By Wall Street Journal
This article was published in Wall Street Journal April 1, 2022.
Procurement bids to suppliers in Mexico are surging, says a tech firm that also sees purchasing from China slipping.
New data suggests Mexican suppliers are gaining ground as manufacturers reset their supply chains amid growing global disruptions.
Last year, large American manufacturers solicited chemicals, produce and construction materials and other goods from six times as many suppliers based in Mexico as they did in 2020, according to procurement software firm Jaggaer. At the same time, the number of suppliers in China that received procurement bids declined by 9% in 2021, Jaggaer said, using data from its 30 biggest U.S. manufacturing customers with an average of over $30 billion in annual revenues.
The push for suppliers in Mexico comes as more companies say they are resetting their supply chains by adding suppliers and bringing some production closer to end users. The effort is aimed at bolstering resilience and reliability following a series of shocks to supply networks brought on by Covid-19 outbreaks, port bottlenecks, extreme weather and geopolitical conflicts.
“If you’re a manufacturer and you used to have strategic relationships with one or two suppliers that produce the same good or a similar good, we’re now seeing that same manufacturer have relationships with three or four different suppliers,” said Jim Bureau, chief executive of Morrisville, N.C.-based Jaggaer.
The added suppliers tend to be closer to the buyer and its customers, he said. The company tracked a 514% increase from 2020 to 2021 in Mexican suppliers receiving bids from its big U.S. buyers and a 155% increase in Latin American suppliers receiving bids over the same period.
At the same time, the company found those manufacturers sought goods from 26% fewer suppliers in the Asia-Pacific region.
A separate survey of 2,000 U.S. and U.K. chief executives by London-based procurement and supply chain consulting firm Proxima Group found that 15% had moved production closer to their home countries or sourced from suppliers in nearby regions, and 26% were looking into doing so.
Companies are seeking to build redundancy into their supply chains, said Tom Stringer, who leads Chicago-based consulting firm BDO USA LLP’s site-selection practice.
“That ability to go from one to two to three or four suppliers for different items to ensure it sits on the shelf, and it’s available for the consumer,” he said, “that’s a big issue that’s being addressed right now.”