4th Borderless Business Congress

Mexico is Ready for “Automation for the People”

Explore the post-pandemic evolution of automation in Mexican manufacturing, with technological advancements and collaborative robots driving competitiveness.
mexico-is-ready-for-automation-for-the-people
Main topics

Recently, it has been reported that U.S. manufacturing companies are unable to hire enough personnel to produce, package, or ship their products. Automation has been a recurring topic, and we can distinguish two eras: automation before the COVID-19 pandemic and automation post-pandemic. The first wave of automation was mainly focused on improving quality, safety, and health conditions in certain operations.

After the pandemic, U.S. companies have experienced the effects of automation in Mexico, where much of their manufacturing is located, in two key areas: 1) supplementing human skills and 2) supplementing employed personnel in their plants. In the first case, automation has focused on replacing low-skill activities, such as cutting and packaging, tedious and repetitive tasks that usually cause high turnover due to the lack of perceived added value by workers. Regarding the elimination of positions, more than just reducing costs, the goal is to transform the nature of the work environment, facilitating hiring, reducing turnover, improving working conditions, and developing skills in employees for current and future positions.

Technological Advances and Cobots

This new approach is possible thanks to technological advances, with robotic systems now costing 50% less than 30 years ago and the introduction of so-called “cobots,” collaborative robots that directly interact with humans in manufacturing cells and warehouses. Cobots require human programming according to existing volume requirements, and the return on investment, thanks to these technologies, has been reduced from an average of 8-10 years to just 1-3 years.

According to McKinsey statistics, productivity, measured in volume produced per employee in the packaging sector, grew by 70% in production and 280% in packaging and preparation for distribution areas. For Mexican states with high manufacturing capacity, this means that spaces will be maintained or reduced, shifts will become more flexible, and the total capacity of the company will be evaluated with stricter and shorter return on investment criteria.

Competitiveness and Productivity

With the pressure on companies to improve their profit margins, when we talk about “Automation for the People,” we must consider the following factors:

Primary Secondary
Automation for the People
  • Productivity Improvements
  • Quality Improvements
  • Production Volume Improvements
  • Safety Improvements
  • Capacity Improvements in Associations
  • Training Improvements
  • Maintenance Improvements
  • Employee Turnover Improvements
  • Higher Salaries for Personnel

Mexico must accelerate its adoption and, more importantly, be proactive in investing in these concepts, as competing solely on labor costs is no longer sufficient; we must focus on productivity. Why? Recently (May 2024), the U.S. reported that nearshoring in imported clothing, fashion, and textiles was affected mainly in Asia. Despite a 9% decrease in consumption from China, it increased in countries like Vietnam and India by 5%, from other Asian countries by 1%, and from the rest of the world by 3%. This means no benefit was generated through nearshoring. In Europe, the situation is similar: consumption from the TMEC areas and Latin America decreased by 3%, while it increased from Vietnam and India by 3%. This indicates that proximity is not enough; we must sell how productive we are, much of which will come from the adoption of technology in the companies we have in the state.

mexico-is-ready-for-automation-for-the-people

Investment in Semiconductors in the U.S.

Finally, let’s consider the geopolitical context: in May 2024, U.S. semiconductor companies jointly announced investments of between $200 and $350 billion over the next decade, with the largest investments in Arizona ($62 billion), New York ($21 billion), Ohio ($20 billion), and Texas ($52 billion), aiming to create jobs and promote regional semiconductor manufacturing. However, the U.S. struggles to retain talent, especially engineers and technicians. While California, our most important trading partner as a state, expects an investment of ~$4 billion, the scale of talent migration from California to Texas, New York, and Arizona will increase. This will lead to a natural export of talent and, in turn, a faster adoption of technologies in Baja California, generating better-paying jobs, though not necessarily more jobs. Therefore, the invitation is to seek to measure ourselves in terms of job creation, job quality, and company productivity, as this last factor defines the profit margins that interest investors.

Luis Manuel Hernandez, PhD, Coordinator of the Nearshoring and USMCA Compliance Dialogue Table
LI. https://www.linkedin.com/in/lmhg/
X. @LuisMHernandezG

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