changing world, the better. That’s what agile Supply Chains are all about.

If you are interested in finding out more, please visit us at our pavilion at ProMat 2019 in Chicago at stand #S3871 April 8th-11th.

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