Case Study of Strategic Expansion in the Paper Manufacturing Industry.
Client Overview
The client, a leader in the paper manufacturing industry in Mexico, operates multiple plants across Mexicali, Monterrey, and Guadalajara. Their portfolio includes a range of hygiene paper products, predominantly utilizing recycled paper sourced from Dallas, USA. In an ambitious move to optimize its operational efficiency and logistics costs, the leading Mexican paper manufacturing company embarked on an initiative to explore strategic locations for a new paper mill, studying potential cities in Mexico and Texas, USA. This case study outlines the comprehensive site selection process undertaken to support the company’s expansion objectives, focusing specifically on operational and environmental considerations.
Main Challenge
The primary challenge revolved around identifying a suitable site for a new paper mill that would not only facilitate closer ties to the recycled paper supplier but also ensure streamlined delivery to its existing plants. Critical factors such as water and electricity availability, cost-effective land acquisition, favorable governmental incentives, and efficient transportation routes were essential considerations.
Service Provided
Phase 1: Criteria Establishment
A meticulous framework comprising ‘MUSTS’ and ‘WANTS’ guided the evaluation process. The MUST-Haves criteria focused on non-negotiable factors such as water availability and electricity capacity, crucial for the operation of a paper mill. The ‘WANTS’ included operational costs, infrastructure quality, labor market competition, governmental incentives, quality of life, security, labor environment, and logistics.
Phase 2: Site Evaluation
Cities within Mexico and Texas were assessed based on the established criteria. Mexican cities considered were Monterrey, Querétaro, Saltillo, Nuevo Laredo, Piedras Negras, Monclova, and Acuña. In Texas, Waco, Temple, and Texarkana were evaluated.
Phase 3: Decision Process
Data collection and scoring against the rating system provided a comprehensive view of each potential site. This process enabled an objective comparison aligned with both the company’s immediate operational needs and its long-term strategic objectives.
Results
Upon concluding the site evaluation, a surprising outcome emerged: Texas cities notably offered lower operational, land, and logistics costs across the majority of assessed variables when compared to the cities evaluated in Mexico. This contrasted sharply with the initial assumption that Mexico would present a more cost-effective option. And despite the exception of two cities in Mexico featuring lower payroll expenses, the analysis underscored Texas’s advantages in overall cost efficiency, for this client, since it was not a labor-intensive project.
Conclusion
This shift in findings from the initial hypothesis underscores the critical importance of thorough, data-driven site selection studies in the strategic planning process. Far from being a straightforward choice, the assumption that Mexico would invariably offer the best option for a manufacturing footprint relocation or expansion was effectively debunked, highlighting Texas’s competitive edge in overall cost savings for the paper manufacturing industry. This case study not only demonstrates our firm’s rigorous approach to enabling informed decision-making but also illuminates the complexities of global operational expansion.
By dispelling misconceptions and exploring all viable options, businesses can ensure that their expansion strategies are both financially sound and strategically advantageous. Through this meticulous selection process, the client is now equipped with essential insights that steer clear of assumptions, favoring a solid evidence-based foundation for their growth trajectory.