Strategic Sourcing For Manufacturing Services Dearborn MI / May 2015

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1 Strategic Sourcing For Manufacturing Services Dearborn MI / May 2015 Salomon Noble INTERMEX Industrial Parks 1

2 Strategic Sourcing Fundamentals 1. What? 2. Where? 3. How? 4. Why? 5. How Much? The Thinker / Le Penseur Auguste Rodin Tips throughout the presentation! 2

3 1.0 WHAT Product? Full - Assembly Sub - Assembly TIP 1 / Engineering, Visuals, Routings, Tooling, Golden Standard TIP 2 / Phased Transition, Technology Transfer Plan & Certifications 3

4 2.0 WHERE? TIP 3 / The 3L Rule: Location, Location, Location 4

5 3.0 HOW? Wholly Owned Foreign Subsidiary WOFS OPERATIONS CONTROL EXPOSURE Total Greatest 3.1 The Shelter Program Total None Contract Manufacturer Sub-Contractor Minimal None TIP 4 / Risk Optimization while maintaining Total Operations Control Tip 5 / Worry Free Soft landing strategy through a Shelter Program 5

6 3.1 HOW / The Shelter at a Glance CUSTOMER Raw Materials Equipment Tech. & Train. Management Personnel Production Core-Processes Finished Goods SHELTER S SUBSIDIARY COMPANY SERVICES Human Resources Administration & Acct. International Commerce Environmental Overall Compliance INVOICE Shelter Fee Industrial Facility Lease Pass Thru Expenses SHELTER & REAL ESTATE PROVIDER TIP 6/ Guarantee Mexican Law, rules and regulations COMPLIANCE TIP 7 / OUTSOURCE NON-CORE Manufacturing Support Services 6

7 4.0 WHY? ECONOMIES OF SCALE $$ TIP 8 / Focus on What you do Best! Tip 9 / Leave the Rest to the Shelter Provider TIP 10 / Maximize your Operation s Competiveness! 7

8 4.1 Examples WHY? TIP 11 / Many corporations Landed in Mexico THROUGH THE SHELTER PROGRAM 8

9 5.0 HOW MUCH? THE SHELTER COST MODEL TIP 12 / Get a Cost Model from your Shelter Provider TIP 13 / Pro-forma the Operation s Expenses by City/Market 9

10 THE SHELTER COST MODEL 3 Steps to Pro-forma 10

11 STEP 1: Industrial Sector & Processes Match Sector / Process Aeronautic Automotive Medical Electronics Appliances Other Assembly Sheet Metal Precision Machining Injection Molding Extrusion Other 11

12 Case Study 1 / Automotive wire harness assembly Location: Sector: Process: Product: Year 1 Year 2 Direct: Indirect Hourly: 0 0 Indirect Salary: Total Headcount: Shift: STEP 2: Populate Questionnaire / Planning Premises Facility Size: Shipments: Exchange Rate: Chihuahua, Chihuahua, Mexico Automotive Wire Harness assembly. Wire harness assembled parts for the automotive industry. 1 st. Shift (total cost based on 1 st. Shift only) 75,420 Sq. Ft. Inbound (4) Outbound (4) El Paso, TX $14.50 $13.00 pesos per US $1.00 dollar usd Cost Model does not include: Non Recurring Expenses (NRE), Raw Materials, Equipment & Depreciation, Ex-Pat Costs

13 Step 3: Pro-forma Operation Expenses Automotive wire harness assembly Operation Chihuahua Cost Curve $14.00 $ Total Cost / Direct Labor Yr. Hrs. $12.00 $1.30 Shelter Fee USD $ / Direct Labor Clock Hours $10.00 $8.00 $6.00 $4.00 $1.53 $0.39 $1.10 $1.21 Building Rent Logistics Cost Facility Op. Expenses Personnel Related Cost $ 7.67 $0.65 $0.38 $0.17 $0.57 $1.05 $6.41 Labor Cost $4.84 $2.00 $ Direct Employees

14 Case Study 2 / Plastic Injection / Plastic molded components Location: Sector: Process: Product: automotive industry. Year 1 Year 2 Direct: Indirect Hourly: 0 0 Indirect Salary: Total Headcount: Shift: Facility Size: Shipments: Exchange Rate: Chihuahua, Chihuahua, MEXICO Automotive Plastic Injection Molding Plastic molded products for the 1 st. Shift (total cost based on 1 st. Shift only) 107,470 Sq. Ft. Inbound (6) Outbound (6) El Paso, TX $14.50 $13.00 pesos per per US $1.00 dollar usd Cost Model does not include: Non Recurring Expenses (NRE), Raw Materials, Equipment & Depreciation, Ex-Pat Costs 14

15 Automotive Plastic Injection / Chihuahua Cost Curve $16.00 $ Total Cost $14.00 $1.52 Shelter Fee USD $ / Direct Labor Clock Hours $12.00 $10.00 $8.00 $6.00 $4.00 $2.46 $0.59 $1.51 $1.08 Building Rent Logistics Cost Facility Op. Expenses $ $0.89 $1.05 Personnel Related $0.37 $0.93 $1.00 $7.62 Labor Cost $6.16 $2.00 $- 85 DIRECT LABOR 200 Direct Employees

16 Intermex at a Glance Established 1971 INTERMEX 5,000+ employees nationwide ISO 9001: 2008 certified Over 200 customers from 10 different countries One of the most important Shelter Provider and Industrial Real Estate Developer in Mexico First Silver LEED Certified Industrial Sustainable Building in Mexico Textron Bell 120,000 SF Chihuahua city Cessna 472,000 Sq.Ft. Campus

17 The Future is Now! Lets make a Deal!

18 Salomon Noble CEO Intermex Industrial Parks Tel +52 (614) Mobile (614) Think MEXICO, Think INTERMEX!! 18

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