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Welcome to the industrial talk podcast with Scott Mackenzie. Scott is a passionate industry professional dedicated to transferring cutting edge industry focused innovations and trends while highlighting the men and women who keep the world moving. So put on your hard hat, grab your work boots, and let's go
00:21on, we're going to be doing a:
I believe you. How are you doing? Very good. Scott, thank you so much for the opportunity. It's a pleasure. Yeah, talk to you and share perspectives with you.
I'm all into it. I'm telling you right now, listeners, we're gonna be talking a little bit about nearshoring is a great topic. Primarily Mexico, Latin America. And Nepanoa No, I got it. Nepanoa, the hey got leaders in in being able to make that happen. And I think that that's an important conversation to have specially with challenges with supply chain and, and the importance of manufacturing. Before we get into that conversation. Alberto, give us a little background on who you are. Sure.
06:37en in the United States since:
Whoa, hey, I got all the government I didn't get that ally short.
I mean, well, we need to think about it that way. Right? It's not only a supply chain issue, but with the complexities that are happening around the world. Europe, Asia, I mean, just yesterday, right? We were looking at some missile tests in Asia, we not only need to think of our supply chain, we need to think of as Okay, which countries which markets, which regions are our allies. Alright, so that's a way to take a look at every risk counts when we're thinking of moving operations.
So one of the questions I have is, is, let's say I approach I'm a business I'm interested in, at least beginning i, i source my products here, I manufacture my products here. I do that over here, wherever here is let's say it's a wherever it is, right? And I see the value, I see the importance of sort of bringing critical items nearer to me, right? And how does that sort of journey begin with you? Like, how do I just approach it? What's that journey look like?
Sure. So Scott, it's not usually about moving all of your production or source everything from one country. But if anything, the last three years proved to us that, you know, diversification having 123 suppliers of the same part is really beneficial, especially in a state like the one that we're living today that it's really unstable. Um, how it works with us is we have a methodology, which we call the EPA, NOAA lifecycle. And our conversations usually begin with a question. And it's usually the CEO or the CFO, right or just the owner of a manufacturing shop. And the question is, Hey, can I take my facility to Mexico? Can I expand my facility to Mexico, can I find X or Y product in blue? I've heard that Brazil is fantastic for this type of part. That's usually the question. And that's how we begin conversations. From there, we focus on making an analysis. Okay. Let's talk about financials. How would your company look? If you started working in Mexico? Right? How would it work if you sourced this product? From Colombia? Right, let's talk about the people. Okay, if you're going to be manufacturing elsewhere, what type of people do you need? What capabilities are you looking for? Right? What are the biggest issues that you're facing today? Operating elsewhere? Right? How can that play a role? Because Scott, many times when we have these conversations, we think of Mexico as a whole, we forget that Mexico has more than 130 million people in it. Right? We think of Latin America as a whole. But operating in Brazil, Colombia, Chile, Peru, is completely different, different regulations, different, different people, different cultures, and it's important to be able to navigate them. Once we make that analysis, we encourage our clients to make a decision. And you'd be surprised because sometimes the decision is no, guess what? Continue working with a company you're working with or maintain your operations where they are. At this point, it truly doesn't make sense for you to expand. But of course, in a patient's
so you don't have you can if I came to you and I just said I'm interested, I don't know where to go. I don't know where to start. I don't even I just think it might work out well. The Napa NOAA team net Bonilla will say okay, let's look at let's look at it. And yeah, this is fine. This could be improved this whatever. You give us that roadmap, right?
I'll give you that, that roadmap, and it will always be backed by data. Right? And it will always be backed by how does this? How is this coherent with the strategy of your business going forward? I'll give you an example. Just today, I had a call with a client that it was going to Mexico, but guess what, the facility that they were looking to, it was 30,000 square feet. They wanted to start with something small, maintain all their operation that us, but they were just looking at Mexico for that specific piece. Well, guess what, we weren't able to find a facility at the price point that they needed it so that it made sense for them. We're gonna revisit this in six months, because today, it doesn't make sense, right? And that's okay. Now, that's one story. The other side of the story is it makes sense. And then our team will accompany through the expansion or through the engagement of sourcing product from Mexico and Latin America. And that is a whole different ballgame. Scott, we're talking government relations, we're talking negotiations, we're talking understanding customs and our border, understanding logistics in general, very well. So we become an extension of the companies that are coming into Mexico and Latin America. And we take care of that project for them. So that way, they can focus on operating do what they do best. And we become their Mexico slash flat tam team to get things done them
here. What is the value proposition of why I would consider moving operations down to Mexico or even you know, Latin America? What what? What's that driver? Why, why? Why is that important?
There are several drivers, but there's two that are very important. The first one is people. When you look at the demographic of Mexico, when you look at the demographic of Latin America, you're gonna see young people, the average age in Latin America is between 25 and 30 years old Scott. So when we have young people, young professionals that need jobs that want to innovate, that really gives an opportunity, more importantly, in specific countries, because when we say Latin America, in this conversation, we're ignoring your why we're ignoring Bolivia, Venezuela, right? I mean, we're truly focusing from Brazil, Chile, Colombia, Peru, a little bit of Argentina, and of course, Mexico, but in my world, Mexico counts as North America, Mexicans just happen to speak Spanish. But when you look at dedication level, would you be surprised if I told you that in Mexico, more than 300,000 engineers graduate every year? industrial chemical Central, mechanical?
That's it's another I would imagine, yeah, that's the case. But you know, it. It's never been a source of topic. But it's important, and especially when we're struggling with finding people here.
That's exactly the point. So that's why people plays a very important role. The first conversation, the first question that companies have is, hey, what type of people will I find? And the response is, well, what type of people do you need? Right? Now? What if I told you that turnover for companies in Mexico is 60% less than it is in the United States? No way. 60 60% Think about all the training that goes in when you hire somebody, think about the years of experience that they You may have operating a machine managing a team, just knowing the culture of your company. And then having to do that all that investment again and again and again. And again. That's a big number. Right? So that one is the main point. The second point is the financial one. But I want to be very specific here. When I talk financial, I don't mean oh, it's cheap labor, because guess what it is, when you compare Latin America with Asia, very difficult and very, very, very, very few cases, you will find that it is less expensive than it is to operate in Asia. But when I say by financial, it's the whole supply chain, you will need to make sure that everything flows, right via Latin America until you know it reaches your final client. And of course, there's a labor component then, right? It's not as expensive as it is, you know, in Canada or the United States. But it's logistics, it's where are my suppliers? What are they providing? And definitely the people and of course, acknowledge, right? Is there availability for automation? Or even for management systems? Right? What's the cost of that? So all that added up? It gives you a financial picture. So truly, the play here is people and financial. Does it make sense?
Yeah, it does. Do you find their struggles within sort of the government area?
No, definitely. Scott, thank you very much for, for asking that. I always say that. Mexico and Latin America need the infrastructure to attract more foreign direct investment. And when I say infrastructure, people think, oh, it's roads and bridges. Yes, that's one piece. But I'm talking business infrastructure. I'm talking making it easy for people to go down there and establish a corporation. Yeah, get rid of bureaucracy, making it easy to hire and let go of people. That is very important. And that's what I mean, the business infrastructure, right, when you show up to a specific state, and they welcome you and say, Hey, we have all this land available. Hey, we have all this people available. Hey, here are the companies that could help you. While there are other states that you call them and let them know, Hey, we're bringing some investors or we're bringing this business to your state. All right, thank you very much. Appreciate it. No need to attract. Right. So definitely the government should be helping more right to, I would call it unite. Right this side of the world. Scott,
do you see any changes taking place there? I mean, do you see some sort of shift in that?
I've seen local efforts, once again, each one of these countries is large. Right? So let's talk about Africa, when you show up early on, which is the state of Monterrey right there in the north part of Mexico, very industrial. Right, many, many, many American companies operate there, you can see that there's a business infrastructure, right, you show up? Right? There's particularly investment. Right, which is, you know, it's an organization that is devoted to attract investment. Right. There's attorneys there, there's tax consultants, immediately, industrial developers, you know, show up, but then you go into another state, right? I may not mention any names, I will not mention names, but you go into another state. And you see that it's not seeing treatment. Right. So then you start wondering, okay, why does mobile noon receive a lot of this foreign direct investment? Well, that's the reason. I wish, I wish that countries would take more of united approach and say, Hey, come to our country, and get it done. You know, instead of just being the local governments of each state, because what will happen there is, you know, that gap between the rich states and the poor States will continue to widen. And that's not what he wants, specially in such large, large countries, like the ones that we operate in. The same thing happens in Brazil. The same thing happens in Colombia.
The so again, back with my company head on. I have a specific need. Nepanoa, Team Napa, Noah says, yeah, here we go, we're gonna do this. A part of that is determining where maybe Mexico is not the place, maybe it is another portion of Latin America. And because their strengths and weaknesses, and whatever, do you guys help with that journey to as well?
Definitely. Scott. So that's part of the analysis that we make, right? So we had a client, for example, Scott, and they had to do beanies, right, winter beanies, right for our heads. And, of course, you know, for cotton perspective, they'd always huge right, the industry with areas testing, but they initially wanted to go to Mexico. Well, what happened was, well, guess what? Yes, we can go to Mexico, but it's going to be more expensive. Perhaps there's not the necessary you know, volume that you need. And we ended up going to Peru with them. We walked them through what did we do? We got to prove and we analyze how many companies can actually make this product. In particular for them, their beanies are quite special, they have something that is that that is unique to them. So we do require a little bit of product development by The companies that we were talking with over there, but we took them through the whole process. Hey, first, give me an NDA. By the moment, you know, when someone Latin America signs NDA immediately, they're telling you okay, I'm serious about this right? Then second of all, hey, can never talk to some of your customers. Perfect. We do some due diligence there. And then we jump into, okay, here's our client, here's exactly what we're going to be doing. Can you do it? What's, you know, volume cost, you know, the usual. But we can do that, not only in Mexico, but you know, across la time, our network is truly expensive in the region.
Soon. Good point. I mean, I, I wouldn't know where to start. And and the reality is, is I see the necessity to find trusted individuals to help along this journey. The last thing I want is this saying, Yeah, we're all thumbs up, I'm, I'm heading down to Mexico got an extension of my manufacturing, whatever it might be, and then all of a sudden, something happens, right? And I can't do anything about it. That's not within my wheelhouse of, of capabilities. So it's I, I see that men, but that's with anything, you know, if I'm going to be manufacturing in Asia, it's the same thing. I'm not gonna, I can't do that. You know, so you hit,
you touch a very important point, because our clients are the companies expanding or working with within this countries. And we'd like to say that we have a lot of relationships, but no commitments locally, our commitment is to our client, we maintain that independence. And I'll give you an example. Somebody may come to you and say, Hey, I heard that you're expanding. And let's choose Mexico, that you're expanding in the state of Durango. Well, guess what, I'll get you the location, you need 100,000 square feet facility. Fantastic. But then that person will take a commission on whoever they bring into Mexico, and then they'll charge you for the service over here. That's not what we do. Right? We're a professional services firm, what do we do is we maintain their independence. And we're able to work with all realtors, with all industrial developers, with all attorneys, we all tax advisors, because we represent your company, right. And that's the only obligation. And that's something very important when you're doing business internationally be able to maintain that independence, but work with someone that knows the rules of the road and is able to navigate
set our expectations on a typical timeline, I understand generally speaking, right? And it also depends on the product, whatever it might be, but but how quickly can something like this take place?
So if it's a full expansion, Scott, and let's take the example of one of our clients that built a 125,000 square foot facility in Mexico as their third facility, that project took 16 months, okay? Why? Because there were a solid 10 months in there of just the build out of the facility. Right? Before that, we had to do all the legality of work, right, we had to find the people bring the machines in. So now, that's one of our longer projects, something that is smaller is, hey, we need rubber hoses, literally, in three weeks facility here in Illinois, can you connect someone, right? That's something that that's something that would be pretty short. Now, from a sourcing perspective, usually those projects take from four to six months, because very rarely do we work with companies, Scott, that have a specific need, hey, I need a pen. Right? Or it's usually this is proprietary from my product, and we needed to sign in, and I'm doing it in China or Vietnam. So the companies, you know, when that time we to understand what needs to be done, and there's some tweaking the process. So usually four to six months to vet them, find the right partner, negotiate and then actually start testing exactly,
Yeah, no, Scott. So the main pushback that we have when we deal with clients is I don't know, just as people, we are always afraid of what's unknown, right? We are afraid of going and literally stepping into another country. Right? There's always doubt in there. Is this person going to run away? For starters, will they ever take my call? Right? It happens a lot in technology companies, for example, when you know, they hire someone outside of the United States, and, you know, suddenly that person never connects, right? It's like, yeah, they showed up the first day took a first paycheck paycheck, and then they just laughed. They just, you know, left the company, we we avoid that we help you know, companies avoid it. So that's the first one. The first one is, hey, this is unknown. I have never done this before. I've seen a lot of success and success cases. But hey, I also read the news. Right? And I've seen that it's insecure in some areas, for example. Right. So that one is always the first roadblock. And the second World walk, Scott is the financial one. And let me tell you why. Particularly for medium to large projects, we're talking about an investment, right to actually set up operations abroad. And that's usually is gonna be depending on project, right, it can be as low as $10 million. You know, we had a client that invested $120 million. Well, where does that money coming from? Very rarely, a US financial institution, or any financial institution, different country, you will lend you money for you to place your assets in another country. Yeah. It's just rest, right? We're not going to do that they're not going to do it. Right. But then, okay, let's assume that this company is setting up in Brazil. Well, do you think that our Brazil, you know, financial institution will be like, Hey, Scott, good to meet you. You just made it into Brazil, here you go. $20 million. So there's a gap there. But it's also an opportunity, right? For financial lenders and companies to be able to say, Okay, guess what, particularly in Mexico, and Mexico works out very well, because we have us MCA Yeah. Right, that gives regulations for the region. Yeah, be like, alright, I'll lend you the money. So you can actually, you know, expand your business into Mexico, and your IP is going to be taken care of, and there's a rule of law right there. But those are the two main things that that we face. You know, the first one is, I just don't know what I don't know. And the second one is, Okay, this looks fantastic. I need to invest in it. Where am I going to get the money from right and have the slide.
And again, it would make me feel warm and fuzzy. If we go through the process and saying, yeah, it's the right decision from a business perspective to be able to expand in Latin America or Mexico, and then be able to sort of wrap it with the right financial and insurance and all of the stuff that is necessary to make sure that it succeeds the way you're supposed to, you know, there's always businesses business. So, yeah, I kind of like that. I kind of like that. All right, we got to wrap up. Tell us how does somebody get a hold of Alberto?
I'm very available, Scott, you can find me first in my email, which is Alberto. That's Albert. Just I don't know what the end at Napa nola.com. Pretty simple Alberto at Napa nola.com. On Twitter, I am my Twitter handle is at BethelVRL. So that's a little bit more complicated, but it's Beto is the short of Alberto. So it's B eto. And my last name, V as in Victor, I double L. A, WR? e al. Same handle on Instagram. And of course, you can always send us a note to connect at Napa nola.com.
I really enjoyed this conversation. I wish I'd like to do more. Absolutely. Just because I think it's a topic that I mean, we just sort of skirted on it. I think that you know, when you start talking or start rolling in the say, supply chain, when you start and even even the conversation that wrapped around the financials. I think that that is an interesting conversation as well. Wonderful job, Alberto. All right, let's, we're gonna wrap it up on the inside. We're gonna have all the contact information for Alberto and team Nepanoa, so don't go away. We will be right back.
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