The Tecma Group of Companies Chairman and CEO, Alan Russell, shares some “on the ground” insight into manufacturing in Mexico at the recent Supply Chain Summit. The event was hosted in early February 2016 by the preeminent maquiladora industry publication, MexicoNow.

In his presentation, “On the ground in Mexico,” Alan Russell provided attendees with practical knowledge designed to ensure that those new to manufacturing in Mexico take into account important considerations that are critical for success. For instance, cultural differences are important to take into account when dealing with personnel on the shop floor. In Mexico, more so than in the United States, the family takes precedence over all other considerations. In the workplace, part of the “emotional salary” that is paid to employees takes the form of family-centered celebrations that take place in the plant for occasions such as Mothers’ Day and the International Day of the Child.

In his presentation, Tecma’s Chairman and CEO also points out that in the Mexican culture time is a more fluid concept when compared to issues having to do with punctuality in the United States, and that in Mexico position, titles and status carry more weight than may be the case north of the border. While Americans put a premium on efficiency in interpersonal communications in the workplace, those that are manufacturing in Mexico will observe that natives of Mexico will forfeit efficiency for the sake of formality and courtesy.

Alan Russell made it a point to note in his Mexico presentation that production in the maquiladoras was not affected adversely by the drug violence that plagued the country until recently. He explained that even at the height of the cartel turf war, not one expatriate working in Mexico was killed or kidnapped, and that, during that time, there was no drug violence related interruptions in supply chain activity. As of the time of this presentation, drug-related turmoil in Mexico, and Ciudad Juarez, in particular, had significantly diminished and continues to do so as civil society returns to normalcy.

For those that are considering manufacturing in Mexico whether supported by a Mexican shelter company, or as a wholly-owned subsidiary, Alan Russell’s “On the ground in Mexico,” presentation provides basic and useful information.

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According to the professionals at CBRE in El Paso, the number of “active users” seeking space in the Ciudad Juarez real-estate market has seen a significant rise in recent years.

Tecma Group of Companies:

Hello. Welcome to another installation of Tecma Talk Podcasts. These are recorded conversations during which we discuss issues that have to do with manufacturing in Mexico, and related topics. Today we have the incredible pleasure of having two fine gentlemen with us. They happen to work for CBRE, which is a company that operates in the Ciudad Juarez commercial real-estate market, as well as others. We have with us Pedro Nino, Jr. and Andres Sandoval. Gentlemen, how are you today?

CBRE:

We are doing well. Thank you for having us. Thank you again for the invitation.

Tecma Group of Companies:

Either Pedro or Andres, could you tell us a little bit about CBRE, before we move on to questions about the commercial real-estate market in Ciudad Juarez?

CBRE:

Absolutely, this is Pedro. CBRE is a global, full service real-estate company. We handle everything from leases and purchases to financing. A to Z is our line in terms of commercial and industrial real-estate in Ciudad Juarez, and worldwide. We have over fifty thousand employees all over the globe. Our office in El Paso is a little smaller, but we are focused on both sides of the border, this being El Paso and Ciudad Juarez. We also handle the Rio Grande Valley in McAllen and Reynosa. More recently, we have also been very active in Chihuahua City, so the border demographic is our focus here out of El Paso with CBRE.

Tecma Group of Companies:

Thank you for that overview of CBRE. Now, to start things off, let’s concentrate on taking a look at a 30,000 foot overview, and a snapshot of the market for industrial real-estate in Ciudad Juarez. Please give us a bird’s eye view of what is happening there now.

CBRE:

This is Andres. The Ciudad Juarez industrial market is measured in square feet. It is about a 64.5 million square foot market, which consists of about five hundred and fifty industrial buildings. If the El Paso industrial real-estate market is added to that, the two markets combined are about one hundred and twenty million square feet.

Of course, Ciudad Juarez is known as the “birthplace” of the maquiladora industry. Things got started in the late 1960s. Today Ciudad Juarez has the largest industrial real-estate market on the US-Mexico border. This is both in terms of square footage and employees. As you know, the Ciudad Juarez area has a strong presence of a diversity of industries. These include automotive manufacturers, makers of medical devices and electronics, and appliances. There are manufacturers that are in the Ciudad Juarez industrial real-estate market that are from all over the world. They are mainly from the United States, but we also have companies from places like Japan, Taiwan, Germany, Sweden, Italy, and France. So, it’s a very diverse market, and, of course, it is a very important part of North America’s manufacturing base because of labor costs and location on the US border. Also, we have a very sophisticated industrial real-estate market in terms of both developers and owners of real-estate, as well as contractors and construction companies.

Tecma Group of Companies:

Thank you. That was a fairly comprehensive overview. Let’s start the questions regarding the Ciudad Juarez industrial market by first taking a look back and then, a look forward. We would like to hear your expert opinion on the topic of what we can expect to see going forward, but first what about 2015? At the end of the year, when you reviewed your information what did you see in terms of vacancy rates, for example, net absorption, and the cost of renting. What kind of things were being developed? Was there a lot of construction going on?

CBRE:

If you recall, the last time we did a similar podcast, we were praising the market for the tu[...]

The Tijuana industrial real-estate market is one of the most active in Mexico.

Tecma Group of Companies:

Hello and welcome to another installation of Tecma Talk podcasts. If you are a regular listener to these recordings, you know that they are centered upon issues that have to do with manufacturing in Mexico, or manufacturing in Mexico itself. Today, we have the pleasure of having JP de Kervor with us. He is from a company called Maquila Properties. JP please introduce yourself and tell us a little bit about your company before we get into the questions that are on the subject of what is going on today in the Tijuana industrial real-estate market. Welcome JP. How are you today?

Jean Paul de Kervor:

Excellent. Thanks. Since 1988, I have been involved in the Tijuana industrial real-estate market focusing on tenant representation and new start-ups in the high tech industry. I started out in manufacturing, working for a company called California Chemical in setting up a company in Mexico. As a result, I have a lot of experience on the operations side of things. Over the course of the project, I realized that the real-estate broker was making more money than I was, and decided to switch over pretty quickly to real-estate back in 1989.

Tecma Group of Companies:

That sounds like it was a smart move. Can you tell us a little bit about Maquila Properties, and its place in the Tijuana industrial real-estate market?

Jean Paul de Kervor:

Maquila Properties has done in the area of one hundred million square feet of transactions in the Baja region, as well as a few things in San Diego and Monterrey, and Juarez, but, really, we are focused upon the Tijuana industrial real-estate market. We have done some major transactions. For instance, we recently sold the Snapple building to Cerveceria Mexicana. This was a 170,000 square foot building on fifty acres. We have also done a lot of work in the medical field, which happens to be to be one of the hot areas in the Tijuana region. We have done really well with it over the last few decades.

Tecma Group of Companies:

It’s good to hear that. From what we read and see, in terms of industry trends, there is a lot of interest in the Tijuana area. As you may know, Tecma recently acquired a shelter company in your area called Made in Mexico, Inc. It is a pleasure getting involved in the market over there, and having the opportunity to speak with people like you that understand it.

You mentioned that you started in the Tijuana industrial real-estate market in 1989. Can you provide some insight into what is going on in terms of industry in Tijuana today, and how does that compare to what things look like when you first started out in 1989?

Jean Paul de Kervor:

There are a lot of similarities. I actually did my MBA thesis on how to finance maquiladoras. When I first began in the Tijuana industrial real-estate market all the manufacturers would come down to the border, and then as soon as they got there they would say, “how am I going to finance this move? I’d like to buy a building, and I’d like to move my equipment to Mexico.” They quickly found out, back in 1989, you lose your UCC-1 filing and, guess what, your bank doesn’t want to use it as assets against collateralized lending and, not only that, they don’t do real-estate in Mexico.

So, this was a serious question. At the time, GE Capital was pretty much the only game in town for any kind of financing, and there were a few Texas banks doing some financing with the proper US guarantees. That being said, because of the limited avenues for financing at that time, the entire Tijuana industrial real-estate market was eighty to ninety percent controlled by five families, i.e., the Bustamantes, the Fimbres and others. I know that in El Paso and Juarez that a similar, close knit situation exists. Back then we were getting a sixteen to twenty percent cap rate on most of our buildings, and the vacancy rate was at fi[...]

The Automated Commercial Environment (ACE) replaces a the Automated Commercial System (ACS), which has been in place since the late 1980s

Tecma Group of Companies:

Hello, and welcome to another installation of Tecma Talk podcasts. If you are a frequent listener to these recordings, you know that they consist of discussions between Tecma and individuals that have expertise in issues that have to do with manufacturing in Mexico, or topics that are related. You also know that the folks that we speak with are experts in their fields, both internal to the Tecma Group, as well as folks from the outside.

Today we happen to have an external expert with us. His name is Joe Alcantar. I’ll let Joe introduce himself, and say a little about his company in order to inform you as to what Joe’s expertise is.

Joe Alcantar:

My name is Joe Alcantar. I am president and owner of Brown, Alcantar and Brown, Inc. Customs Brokers. A customs broker is a company that provides import and export clearance services through US Customs. I have been involved in doing this since 1973, and earned my customs broker’s license in 1974. The history of the company begins with my father, one of the original founders. He started this business in 1949. To say the least, there have been a lot of changes from that time to the present day.

Tecma Group of Companies:

Joe, back in the older days that you mentioned, things consisted of pushing a lot of paper. Surely, things have changed, at least in that realm. Today technology is at the forefront. That comment is a good segue way into today’s discussion. What we are going to talk about, and you are going to have to explain the particulars of this, because I have no expertise in this area. I’ve been reading recently that at the beginning of this month, November 2015, there were some changes made to what is known as the Automated Commercial Environment of the US Customs and Border Protection Service. There are some changes that are going to be coming up. Today, we are going to be talking about the Automated Commercial Environment, as it is known by its acronym ACE. The first question to get into the topic is, what is ACE an why is Customs changing what is going on in the environment?

Joe Alcantar:

That’s an excellent question. The Automated Commercial Environment (ACE) is a totally new system, a new software system, for processing imports as well exports. It is going to replace the system that is currently being used and has been in place since the late 1980s. That system is called Automated Commercial System, which is “ACS.” As you can imagine, this system has been around for a long time, and, because of that, there have been many efforts to do patches and upgrades. The Automated Commercial Environment (ACE), however, is going to be a totally new operating system for

Customs and people that file entries for imports and exports through Customs. Such parties include customs brokers, exporters and importers. Customs has been working very hard on this. It is a huge, multibillion dollar project. In a nutshell, that is what the Automated Commercial Environment (ACE) is.

Tecma Group of Companies:

The answer to the question of why is Customs changing things is due to the fact that, as you mentioned, the system that has been in place since the late 1980s has been jerry rigged and patched. Would that be an accurate assessment?

Joe Alcantar:

Yes, that would be accurate.

Tecma Group of Companies:

So that the listeners have an idea of time frame, can you provide information that has do with Automated Commercial Environment implementation dates?

Joe Alcantar:

Yes, that is a really critical question. The ACE implementation dates are very important. Actually, the first date has already been pushed back. Originally Customs wanted to “go live” with the Automated Commercial Environment at certain entry times and with certain other, what they call, “partner agencies.” [...]

Tecma Transportion Services’ head, John Rippee, explains that Clean Transportation certification in Mexico is becoming more common.

Tecma Group of Companies:

Welcome to another installation of Tecma Talk podcasts. If you are frequent listener to these recordings, you know that they are discussions with experts that are both internal and external to the Tecma Group of Companies. The discussions basically center around issues that have to do with manufacturing in Mexico and related topics. Today we have the privilege of speaking with John Rippee, a Tecma Group internal expert. He is joining us. John, how are you? Could you please introduce yourself to the listeners.

John Rippee:

I’m fine. I am the current Vice President of Border Solutions at Tecma. I’m specifically responsible for increased efficiencies for border crossing, customs processing and compliance. My job is to constantly try to make the importation and exportation of goods moving in and out of our borders as invisible and efficient as is possible for Tecma clients. If you can run a business without the worry and concerns related to late shipments, long border lines and all the troubles that come with those issues, then you are typically a happy customer. Our goal here at Tecma is to make this happen.

Tecma Group of Companies:

John, recently Tecma was able to put a feather in its cap. A team of folks from the organization went down to Mexico City and received, in English it’s called the Clean Transport in Mexico certification or award, while in Spanish it’s called “Transporte Limpio.” From what I understand, there is an EPA program that is something that mirrors this program in Mexico. Could you explain a bit about both what Mexico’s Clean transport certification program is, as well as the EPA “Smartways” program that mirrors it?

John Rippee:

Some years ago, the EPA, in the United States, came up with the Smartway Transport Partnership. Currently there are close to three thousand companies in the US that are involved in that program. Essentially, what it does is that it promotes in vehicle technologies that reduce fuel consumption and emissions in the United States. That makes the air in cities cleaner, and it makes communities more “livable.” It has been very successful with its branding. A lot of people listening to this recording will be very familiar with the brand “Smartway,” because they may see a lot of trucks going up and down the road with the logo on them. It became very successful via branding, because, now, companies that are Smartway get preferred contracting with a number of companies that exist out there. Mostly because, one, they want to be “green,” and, two, it’s also cheaper. If you can reduce your emissions, you burn less fuel and fuel costs money. That is the basis of the entire program. Most of the participating companies have seen about a ten to twenty percent reduction in fuel consumption, which translates into a ten to twenty percent reduced cost of the fuel that is being purchased for moving product.

Mexico has seen this success of the Smartway Program over the years, and several years ago decided to mirror that program. They set their agents up and taught them how to audit and to train companies to take measures to receive Clean Transportation certification in Mexico. Since Tecma has its own logistics company for cross border trade activities, the company decided to enter into that program because it made sense. We want to contribute to the creation of a sustainable and livable city, and we certainly want to reduce the shipping costs that go directly to our clients. So both Smartways and Transporte Limipio, or Clean Transport, officials are looking to expand the programs to include more participants. This will help to reduce fuel consumption related emissions. We’ll probably see the creation and expansion of similar programs occur[...]

According to Rafael McCadden of Colliers International Mexican industrial real-estate occupany and absorption rates are healthy.

Tecma Group of Companies:

Hello, and welcome to another installation of Tecma Talk podcasts. If you are a frequent listener to these recordings, you know that they consist of discussions with individuals that are experts in issues dealing with manufacturing in Mexico or related topics. Today is no different. We have the distinct pleasure of having an opportunity to converse with one of my favorite folks to chat with. His name is Rafael McCadden. He is with Colliers, which is a very well-known global industrial real-estate firm. He’s based out of Mexico City. I’ll let him introduce himself to you, and to provide a little bit of background information before we take on today’s questions. Rafael, how are you?

Rafael McCadden:

I’m good. How about you?

Tecma Group of Companies:

Couldn’t be better. Thanks.

Tell us a little bit about yourself so that the listeners have an understanding of the context from which you speak.

Rafael McCadden:

Sure. Thank you. Well, I have been in real-estate for over thirty years. I have been in industrial real-estate for twenty years now, and with Colliers as director of the industrial and logistics division in Mexico for over ten years. It has been a very exciting career. I can say that it is very interesting to see what is happening with industrial real-estate in Mexico.

Tecma Group of Companies:

Rafael, the last time we spoke, and it’s been quite a while. Actually, it has been over a year. At that time you had commented that Mexico had pretty much succeeded in emerging from the difficult period that began in 2008, and that the market had picked up for industrial real-estate in Mexico on a national level. Is that trend continuing? If yes, can you provide us any statistics that will give us an idea of what the activity levels of today are?

Rafael McCadden:

Sure. I would say that the trend continues to be positive in most markets in Mexico. Vacancy rates continue to come down. Net absorption rates are rising. There are a few things that make this happen. One, I would consider, is being neighbors with the US. I would say that this is the most important factor. Sharing a 2,000 mile border with the United States is one of the most important things that has promoted and benefited industrial real-estate in Mexico. Another thing is that the “baby boomer” generation in Mexico is in its mid-20s. This is a very important consideration in that it is generating a lot of people coming out of school that are eager to work. That has helped a lot in terms of hiring and maintaining low turnover rates. Companies are recognizing that there are plenty of young engineers available to hire for design centers, technical centers and, of course, for manufacturing lines, as well.

Tecma Group of Companies:

So, all in all, things are still looking positive. Would this be a safe assumption to make?

Rafael McCadden:

Yes, definitely. Now some of the regions in Mexico do have, I would say, a more prosperous growth and set of circumstances. The Bajio region, which includes four states that are located to the north of Mexico City that are Aguascalientes, San Luis Potosi, Guanajuato and Queretaro, are the ones that are posting the best numbers in terms of growth. This is mainly because of investment that is occurring in the automotive industry. There are four new Japanese assembly plants in the region. It is also said that there are over 300 Japanese suppliers to the automotive industry that have moved in. Of course, that is huge. In a period of less than five years, Mexico has duplicated its automotive production capacity.

It’s not only Japanese companies, however. BMW has begun the construction of its new assembly facility in San Luis Potosi, and, just Southeast of Mexico City, in the State of Puebla, Audi is almost ready to roll out new production [...]

Global supply chain specialist, Michael Hetzel, talks to Tecma about looking at the short and long term horizons.

Tecma Group of Companies:

Hello and welcome to another installation of Tecma Talk podcasts. If you are a repeat listener to these recordings, you know that Tecma Talk podcasts consist of conversations with experts that are both internal and external to the Tecma Group of companies. We talk about manufacturing in Mexico, and things that are related. Today is no different. An external expert is with us. His name is Michael Hetzel. Michael is an individual that has voluminous experience as a global supply chain specialist, and will speak to us today with respect to supply chain and its function.

Michael, how are you ?

Michael Hetzel:

I’m doing well. Thanks for having me in.

Tecma Group of Companies:

Michael, just so that the individuals that are listening to this podcast have a bit of a frame of reference from the perspective from which you speak, can you please provide us with a little bit of information about your personal and professional background?

Michael Hetzel:

I’ve spent eighteen years in manufacturing. Nine and a half of those were as the CEO of a metal stamping and injection molding company serving markets in automotive, electronics, telecom and so forth. We grew that company four hundred and eighty percent and sold it to a publicly traded company. I have spent the last thirteen years as vice president of business development for this hemisphere for a third-party quality services firm. We were providing services in thirty-eight countries. That assignment ended just this July. Along the way, I’ve also conducted a speaking practice. I make presentations to various groups, and also I publish articles on global trade, and supply chains and quality. Some of the groups include the North American Die-Casting Association, the Society of Manufacturing Engineers and others. I’ve spoken in five countries, so far, and, at this time, I am in transition and looking for my next exciting assignment in international trade.

Tecma Group of Companies:

That is a good thing for people that are listening to this Tecma Talk podcast to know, considering the fact that the experience that you have in this area is vast. For today’s discussion, we have five questions that we are going to look at. The first among them that I would like to pose to you, Michael, is: From your perspective, what are the most significant changes that are currently occurring in global supply chains?

Michael Hetzel:

Well, there are two tracks that are associated to what I am seeing in the supply chains. One track is related to the idea of short-term visibility, or the near term horizon, while the other has to do with the longer term horizon.

In the short-term, people are seeing a decrease in oil prices, which was impacting their overseas costs rather than their nearshore costs (in this market anyway). Unfortunately, in some cases, people tend to think that this is going to last forever. It’s like at one time, not long ago, they thought that high bunker charges, and so forth, were going to last forever. With respect to the longer term view, companies are adjusting their supply chains and architecture to reflect a longer term view of manufacturing their products in proximity to market. This is something that I have advocated for many years. Sometimes this means having supply chain elements that are comprised of the same inputs in several countries. In short, there is a lot of change going on. In the US market, for example, many companies are pulling back in from Asia. A couple of recent studies by AlixPartners and KPMG show that, overall, Mexico is a lower cost location to manufacture for the

US market than China is. From our experience, this is absolutely true, although Mexico has the constraint of a narrower availability of categories compared to some of the other Asian countries, particularly China. This issue can be [...]

The medical device industry supply chain in Tijuana can accommodate both simple and complex manufacturing.

Tecma Group of Companies:

Hello and welcome to another installation of Tecma Talk podcast. These, as frequent listeners to these discussions know, are conversations that deal with the topic of manufacturing in Mexico, and issues that are related. Guests are experts that are both internal and external to the Tecma Group of Companies that have expertise in a diversity of areas. Today is no different than any other day in that regard. The individual that we are speaking with today comes to us from outside of the Tecma Group of Companies. His name is Ian Monroy. Ian is an individual that is based in Baja California, Tijuana to be precise. He is well-spoken and well-informed with respect to the supply chain situation and the supplier base that serves the Tijuana and Baja California medical device manufacturing sector. I’d like to welcome you today to Tecma Talk, Ian, and ask that you tell us a little bit about yourself both personally and professionally.

Ian Monroy:

Thank you for the kind introduction. My name is Ian Monroy. I am a season sourcing and supply chain professional with about eighteen years of experience. I hold a Master’s Degree from CETYS Tijuana. I started off in the very different field of international political studies. Live does have its twists, and I ended up working the area of supply chain of industry.

Tecma Group of Companies:

Today, our focus is going to be on the medical device industry. You’ve communicated to me that, over the last several years, that you have become very familiar with the supply chain of the medical device industry. Is that a correct interpretation of comments that you have made in our discussions?

Ian Monroy:

The focus of my comments on the medical device supply chain in Tijuana will be on when I was working for Made in Mexico, that’s a NxStage Medical company out of Boston. NxStage manufactures both the disposable, and the machine, for dialysis therapy. Additionally, we manufactured our own dialysis solution.

When I went to college, I wanted to be a doctor, so, in a way, this is the closest that I have been to studying medicine. I became involved with NxStage. We started off with zero medical device industry supplier base in Tijuana. Since all of our vendors were based on the East Coast, we started moving some vendors, or products better yet, to the West Coast to California and to Baja. That is how I became involved with the medical device industry here in Baja California.

I started participating in the Tijuana-Baja California Medical Cluster, which is a group of companies that are related to the manufacture of medical devices here in Tijuana and Baja California. I became their supply chain committee coordinator.

Tecma Group of Companies:

Between the medical device experience and that which you have had with the medical device cluster organization in Tijuana, you have a broad overview of what is there in terms of both the industry and the industry that constitutes the Tijuana medical device industry supply chain. That second point is what we are interested in learning more about today. First, however, it would be good if you could give us an overview of what the industry looks like in terms of its diversity and role in the local manufacturing economy? I’m sure that the listeners would find that information to be interesting.

Ian Monroy:

The medical device industry has been resident in Baja California and Tijuana for more than twenty-five years. It had its start in the very simple assembly of disposable medical products. Since the beginning, however, the industry has evolved. We have grown at the that has reflected growing demands from American OEMs in terms of increasing complexity in the manufacturing process. We went be on strict assembly and began doing molding, medical device molding, that is. I mean the type of molding that requires a clean [...]

The Tecma Group’s Mark Earley explains how having a strong Foreign Corrupt Practices Act in place enables companies to conduct transactional business in an honest and straightforward manner.

Tecma Group of Companies:

Hello, and welcome to another installation of Tecma Talk Podcasts. These, as regular listeners know, are discussions with individuals that are internal and external to the Tecma Group of Companies. They are on subjects that have to do with manufacturing in Mexico, and things that are related to that topic. Today, we are with one of our internal experts. His name is Mark Earley. I will let him introduce himself, in a moment, but first I will give a bit of background on what we are going to speak about. We are going to talk about the Foreign Corrupt Practices Act. This discussion contains useful information for any company that is doing business that transcends international boundaries. Mark, please introduce yourself, and speak to the importance of this topic, if you could.

Mark Earley:

Thank you. I appreciate the opportunity that has been provided me to speak on this very important topic. I am the vice president of accounting within the Tecma Group. I have also been assigned the duties of the roll out of the of the Foreign Corrupt Practices Act, or the FPCA, for Tecma. This includes for, not only our own employees, but also agents and representatives of Tecma that potentially have the ability to corrupt foreign officials.

Tecma Group of Companies:

It is interesting that you mentioned a few moments ago that the Foreign Corrupt Practices Act is almost thirty years old, so it has been around a while. Can you tell us exactly what the FPCA is?

Mark Earley:

Sure. This is a US law that was enacted in 1977 to prohibit bribery of foreign officials. There are really two main provisions of the Foreign Corrupt Practices Act. The first is considered the “anti-bribery” portion of the Act, while the other one consists of the accounting provisions. The best way to look at the “anti-bribery” section of the FCPA is to consider that it points out what constitute violations. It prohibits bribery of any foreign official, and in the accounting provisions we are looking at the internal controls that a company employs to ensure that bribes are not paid out to foreign officials. Basically, the provisions included in the accounting section of the Foreign Corrupt Practices Act make it difficult for bribery to take place.

Tecma Group of Companies:

Why should companies and individuals care about the Foreign Corrupt Practices Act?

Mark Earley:

It is interesting that the Act has been around for thirty-eight years. If you look at most companies, and how they would go ahead and protect themselves to ensure that employees or agents that represent their organizations were not involved in bribery was mostly through the “code of conduct” that a company would have. That is something that an employee would review and sign upon starting with an employer. Some companies would go through this, or a similar exercise, every year. In the last ten years, we have seen an increase in the enforcement of the provisions of the Foreign Corrupt Practices Act by the Department of Justice (DOJ) and the Securities Exchange Commission (SEC). When we look at the year 2013, for instance, the average fine that was levied for FCPA violations was US $80 million, per occurrence. What we’ve seen, then, is a drastic increase in enforcement levels. We see that both the DOJ and the SEC have hired quite a number of individuals whose sole function is the prosecution of violations of the Foreign Corrupt Practices Act.

Tecma Group of Companies:

Ignoring the FCPA can be costly?

Mark Earley:

Yes. One thing that I would like to mention is that both criminal and civil penalties can be associated with violations. This can impact not only the companies, but the individuals involved.

Tecma Group of Companies:

This is even more reason to [...]

Matt Jordan, vice president of operations at Providien’s subcontract operations lends his insights on medical device manufacturing in Tijuana to Tecma Talk podcast listeners.

Tecma Group of Companies

Hello and welcome to another installment of Tecma Talk Podcasts. Individuals that have frequented our website, and listened to our material before, know that what these recordings are composed of are conversations with experts that are both internal and external to the Tecma Group of Companies on subjects that have to do with manufacturing in Mexico and related topics. Today we are going to concentrate on medical device manufacturing in Tijuana. We have a very seasoned manufacturing executive that represents a company called Providien that is located in Tijuana, and doing business there. His name is Matt Jordan. I will ask him to tell the folks that are listening to this recording a little bit about the company, and about himself. Matt, how are you today?

Matt Jordan:

Good. Thanks for having me on.

Tecma Group of Companies:

Matt, please tell us a little bit about Providien and yourself.

Matt Jordan:

Sure. Providien is a medical device manufacturing company that makes devices in three primary categories: (1) metals; (2) plastics and (3) finished goods contract manufacturing. Finished goods contract manufacturing is the lion’s share of the business. That is what I am responsible for, and that is done all south of the border here in Tijuana, Mexico. We occupy five buildings and have just over one thousand employees. We have three different manufacturing offerings. We do outsourced production lines, production work cells and we do have two focused factories, which are manufacturing products that are dedicated to only one customer.

Providien does about $90 million in sales annually  and has a total of 1400 hundred employees. We’ve got some ancillary locations in Southern California. For me, my background is split 50/50 in terms of the OEM and the contract manufacturing. I started my career with Medtronic, beginning my work at their ear, nose and throat division which had just won the Shingo Prize for lean manufacturing excellence. I spent a few years on an ex-pat assignment implementing “best practices” for manufacturing across eight facilities in Europe in France, Germany, Switzerland, Ireland and the Netherlands. I came back to the United States and finished up with Medtronic working for surgical navigation and cardiovascular.

After that, I moved into the contract manufacturing side and joined a company called ATEK medical, which has since been acquired by another company. I took an ex-pat assignment with them to start medical device manufacturing operations in Costa Rica. We put signs on the doors, turned the lights on and when I left, we had very large manufacturing work cells in place for catheters, perfusion tubing set cannula and tourniquet cuffs. Subsequent to that, I moved into business development. It was important to me to understand how to drive top line growth, and pricing and the financials behind the operation. I was very successful in that area, and was awarded and transferred over US $30 million worth of business. About two years ago, I joined Providien. I’m the vice president of operations and, again, operating the finished good contract manufacturing side of the business, which is south of the border.

Tecma Group of Companies:

It is clear that you have a diverse background in both geographical and in terms of functions within the industry. Let’s function on the geographic aspect of your experience. You have been in Europe. You’ve been in Central America. Given this, from your perspective, why is medical device manufacturing in Tijuana a choice that should be considered by people that are making decisions for their companies from a strategic perspective?

Matt Jordan:

Sure. Firstly, I want to say that I love the environment and the people down here in Tijuana. It is[...]