Third Party Containment in Mexico

T

tomvehoski

#1
Had an issue with a customer in Mexico last week that makes me suspicious on a few things. I received an e-mail that one of our parts (small stamping) had a burr in one of the holes. It was not from my usual contact there, but he was CC'd. They wanted me to approve a sort at our cost, so I asked them to provide a quote for a visual sort and hand deburr of 9000 pieces. I've approved similar things in the past, and they never seem to send a quote or charge us - I think they mainly want me to respond with CA, which I do.

Anyway, this time a quote comes in from a third party containment company, with a price tag 10 times what I could get the same thing done locally for. It also came from a yahoo e-mail address. They claimed 40% of the shipment was bad (no way would we have missed that). I pushed back, saying I would not approve unless they could prove the burr met the "fails safe handling and assembly" quote on the print. I also wanted a larger sample take to determine what percentage really needed deburring.

They did reply showing some parts that could not be put on a fixture. The percentage NC dropped to about 6%, and the sort quote dropped to a reasonable amount, and deburr at 8 cents each. I approved the sort, but not rework until I know an exact quantity that is bad.

The whole thing makes me suspicious that someone is trying to pass off work to a buddy and bill us, since being 2000 miles away makes it difficult for me to drop in and check it out myself. I was talking to a friend that also deals with Mexico, and she heard that this is becoming common, and is related to drug cartels not being able to make as much money with government crackdowns. Apparently they are setting up sham containment companies to make a quick buck, figuring it is not worth the time for US suppliers to fight. I can't seem to find any news articles on that, so not sure if it is someones guess or there is actually a problem.

Anyone else have a spike in containment issues and costs recently?
 
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D

Duke Okes

#2
In my opinion anytime you do business in another country where shady deals are common you need to have a reliable representative in that country who can go on-site and verify things.
 

Wes Bucey

Quite Involved in Discussions
#3
I wouldn't turn loose of a dime until I had at least 50 or 100 samples to look at (air freight overnight) to determine whether the N/C is yours or not. 25 years ago, we had a customer bitch and moan about an N/C on some parts. Actual samples determined they had been made by someone else. The customer wanted to scrap and have us send replacements. (Biggest clue - they didn't have our distinctive blue and white cartons in unitized packing!)

Bottom line
It could be fraud or simple error on customer's part. Like they say before letting loose of a big poker pot - COUNT THE CARDS! (Lots of folks have been fooled by four flushers!)
 
A

arios

#4
The whole thing makes me suspicious that someone is trying to pass off work to a buddy and bill us, since being 2000 miles away makes it difficult for me to drop in and check it out myself. I was talking to a friend that also deals with Mexico, and she heard that this is becoming common, and is related to drug cartels not being able to make as much money with government crackdowns. Apparently they are setting up sham containment companies to make a quick buck, figuring it is not worth the time for US suppliers to fight. I can't seem to find any news articles on that, so not sure if it is someones guess or there is actually a problem.

Anyone else have a spike in containment issues and costs recently?
I live in one of the border cities in Mexico badly affected by the drug wars. I admit we are having severe security issues, but I doubt that what you faced has some connection with the situation and I hope it constitutes an isolated event. In my years in the industry in the border I have dealt with similar issues that could mostly be classified as inadequate management of quality issues, and these with vendors in different parts of the world (e.g. USA, China and domestic), and to date have not found myself in a case where the reason behind a missunderstanding relates to a fraud or attempt to commit a fraud. I hope these comments do not result into an eventual stereotyping of our industry. In Mexico we take very seriously customer satisfaction and doing bussiness, and I hope the problem you faced gets successfuly resolved.
 
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SteelMaiden

Super Moderator
Super Moderator
#5
I wouldn't turn loose of a dime until I had at least 50 or 100 samples to look at (air freight overnight) to determine whether the N/C is yours or not. 25 years ago, we had a customer bitch and moan about an N/C on some parts. Actual samples determined they had been made by someone else. The customer wanted to scrap and have us send replacements. (Biggest clue - they didn't have our distinctive blue and white cartons in unitized packing!)

Bottom line
It could be fraud or simple error on customer's part. Like they say before letting loose of a big poker pot - COUNT THE CARDS! (Lots of folks have been fooled by four flushers!)
I've seen this happen right here in the US. At another division that I worked with, we had a customer that would routinely claim large amounts of reject. Before I started working there, they would just pay the claims. When I started working there (as well as a new quality manager starting at the same time) we instituted a "no sample, no payment" policy. Amazingly, the amount of money that we paid out to that company dropped to next to nothing that first year. They used to send a claim to all their suppliers and collected whatever they could from whomever would pay. I bet their stock took a beating the year we threw the BS flag.
 
T

tomvehoski

#6
I thought the drug cartel link was a stretch, but figured I would throw it out there to see if anyone could confirm.

I think I am going to require them to send all of the rejects back. I'm supposed to have another batch in from our tumbling source today, and the job is scheduled in stamping again this week, so I will be able to see what the tool is actually producing.
 
A

arios

#7
The most affected sector is the commerce, rather than the manufacturing plants.

The "war" as it is happening now is among cartels fighting for control on certain territories and the government is prosecuting them as well. Some of the cartels have a tendency to "hire" members of local gangs for their dirty jobs, sadly corruption also exists and there have been former and active officers getting involved too. Most the gangs are made of pretty young people including many teenagers.

On certain border cities, mainly Ciudad Juarez and Reynosa the involvement of young people on the conflict has contributed the increase of other type of criminal activities, e.g. kidnapping, black mailing, robbery.

I recently provided a set of training courses on a local chamber of commerce whose associates include most of the Maquiladoras (twin-plants) and I asked the same question regarding the impact of the war on the industry. They explained what we are seeing also, that the industry is not being affected and that there is activity of companies moving to this area which is still pretty competitive.

Our life style has definetly changed to some degree, but thank God we are Ok. We spend our time on the city almost normally, taking our children to school, going to work, shopping, going to Church, and even having leisure at the local parks. We have learned that there are military and police check points in several points of the city and we know how to proceed if we are asked to stop.

I am not minimizing the problem, as I said there are violence issues sparking here and there every week, mostly among cartel members, but on the other hand it is important to be realistic and not to exagerate the magnitude of the problem.

I hope in the Lord that our city will at some time have its peace back. And we ask you please to include Mexico in your prayers.
 
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