Saturday, July 31, 1999

Mr. XXX

Controller

XXX Company, Inc.

San Diego, Ca

Dear Greg:

Thank you for your hospitality and most informative tour of your facility this last Friday.

Based on my experience with dozens of maquiladoras and companies in Mexico, your xxx assembly operations are an ideal first step into manufacturing in Mexico. The simple fact that your actual labor costs in the US is about ten dollars more per man/hour than it would be in Mexico should be reason enough to make a determined effort to gain the full advantages that may be possible by manufacturing some of your product in Mexico.

The advantage differential between doing it yourself by setting up your own company or contracting with a shelter operation will be minimal and either choice would bring your positive results.

Since uncertainty is usually the primary cause for companies not to pursue this avenue, I want to give you a step by step outline for success. Please feel free to use this short note as a checklist as you move toward lowering your manufacturing costs while maintaining your highest quality standards.

You may want to make contact with Mr. John Riley, VP/COO of VerTeck International, Inc., a well known and reputable shelter operation with several facilities in Tijuana and offices near the Otay border crossing. His number is 661-6868 and please mention that Bernie and I suggested you call. He will provide you with the most current operating costs and will advise you on any customs or legal matters of importance. I have attached a copy of my year end report for the XXX operation which will give you a picture of how it might work if you formed your own company.

In many cases operations could start in as little as three weeks but I advise you not to move this quickly. You must first change the corporate culture to allow for this kind of process. And as you know, change is among the most difficult of all human activities.

Ideally, the idea of testing the idea of manufacturing in Tijuana should come from your own employees.

You may already have in place the mechanism for quality circles, or meeting where employees voice their ideas. If management were to pose the question of how the company is to continue to gain market share and the need to compete against potential Chinese and Taiwanese manufacturers with labor rates at $0.25 per hour… somebody is bound to suggest a pre-emptive strike by setting up a small operation in Mexico. As you said yesterday, the buzz is already there. But for the idea to be vocalized by an employee, then followed through by management, will preserve the sprit de corps that is so obvious at Taylor. (The magic of the Socratic method)

Once the buzz is seen as positive, the next step is to create a project team to make it real.

Most departments will be affected by having an operation in Mexico. Materials must be kited in exact quantities to comply with the pedimento (in-bond rules) process. More people will be involved with shipping and receiving documentation for customs and freight coming and going. Technical personnel will be required to visit the Mexico facilities and will need the proper permits and time off from their normal duties. Transportation must be handled. Payments to XXX de Mexico (your new company name in Mexico) will require new arrangements with the banks and people (or hours) to be handled. A process for receiving inspection must be initiated along with new areas for receiving containers of cases which may not be used for another week.

It will take the people on the floor who will be doing this work to define and create the actual processes. These things can’t be mandated from management since there are so many details they know nothing about.

Since most supervisors in the real world today have received very little supervisory training, and hardly any ever receive an honest course in real life project management, some training will need to take place possibly in parallel with the project itself. My greatest success has come from training people in project management using the projects they are involved with at the time. It’s more mentoring and facilitating than actual book learning.

Your prospective XXX de Mexico manager must receive intensive training in how to deal with the Mexican worker, the rules and regulations, and other factors for him to be an effective leader. Without this training the whole project could fall flat. It should be one of your highest priorities.

There are four fundamental phases:

1-    Decision to expand operations into Mexico

2-    Establish a team to execute all phases of the change

3-    Training, mentoring, coaching and facilitating

4-    Execute the project, milestones, measurements, adjustments, new process in place.

            A simplified Gantt chart might look like this:

As part of the training people will be asked to create the training documentation and processes for the Mexican employees, determine and document quality procedures and documentation, define production control systems for the transborder facility, and actually train their counterparts in Mexico be they employees or members of the shelter’s staff.

Even though a shelter operator may offer to provide training, the training material must be yours. Generally, the training of individuals doing the work in Mexico is done by your manager whose principal responsibility will be training, mentoring, counseling and leading. Major personnel problems are handled by the shelter operator, or your personnel department.

Your cost for this training will be from $1,500 to $2,500 depending on the number of ‘missing’ elements as we would determine from a simple needs analysis to take place after the first quality circles meeting where the employees volunteer to help.

It would be a real pleasure to have the privilege of conducting this training at your facility myself. Billing would take place through the Economic Development Division.

The alternative to fee based training would be in developing a non-credit course where you would guaranty 25 students and we would get funding through the college system.

A third alternative: We could develop a course combining these important elements and possible apply for, and receive ETP funding.

When faced with a to-do list of hundreds of items, most people will freeze, panic and get sick. With my practical, down-to-earth project management training, these same people will succeed and shine like bright stars.

I am at your service, at no cost to you, to show pictures and explain Mexico operations, place myself at your disposal to answer questions, facilitate a quality circles meeting or meetings, or in any way help in your process of expanding operations. Our vested interest is in doing whatever possible to keep US companies healthy against the increasing number of global competitors.

Sincerely,