Originally Posted in Mexico Business News
RK: Roberto Klosek RR: Richard Rubin
Q: As the oldest shelter in Sonora, how did Javid LLC develop the skills required to support the state’s manufacturing industry? RK: As a subcontractor, I had to develop, build and test products so I became acquainted with the intricacies of the manufacturing process. One of my clients, a CNC machining company, asked me to sublease a space for them. This agreement eventually expanded into management, logistics and several other services and laid the foundations for Javid LLC. I eventually convinced my clients that a shelter company would provide significant economic advantages and allow them to concentrate on timely production and shipping. Today, this relationship benefits us both, shelter and client. RR: Subcontract manufacturing is always increasing and Javid LLC’s goal was to help companies transition from subcontract manufacturers to direct manufacturers. This brought about a set of new challenges, including logistics, transportation, acquiring personnel, customs, environmental compliance and permits. Foreign companies were uninformed about regulations, laws and processes in Mexico so we had to become experts in these areas to support them. We focused on making companies entering our shelter feel comfortable. We developed a whole range of services to support their administrative offices so they could concentrate on production and quality.
Q: How has your shelter evolved to reflect the global market's needs? RR: The shelter model has changed considerably over the years. The model began catering to companies looking for cheap labor in Mexico and that brought all their management from the US. Nowadays, few foreigners manage corporations here because Mexico is producing a greater number of engineers and managers. Thus, management chains generally consist of bilingual and highly qualified Mexican professionals. This attracts foreign firms, such that even companies that had left for China have returned to Mexico.
The country enjoys shared time zones and no currency problems which attracts foreign direct investment. Interest from foreign companies has translated into many benefits for local industry, which have filtered through to the entire Mexican economy. The country has the lowest rate of unemployment seen in many years. Qualified labor has helped the development of a local aerospace industry, including several ITAR-certified companies such as Semco Instruments and Aeronamic Aircraft Subsystems.
Javid LLC can centralize these services in a single office, reducing the need for multiple administrative personnel in many different companies. Javid LLC’s strategy is to generate long-term customers so we adapt to their needs in terms of pricing, services and quality. By the end of 2016, Javid LLC will have over 3,000 employees under its belt to keep up with our accelerated growth. We signed contracts with six companies in 2015, and one direct aerospace employee may translate to up to six indirect employees in other sectors, from transportation to food.
Q: What are the greatest challenges that foreign companies report having faced when they enter the Mexican manufacturing industry? RR: CNC machining was recently integrated into the state so companies had to spend a lot of time training their employees. To solve this problem, we have created partnerships with universities in Sonora and donated US$10,000 to the creation of training programs across many industries. RK: The state had to overcome its negative image due to misinformation regarding Sonora. There was a time when companies did not want to use the Made in Mexico branding on their products. However, this has changed considerably and Javid LLC is trying to connect with directors, inviting them to visit the company's plants to see our advanced technologies and highly qualified staff. They are often astounded when they see our plants' quality because they are sometimes even better equipped than those in the US. Once they see our facilities, they understand that Mexico is not a second- rate manufacturing country.
Q: How are Javid LLC and other shelters helping to promote Sonora’s talents outside of Mexico? RR: Sonora is known for its manufacturing capabilities. Foreign companies considering Nogales will find us first, if they prefer Guaymas they navigate towards the a Sheller out there and if they choose Hermosillo they will consider different choices as there are many small clusters in the city. We believe that Hermosillo has plenty of potential for us and we are analyzing the possibility of opening another office in the city. We also are evaluating opening another office in a different state to support our clients. RK: Shelters in Sonora have good working relationships. We collaborate closely and even refer companies interested in locations in which we are not present to other shelters and these shelters recommend us to their clients.
Q: How would you describe the help offered by federal and state governments to companies entering local industry? RK: We have received significant support from the government but it can vary depending on the administration. Our current governor has supported the aerospace industry and has many plans to help develop the sector, and especially to curb corruption. RR: The government must continue backing universities because the country needs a large number of quality engineers, programmers and technicians. The government must promote the consolidation of the supply chain by helping companies enter the country and allowing foreign investment. These measures will encourage the economic development of Mexico and boost the quality of life of its people.
Q: What role does Javid LLC play in the operations of the companies it shelters? RK: We take a hands-on approach in their daily operations. For instance, our customers do not handle finance matters in Mexico so any fine they may incur comes directly to us. Therefore, we have a say in topics such as human resources.
What distinguishes us is that our customers know the exact cost per hour of operations because Javid LLC wants to keep costs as competitive as possible. We also provide quarterly reports with a cost breakdown of expenses for purchases, transportation and customs, among many others. RR: In Nogales, we represent 27 companies that fill over 1.5 million ft2 and employ over 3,500 employees. We are facing an important period of growth and for the rest of 2016 we will focus on assimilating six more companies, two of which are billion-dollar businesses. By 2017, we expect to have 30 companies and we hope to continue growing at this rate.