Mexico’s appeal over other geographies is driving big expansions at EMS companies looking to supply the North American market.

Mack Technologies is one of the largest family-owned EMS companies in North America and probably the world. Headquartered in Westford, MA, it also has facilities in Melbourne, FL, and Juarez, Mexico. It recently completed a move to a factory in Juarez that is more than double the previous plant’s footprint.

We talked in January with president Will Kendall and vice president of operations, Mexico Oscar Gonzalez about the expansion, doing business in Mexico, and why when it comes to retaining employees, the stomach rules the body.

Mike Buetow: Oscar, I have visited the plant in Westford a couple times, but I haven’t been to Juarez or Melbourne. I understand you’ve made a substantial capacity expansion to the Juarez plant. Could you give us an overview of what the expansion includes, and what spurred the changes?

Oscar Gonzalez: This move stemmed from our growth. We used to be in an 82,000 sq. ft. facility, and over the past few years we’ve been growing by leaps and bounds, and we ran out of space. As we continue serving existing and new customers, we made the strategic decision to move into a 2x building: a 164,000 sq. ft. facility. We’re occupying 50% of it, with the strategic vision to fill it out in the next few years.

The new building is state-of-the-art. It’s located north of the city, very close to the US-Mexico border – about a five-minute drive, which is very convenient. The new building was built with the latest technology in construction materials: tighter, most energy conservation, and so on.

We have seven SMT lines and are installing an eighth by the end of February. The idea would be to double it, from eight to 16 in the next two years.

Will Kendall: I would add that a lot of the growth we’re seeing is driven by existing customers, and we’ve been trying to support them and support their growth. We needed additional capacity to be a good supplier and be able to grow with our customers, in addition to the fact that we are getting a lot of interest from potential customers who have seen our operation who are very interested in how Mack operates in Mexico, and we’ve seen a very large increase in demand that until we had the new building in place would have been challenging to accept new business.

One thing I’ll point out about the building is we’ve learned a lot from stories from other companies that are relocating operations and buildings. One of the key criteria was the location be convenient for our workforce. We didn’t want to move the building and find out the workforce didn’t move with it. We selected a location that, with our geomapping analysis, is a significantly shorter commute for over 80% of our staff. We’ve been in production in the new building for just over a month, and the latest information I have is turnover due to the new location being inconvenient for employees was less than 2% of the workforce, which we’re very happy about.

MB: What are turnover rates in Mexico compared to, say, your US sites?

WK: They’re higher. The market is higher. It’s very nuanced. The truth is that, in Mexico, the way the labor laws historically had been, there used to be a trial period of 90 days before employees would be permanent, so historically the turnover rates are really high. But it’s almost all driven by new hires who were within that window. I believe the law is different now, so there is no trial period, but that same phenomenon still is in effect where, if there’s high turnover, it’s almost always within the first three months of someone’s tenure.

The tenure for employees beyond those first three months is generally a lot lower, but on average turnover in Juarez, or Mexico in general, is higher than turnover in the United States.

OG: Another important factor on turnover is the corporate culture. You see variations of that from industry to company. Mack Technologies has been working on a Lean culture where everyone’s voice is heard. I think our culture tends to [result in] a better turnover than most. People want to work for Mack. As Will was saying, with this move, it’s another proof that we retain the majority of our employees and workforce, so we have same workforce, same employees, same equipment all in the new site.

MB: That answers one of the questions I had, which was is this an addition to the old site? It sounds like you packed up and moved.

WK: It’s probably about 25 minutes closer to the US border, deeper into the city than where we were, which was generally more on the outskirts.

OG: We were close to the airport in the south part of the city. There are several industrial parks in that area, so we moved to an industrial park, Los Fuentes, which is very conveniently located five minutes from El Paso, Texas. The Texas-Juarez border is, from a logistics perspective – for import/export, as well as the ability to bring in customers – really convenient, and we’re in a well-established industrial park in a brand-new building.

The new 164,000 sq. ft. plant doubled Mack’s footprint in Juarez.

MB: How big is Juarez now compared to Melbourne and Westford?

OG: Juarez is a 164,000 sq. ft. facility, 900 employees.

WK: Melbourne’s 145,000 sq. ft., and Westford is 108,000 sq. ft. Employee-wise and square footage-wise it’s our biggest, but not by a huge margin, especially considering we’re now working to grow the actual production.

MB: If I remember right, your equipment set was pretty similar from site to site. Is that still true?

WK: That’s still true. Our strategy has always been to have similar equipment platforms that we use. I don’t remember when you were here last, but the equipment set platforms have changed dramatically.

MB: You were a Universal shop then.

WK: For SMT we still are Universal, except everything now is Fuzion, and we’ve standardized on a handful of other platforms as well. We use Yamaha for 3-D AOI, Omron for 3-D x-ray. We’ve standardized not only on the equipment side but also on the IT side. We run one ERP system across the company. We run one MES system across the company. We’ve tried to standardize on the best equipment sets and IT solutions, so we’ve got as much efficiency as we can for continuous improvement.

The equipment sets in Juarez are all the same equipment set packages as Massachusetts. There are some small differences but not many, so for specific customer reasons.

MB: Besides SMT, you’re doing box-build, and what else? Are you doing plastic molding in Juarez?

WK: We do not do plastic molding in Mexico. All the injection molding operations are our sister division, Mack Molding. At Mack Tech we only do the electronics assembly, box-build and full product fulfillment pieces of business.

MB: Can you handle RF in Juarez?

WK: Oh yeah.

MB: What types of programs are best suited for Juarez?

WK: Right now, the best types of programs for Mack Juarez are generally in industrial or ruggedized end-market products where the volumes are what we would consider medium-volume, although volume is a relative term, but generally higher volume than the US, but we’re generally not building millions of products.

What usually works well in Mexico is where there is more labor content. If something is automated through machinery, that can generally be built anywhere cost-effectively. When products start to have additional labor requirements, that’s when Juarez becomes a very attractive option for the customer, which usually fits our model as well. With all the changes with tariffs and the Section 301 tariffs in China and the logistics bottlenecks throughout the world, Mexico has, in our view, become one of the most attractive places in the world for building products destined for North America.

MB: We talked about staffing in terms of not losing people, but are the basics of finding qualified labor, are the obstacles similar in Mexico as they are in the US?

OG: There are different dynamics for sure. In Juarez we have 10 colleges and universities where we draw highly skilled engineers from, and planners and business management personnel. The structure of the city government and the universities really supply all that indirect labor. No issues.

Juarez City as a whole has seen growth over the past few years, and there’s a lot of migration from Central Mexico to Juarez, so we are very lucky to still have that pool of direct labor. With the growth in the number of companies, we also have seen growth in population. We are at a point where we meet our hiring requirements quite easily, the challenges being turnover, absenteeism, just like anywhere else. I think the city structure and universities and population dynamics have afforded any manufacturer in Juarez no problem in attracting high-caliber talent, as long as you have the right culture and the right operation.

WK: I would say in general there are obviously labor shortages all over the country in almost every industry right now, and manufacturing is certainly not immune to that. From our perspective it has been easier to attract greater numbers of workforce in Juarez. I don’t want to speculate why that is, but on a relative basis we’re finding it easier to scale up with a larger workforce in Juarez than we are seeing in the US right now.

MB: Going back to when I first started in the industry, which was 1991, the word from EMS companies in Mexico was often large numbers of employees might pick up and leave for another factory down the road because they offered better meals in the cafeteria and things like that. Is there a lot of poaching that still goes on between EMS companies, because there’s quite a few of them in that area.

OG: It happens. I think the best companies are retaining talent; it’s no secret. We do taste contests on the cafeteria providers. They have to be well-established. In Mexico we have a saying: “tummy full, happy heart.” You provide great food and great service … there’s statistics on this. There’s been studies on what are the three key elements of what people look for. Number one: competitive salary. Number two: tasty food in the cafeteria. Number three: being treated with dignity and respect. And training, the amount of hours you provide employees training.

Those are, statistically speaking, the four factors that drive retention higher. Those companies that meet those are the ones that have the highest rates of retention. We’ve seen this, that you know a company may try to poach folks, but I think for the most part you have to be very competitive, and we have seen people leave Mack and come back, so you know we’re doing a very decent job with that.

MB: Would you say you do most of your training in-house, or are there local or nearby training centers you rely on?

OG: I would say 90% is in-house training, from health and safety to IPC to manufacturing to all kinds of training we provide. Every now and then we rely on outside training services.

MB: Walk me through the process when you move a factory. Do you do it piecemeal line by line, or do you shut everything down on Friday, and on Monday it’s all up and running in the new building?

WK: Oscar didn’t have any of that gray hair until a few weeks ago. [laughs]

OG: I’ve done a couple moves in my previous career, but I think it is 90% planning, 10% execution. We were planning on this move for about 12 months, and we really had a very smooth transition. We moved in three weeks. It was 24/7. We partnered with the right transportation companies, with the right contractors, to set up the new building, and we’ve been working on this for a number of months. It was lots of planning and making sure we come up with plan A, plan B and plan C. In three weeks, we moved all seven SMT lines, all the box-build and all the warehouses. I think I calculated 100 trips for moving raw materials and equipment, and about 25 trips of heavy equipment, all insured. We had a great transition team. It was very, very stressful at times, but we’re working 24/7.

WK: I think Oscar hit on a really important thing. The entire thesis for the expansion in Mexico really boils down to the team. Oscar and his team have done a fantastic job keeping customers happy with very high quality and very predictable delivery, and through the team’s efforts they have grown the business substantially. All the indications we have from our customers are they’re very pleased with what the team has done, and it’s the same team that was in charge of the building move. Again, the team executed very, very well in exactly the fashion we would have expected the team to execute it. The move to the new building really is a vote of confidence in the team because we believe it can continue to grow the business effectively with very high quality and very happy customers.

OG: In the beginning, Mike, you asked what spurred [the move]: seven Supplier of the Year awards in the past four years. It’s a great vote of confidence from our customers. High levels of quality, high levels of customer satisfaction. Customers are really happy, and they’re giving us more and more business, and we continue growing, and that’s how we run out of space in the old facility. Will was kind enough to allow us to continue growing and invest in that growth. There’s a lot of reasons, but it’s a strong team we have here, very Lean Six-Sigma-oriented, high levels of quality, and that’s one of the other factors that contributed to this decision to expand.

MB: When you do move like this, does it trigger any mandatory recertifications or requalifications by customers or ISO?

OG: We did. We partnered with each customer. Each customer is different, and based on each customer’s needs, we either provided first-article inspections or a certain level of quality recertification or requalifications. That’s from a quality perspective.

From a building perspective, we obviously had to recertify the whole facility and obtain all kinds of permits: the Mexican Environmental Protection Agency, regulatory Federal Electricity Commission, etc. So yes, we were making sure the building complies with all permits.

WK: As far as our ISO certifications, those traveled with us.

OG: Yes, ISO-9000, ISO-13485, those travel with us. Industrial India Cleaning certificate travels; those traveled with us. We will have to recertify in a year, but we retained all of our certs.

The new site is just five minutes from the US border, easing transportation and visitor logistics.

MB: I want to talk about how programs migrate through the Mack facilities. Does a given program, if it’s sold at Westford, does it stay there, or are they mostly scaling to Juarez?

WK: Every customer’s unique, and we’ve probably implemented every type of structure you can imagine. We always work with the customer to come up with whatever the right structure is for their business and with whatever their needs are. We have likely done every strategy at this point, so we’re pretty good at pinpointing which ones we recommend to customers, but we work with customers to come up with the right strategy, whether that’s launching in the US and transitioning to Mexico, or starting in one site and staying there, or diversifying the business across multiple sites for risk-mitigation purposes. We’ve seen and done it all. It’s a unique situation for each specific customer, depending on what their needs are and the complexity of their own supply chains.

MB: Does each plant have its own procurement group, or is that centralized?

WK: Each plant has its own procurement team responsible for procuring for the specific operation they report into, but we also have senior supply-chain members who oversee supply chain across the whole company.

MB: Do you try to consolidate buys across programs, or is everything program-specific?

WK: We look strategically to make sure our buying practices are getting the best consolidation effort we can, but when we buy parts, buyers buy specific to the customer documentation, and so our strategic supply-chain team looks to essentially consolidate business with suppliers and ensure we’re getting the best value we can for our business and our customers. It’s a little bit of a hybrid.

MB: Would you, under given circumstances, move material from one factory to another, even if a program isn’t moving simply to shore up a shortage?

WK: Absolutely. We will absolutely rebalance materials if it makes sense. We would never do it in a way that would penalize the customer that planned well versus the customer that didn’t plan well. Because we use one ERP system, we’ve built a significant number of tools that allow us to rebalance materials very easily, whether that’s to fill shortages or to work with customers to limit material exposure. It’s a push of a button to identify where materials can go and, in the reverse way, to say what materials can come in to fill a shortage, if any of the parts are elsewhere within the plant or even within the other Mack plants. It’s the beauty of having one IT system.

MB: Do you offer design services at any of your plants?

WK: We offer design for manufacturability and design for test. We don’t offer design-from-scratch services.

MB: What benefits or advantages would you say that having the new facility up and running gives Mack and its customer base that didn’t previously exist?

WK: Number one, we’re going to have significantly more scalability to continue to grow with our customers. Number two, it’s more of a purpose-built facility, so we’re envisioning significant benefits from being able to apply more Lean manufacturing principles to the new operation that we can hopefully gain efficiencies from. Number three, it’s also in a much more central location, so we believe it will actually help us not only retain but attract new talent and make sure we’re staying competitive within the Juarez market.

MB: Does this forecast any changes in Florida or Massachusetts in terms of expansion?

WK: We’re also potentially looking at expanding in those sites in terms of capacity with equipment. We’re seeing significant growth in customer demand essentially across all three of our facilities, the difference being our Florida location has physical space we can still grow into, as does our Massachusetts site, whereas in Mexico we just ran out of physical space.

MB: Do you own the buildings in Florida and in Massachusetts?

WK: We own every building within all of Mack, including Mack Molding, with the one exception being Mexico.

Mexico is our only leased building. We generally don’t like leases, but in this particular case the location is so perfect for our operation, this made sense for us.

MB: How are things right now in getting product across the border in either direction?

WK: Across the US-Mexico border, I’d say they are good.

OG: Right. I think it’s back to normal. You still have to get product across the international border through customs, and then there’s a delay there, but that’s come down. During Covid the last 12 or 18 months, we did see a spike, but I think it’s back to normal. Both US and Mexico customs have added resources and product flows, so it’s not an issue right now.

WK: It’s one problem after another bringing product in from overseas right now, whether it’s the boat can’t reach the port, or the container can’t reach the boat, or if the container comes off the boat, then it can’t reach the truck or the rail. It’s one of the reasons why we really think Mexico is such an appealing option to companies that are looking to supply the North American market. It’s a mess trying to bring parts in, and it’s become very expensive to bring parts in from overseas.

OG: Everybody is moving toward this; it’s common sense. If your customer base is in North America, Mexico is the perfect location to ship from. If your customer base is in Asia, you have Vietnam, you have China, or if you’re in Europe you can stay in Slovakia or in an Eastern Bloc country. I think Mexico is really appealing to the largest consumer base in the world, which is the United States and North America. It just makes a lot of sense to be here. 

Mike Buetow is president of PCEA (pcea.net); mike@pcea.net.

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