Tents and other camping equipment were among the products that became virtually impossible to find in retail outlets in 2020, as consumers turned to outdoor activities to shake off shutdown fatigue. That trend seems poised to continue. From off-road vehicles and kayaks to tents and grills, sales for outdoor goods and sporting products remain at record highs.
While sky-high demand might typically be the best kind of problem, outdoor equipment manufacturers are balancing record-breaking demand against global supply chain constraints, another lingering effect of the COVID-19 pandemic. With expectations that these constraints will linger well into 2022 and beyond, manufacturers are adopting a range of creative solutions to their supply chain challenges.
Many outdoor goods and sporting equipment manufacturers are boosting capacity. Others are looking to expand their supplier network with more nearby, low-cost options. For all of these companies, Mexico offers an opportunity to address booming consumer demand at a relatively low cost.
Adapting to outdoor equipment supply chain challenges
Sports utility vehicle manufacturer Polaris is a prime example of how outdoor equipment manufacturers are learning to pivot in the face of the current industry supply challenge. The company has been running its factories at full capacity but has also been forced to adapt what it produces on the fly based on the availability of specific components.
"We're dealing with producing vehicles partially complete," noted Mike Speetzen, interim CEO of Polaris, noted during the company's first quarter 2021 earnings call. "For example, when foam became a huge issue, we're rolling vehicles off the line without seats and then we're reworking those vehicles. Our rework rates are pretty high… Really, the supply chain is what's constraining us right now."
Because the company expects that supply chain constraints may not improve significantly until sometime in 2022, at best, it's working to transform its supply chain while also boosting production capacity. The company has announced plans to expand its facility in Monterrey, Mexico, where it produces RZR and GENERAL side-by-side vehicles. To ensure it can meet this higher level of supply, the company is working with suppliers on their staffing and supply base and rebalancing its in-sourced and outsourced manufacturing.
Why companies are making outdoor gear in Mexico
Mexico presents a strong opportunity for outdoor equipment manufacturers selling to the U.S. market. As Outside Business Journal reported, brands that aren't facing problems in getting consumers the product they want don't rely on port operations to run their businesses. While Mexico's deep-sea ports provide accessibility for global transport, it's a particularly convenient location for selling into the United States. In 2019, 75% of all exports out of Mexico went to the United States, amounting to a whopping $361 billion. Those goods traveled along a robust system of international highways and railways.
Small to mid-sized outdoor equipment manufacturers may have the strongest case for launching a facility in Mexico. These companies have the greatest opportunity for rapid growth in the face of today's record-high demand for their products, but must balance this growth with a cost-effective approach. Many locations across Mexico afford manufacturers with quality labor at a highly competitive rate, and the ability to launch new operations within as little as 90 days. Mexico also offers access to an already dense component supply chain. Startups competing with bigger companies for materials may find that working with a diverse range of suppliers in Mexico can give them an edge.
Where outdoor products are made in Mexico
Outdoor equipment manufacturers also find that Mexico's mature manufacturing industry has led to a number of industrial clusters that have attracted dense supply chains. While automobiles make up Mexico's largest export sector, the automotive manufacturing industry presence here has built up a number of sheet metal fabricators, just as the aerospace and appliance manufacturing industries have attracted lightweight carbon fiber and composite material suppliers.
And these suppliers are ramping up production to account for growing need across the range of these industries. For example, Zoltek Cos. Inc. announced in June 2021 plans to expand carbon fiber production capacity at its facility in Guadalajara. The company will increase capacity of its PX35 carbon fiber to 10,000 tons per year. This low-cost commercial carbon fiber has paved the way for lightweight carbon fiber to break into new applications in sporting goods, including golf shafts, racquets, skis, snowboards, fishing rods, and bicycles.
As noted above, Polaris makes its SSVs from a factory in Monterrey, where it can benefit from the automotive manufacturing know-how of nearby Saltillo, the "Detroit of Mexico." This fast-growing city in Mexico's northern desert has a strong industrial foundation. Companies are drawn to Saltillo for its skilled workforce, well-connected infrastructure, and prime location. Less than an hour away from Monterrey, Saltillo is an ideal destination for companies that want to operate in one of Mexico's most industrialized regions at the lowest possible cost.
Turn supply chain challenges into opportunities
While supply chain disruptions can be frustrating to navigate, the good news is that today's constraints are a challenge companies are facing worldwide. That means that companies that are able to quickly and flexibly can turn today's challenges into tomorrow's opportunities. Being able to launch into a new market quickly can be the difference between the status quo or tremendous growth.
If you're ready to plan a strategic launch into Mexico, ramping up production at a Class A industrial facility in as little as 90 days, Tetakawi can help. Our complete range of shelter service solutions, including industrial real estate, means that manufacturers can focus on what they do best while we provide the support needed to get your product to market. For more information, contact Tetakawi today.
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