Click to watch Margery Marshall - Global Mobility Strategies
Click to watch Margery Marshall - Global Mobility Strategies
global resources
Need an office somewhere in the world? Office suites, meeting rooms, virtual offices, network access

free downloads
GLOBAL: "Global location strategy for automotive suppliers" report

GLOBAL: "Global location strategy for automotive suppliers" report. 24-page report by KPMG International.

proceed to download

back to index backGLOBALtalk November,  2015

Is Turnover Mexico’s Formidable Foe?

HMC’s* plant had just ramped up a couple of years ago outside of Silao, Mexico. Top management had been summoned to the US headquarter offices to review financial results. The CFO had been tracking the investment plan related to the new component facility south of the border and the expected short term, and trending long term returns were not adding up.

Low labor costs?

Two of the managers in the meeting were expats living in Silao and responsible for the operation there. Both were fluent in Spanish and had received numerous hours of intercultural training while preparing for their assignment. But a very important detail that had not been discussed during the planning stages was now a key contributor to lost productivity, poor quality and late deliveries to the customer. In addition, operational expenses were substantially above the budget.

True cost of manual labor

Stability, repeatability and reliability are three essential concepts required to maintain an excellent level of performance. Where high manual labor is required these become critical and personnel turnover will tend to increase variance and impact these three concepts dramatically.  

What HMC’s cost calculations did not consider

In our very low margin sector, accuracy in costing is indispensable and HMC had developed a robust feedback mechanism to adjust the plan to reality.

In the case of their newest investment however, and considering a high manual labor operation, they met up with a surprise: high personnel turnover.

They had completely missed the following - and some other- details that were now impacting their real costs:

- Productivity costs above the planned costs because of the use of new and untrained personnel on the lines.

- Higher cost of direct labor to was planned since turnover is creating salary inflation in a supply and demand environment.

- Increased costs to recruit and interview personnel- and if you’re not competitive less people (or less talent)  may show up to your door when you need them.

- Disproportionate training and development costs and suspecting that you might be investing your training money for the benefit of your competitor.

- Lost knowledge and its impact on getting things done effectively.

"Same as" costing

HMC had a standard factor for turnover that was so low it was never discussed in management meetings. The same factor was assumed to be true when they prepared and presented the financial justification to build a plant in Mexico and transfer some of the processes from the US. They had used same as” calculations without considering real data from Mexican sources.

Cookie cutter solutions do not work in all environments

Mexico is going through an unpresented period of growth and transformation which brings with it several aspects that must be taken into account when estimating the real costs of manufacturing.

Turnover is partly rooted in  this growth and will not go away any time soon. Your company is neither alone nor defenseless – there are several ways to confront this problem.

In the meantime consider these steps:

a)  take this topic seriously and bring it the surface

b) set up a robust metric to know its true impact

c) absolutely consider a realistic turnover factor in your calcuclations

Sam Yankelevitch is a speaker and trainer, and the author of two books on Lean Communication. He has adapted Lean thinking to solve problems rooted in miscommunication and has over 30 years senior level experience with Mexico manufacturing and automotive.

Que pasa? What is Mexico's media saying

Just Google Mexico rotación de personal and translate the many pages that pop up. There is abundant information on this problem that is plaguing Mexican companies and of course the automotive sector as well.

**HMC is a fictional name for a generic automotive manufacturing company and not associated with any company with the same or similar name.

Note: Mexico is not the only country with a realtively high turnover rate and turnover is not the only problem that impacts operational costs.

Source: Sam Yankelevitch via LinkedIn - GAI

previous page

go top
search our site



Other articles from the same issue (November,  2015).

The conundrum of mobilising global talent
play read on

Not-so-happy returns: Big businesses fail to make the most of employees with foreign experience
play read on

Comparison of Average Annual Salaries in Korean and Japanese Automobile Industries
play read on

Learning from Switzerland’s Apprenticeship Model
play read on

Reform to the Mexican Federal Labor Law ("FLL")
play read on

International Health Coverage and ACA. What U.S. Expats Need To Know
play read on

China: New National Guidelines on Workers Compensation Premiums and the Impact on Payrolls
play read on

Driving Global Readiness: A Road Map
play read on

2015 Global Equity Incentives Survey
play read on

Small Businesses Tap Into Global Talent
play read on

Millennials value greater flexibility, appreciation, team collaboration and global opportunities
play read on

Changing Landscape of Connected Vehicle Market to Reach $1.2 Trillion by 2020, With 1.5 Million Professionals -- Candidates for Training
play read on

Entry-level salaries in India among the lowest in the Asia Pacific region
play read on

Regional Talent Management: Asian Expatriates in Asia
play read on

Is Turnover Mexico’s Formidable Foe?
play read on

Mexico places second for expats: survey Cost of living offsets concerns over safety and stability
play read on

Brazil Offers Both Opportunities and Obstacles for Companies and Their Transferring Employees, According to New Best Practices Report from Cartus
play read on

U.S. Hiring Plans for Q4 2015 Strongest in Eight Years; Global Outlook Uneven
play read on

The Changing World of Corporate Business Travel
play read on

How China country heads are coping
play read on

How to Handle Audits by Labor Bureaus in China
play read on

Proposed Revisions to the EU Pension Directive in Progress
play read on

Refugees a 'godsend' for future German growth
play read on

U.S.: Do SEC Pay Ratio Disclosure Regulations Matter for Foreign Companies?
play read on

The Extension of Labor Contracts in China: Legal Responsibilities and Risk Management
play read on

Polishing the Shine for Asia’s Top Talent
play read on

Our Free eJournals

To visit GlobalAutoExperts Directory, click here.

©2008 | HCI Group, Ltd.
101 West Big Beaver Road, Suite 1400 | Troy, MI 48084 USA
USA Tel: +1.248.687.1060 | USA Fax: +1.248.927.0347
Fax UK: +44.(0)845.127.4765 | Fax Europe: +31.20.524.1659 | Fax Asia: +852.3015.8120