Japanese car manufacturer, Mazda moves critical production from China to Mexico as it suffers supply chain disruptions from COVID19.
Coronavirus’s impact on the world can’t be underestimated. For the business world and supply chains in particular it has been a whirlwind of uncertainty and disruptions which logistics professionals must quickly adapt to.
Supply chain disruptions from China have in particular been a major headache for many brands globally to the point of numerous companies taking early steps to diversify their production centers to other countries.
Mazda wanted to maintain factory production of their popular Mazda3 and CX-30 models, which necessitated the quick sourcing of alternative manufacturing facilities for certain trim components. According to an insider at the supplier, the move has likely cost upward of $5 million, much of which is due air freight charges and increased personnel needs at the Mexico facility.
The amount of planning involved when moving production of that volume and scale is very challenging as automotive factories rely on complex supply chains made up of hundreds of primary and secondary suppliers for various raw materials, components and sub-assemblies. This requires much planning to setup new logistics plans and work with suppliers to alter current procedures.
While not mentioned in the source, Mazda’s supply chain team has likely spent a huge amount of time creating new procedures and worked preemptively with logistics partner to arrange transportation services to support the flow of inputs and outputs to and from the factory.
Mazda is a much smaller automotive company versus contemporaries such as GM or Ford, with a less complex model lineup that requires fewer components and an emphasis on chassis sharing. This facilitates the change of location as the Mazda supply chain is less complex than a more expansive company like Toyota’s would be.
More to come?
Time will tell what other companies follow along the lines of Mazda or if Mazda chooses to permanently maintain component production in Mexico. Other automakers such as Nissan and Toyota are also looking for supplier production outside of China for increased supply chain resiliency during the continued pandemic.
For goods that are destined for North America, utilizing a factory in Mexico is considered “near shoring” and presents multiple advantages including overall cost. Its proximity to the US makes for easier production oversight and reduced transportation costs, while giving firms the ability to ship via truck or rail instead of ocean or air freight. Typically ocean freight passage from China around 1 month, while trucking freight to the US from Mexico takes a few days.
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https://www.japantimes.co.jp/news/2020/03/17/business/japan-auto-suppliers-shift-china-mexico/
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