border areas is a weekly review of developments in the world of cross-border transportation and trade between the United States and Mexico. This week: Mexico-based suppliers gain ground in global manufacturing; John Deere moves some US operations to Mexico; Texas officials have established a joint operations center on the Gulf Coast; and a trucker is accused of allegedly attempting to smuggle $18 million worth of meth.
Mexico-based suppliers are gaining ground in global manufacturing
While China and other Asian countries remain an important part of the global supply chain, sourcing offers for suppliers in Mexico are growing rapidly, said Jim Bureau, CEO of Jaggaer, a US-based technology provider of cloud-based business automation software.
“In the US, from 2020 to 2021, we’ve seen about a 30% drop in Asia-Pacific sourcing and about a 150% increase in Latin America, which is pretty significant,” Bureau told FreightWaves.
Based in North Carolina, Jaggaer provides automated procurement solutions to 1,700 global customers, including manufacturers such as Siemens and Hitachi.
Bureau said Jaggaer’s manufacturing customers aren’t necessarily abandoning Asian suppliers entirely, but are adding more Mexico-based suppliers to their customer base to diversify their supply chains.
“Our customers add suppliers to the mix, which kind of complicates things because then you end up managing a larger, broader supplier base,” Bureau said. “But if you look at how these people are handling things now, there are so many moving parts in the supply chain. Businesses are also trying to manage responsible sourcing and nearshoring to stave off disruption.”
Germany-based Siemens recently announced plans to build a $35 million electrical components plant in Nuevo León, Mexico. The products are exported to Siemens customers in North America and Europe. Nuevo León is located just outside Monterrey, Mexico, about 139 miles from the US-Mexico border.
Siemens has offices in more than 200 countries, including 10 in Mexico. Its customers include aerospace manufacturer Raytheon and truck maker Navistar, which recently opened a large plant in San Antonio.
Bureau said the move to seek more suppliers in Mexico is being driven by higher shipping costs from Asia as well as longer wait times for goods. Multiple COVID-related lockdowns in China over the past few months have caused more delays and route adjustments around the world.
“Even once you’ve sourced the goods, you have to be able to get them from point A to point B,” Bureau said. “It costs me twice as much and takes twice as long to get from Asia Pacific now.”
As of Friday, the cost of transporting a loaded container from China to the US West Coast (FBXD.CNAW) had a spot rate of $9,573.72, up 55% from the same period in 2021, according to Freightos Baltic Index (FBXD.CNAW). Freight rates between Asia and the West Coast have fallen dramatically since May 3, when spot rates were $16,365.74.
As manufacturers diversify their supply chains with suppliers in Asia and Latin America, maintaining quality control, inventory management and risk control can become more difficult, Bureau said.
“The reason you have a key supplier or two is because you can have real-time supplier-managed inventory, you can have quality assurance programs — duplicating that with suppliers in more than one country is not an easy task,” Bureau said.
“So what Jaggaer is doing is taking an overall picture, we’re connecting buyers and sellers through what we call a self-directed B2B trade model, and through self-directed experimentation, wherever we can, we’re trying to set up parameters that enable machine learning, or artificial intelligence, to order sourcing events.” to expand purchasing and vendor managed inventory.”
John Deere moves some US operations to Mexico
John Deere will move its tractor cab assembly from Waterloo, Iowa, to Ramos Arizpe, Mexico, by 2024, the company recently announced.
The decision to move operations was driven by labor market costs, John Deere officials said.
“John Deere’s plan to introduce new product programs into our Waterloo, Iowa operations requires us to consolidate cab manufacturing [Waterloo] to [Ramos Arizpe]. The decision to relocate cabin production ensures the company can balance staffing needs within a tight labor market, while also ensuring Waterloo can free up space to manufacture new products,” the company said in a statement shared by E -Mail has been sent to the media.
The Waterloo plant employs approximately 1,500 people, including 1,100 production workers. It’s not clear how many jobs will be affected by moving the production line to Mexico.
Production workers at the Waterloo plant can earn about $22 to $33 an hour, according to United Auto Workers Local 838, which represents about 3,000 workers in the Waterloo area.
Headquartered in Moline, Illinois, John Deere (NYSE: DE) is a global manufacturer of agricultural and construction equipment. The company has more than 100 factories in 30 countries worldwide.
Texas officials set up joint operations center on the Gulf Coast
Texas officials recently announced the creation of the Joint Intelligence and Operations Coordination Center (JIOCC) in Houston, which aims to create unified disaster response and crime prevention initiatives along the Gulf Coast.
The JIOCC will be a joint control center coordinating operations between the US Coast Guard’s Houston-Galveston Sector; Homeland Security Investigations Houston (HSI), US Customs and Border Protection; and the Houston and Transportation Security Administration (TSA).
“By bringing together and leveraging each agency’s unique strengths, powers and capabilities, we are better positioned to protect the ports and waterways of southeast Texas and southwest Louisiana,” Coast Guard Capt. Jason Smith said in one press release.
The center will be staffed by Coast Guard, HSI, CBP and TSA personnel. JIOCC staff will include a full-time Texas National Guard anti-drug analyst who will focus on providing analytical support for HSI components.
The JIOCC also serves as an event command post in the event of a natural disaster or other emergency.
Trucker charged with allegedly attempting to smuggle $18 million worth of meth
According to Texas authorities, a 33-year-old truck driver has been charged with allegedly attempting to import more than 881 pounds of methamphetamine.
A federal grand jury in Laredo, Texas, recently indicted Luis Alberto Garza Cisneros on two counts, according to a press release from the US Attorney’s Southern District of Texas.
Authorities said Cisneros, a Mexican man, tried to enter the United States from Mexico on May 6 in a tractor-trailer truck carrying scrap stainless steel. Officials at the World Trade Bridge in Laredo reportedly discovered methamphetamines in 24 five-gallon buckets in the tractor’s diesel tanks.
The drugs have an estimated street value of $18 million, officials said.
If convicted, Cisneros faces life imprisonment and a possible maximum fine of $10 million. No trial date has been set.
Watch: FreightWaves’ Carrier Update for June 10th.
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