The Mexican Recession Impact on CaliBaja!

CaliBaja

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CaliBaja is a North American manufacturing powerhouse. Located in Mexico but close to the California border, it serves as a vast hub of industrial jobs, making significant contributions to the production of products that ship all over the world. 

For Mexico, it’s a big boon, offering the community an enormous number of stable, well-paying jobs. As of Winter 2022, CaliBaja is home to seven million people and has a gross annual GDP of $250 billion- $70 billion of which comes from international trade.

In addition to making a significant amount of audio and visual supplies, CaliBaja is also a major manufacturer of medical equipment—a status that has kept them as active as ever during the pandemic.  

“The region has developed a robust manufacturing environment by hosting advanced manufacturing and technology; global business communities which support the manufacturing operations; partnerships with prestigious universities, and collaboration with academic and industry leaders to enhance the dynamics of overcoming challenges, and interchanging knowledge and expertise”, said Dr. Rebecca Sanchez at the CETYS University Graduate School of Business in Mexico. 

At face value, CaliBaja is a healthy community that is significant both for the Country of Mexico, and the rest of North America. Unfortunately, the last several months of 2021 brought in a Mexican recession that has continued to play out into the new year. 

Thanks in part to the Delta and Omicron variants, Mexico has seen a reduction in the workforce that has resulted in production lags and supply chain shortages. 

In this article, we take a look at what this means for a community that thrives thanks to highly active production lines. 

The Problem

Mexico experienced a decline in growth over the last several months of 2021. Though the economy grew over all during the year it ebbed slightly in November and December—a trend that has continued into the new year.

For the time being, the situation has stabilized to an extent. The recession has slowed, and Mexico has a forecasted growth rate of around 2-2.5% for the new year. Not necessarily an aggressive rate of expansion, but also better than what it had experienced back in December. 

As with so many things, Covid has played at least a role in the problem. Even though 2021 saw a fairly significant decline in cases across the planet, there were extenuating factors that hit Mexico particularly hard. 

For one thing, mitigation efforts largely subsided in 2021. Though case numbers did decline for most of the year, climbing Covid numbers brought on by surges or variants were largely unplanned. This resulted in significant labor shortages that then resulted in supply chain issues. 

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Add in the general labor shortages that most countries have seen in the past twelve months and the touch-and-go state of the world of supply chains in general, and it’s not surprising that Mexico has found itself in a tough spot as of late. 

The recent retreat of Omnicron may have contributed to Mexico’s slightly sunnier forecast. However, it should be noted that their 2.5% growth projection teeters precariously on an unstable edge. Many financial experts disagree with the country’s growth potential, and the treasury secretary himself has been very cautious with his estimations for the economy, citing Covid as a potent and ongoing threat. 

What This Means for CaliBaja

Naturally, recessions and supply chain problems are bad no matter where you find yourself in the world. However, for an industrialized city like CaliBaja, it is a particularly significant threat to employment and revenue. 

Covid induced labor shortages are, of course, a prominent threat for factory-driven towns that may see steep declines in production in the event of a large surge of cases. 

It’s also important to remember that CaliBaja plays an important role in the North American supply chain for a wide range of different products. One of the reasons that the town is such a hotbed for industry is because it does a significant amount of manufacturing both for Mexican and American products.

 “CaliBaja region fosters the means to ensure North America supply chain continues to be competitive in the global market, becoming a hub for innovation on how to manage a supply chain when it comes to competing worldwide”, said Dr. Sanchez. 

This means that labor shortages and supply chain disruptions that happen in CaliBaja could easily be felt across the entire continent. However, experts predict that Calibaja will remain stable. “this binational territory responds to its own dynamics, so the technical recession in Mexico will not affect, in a high level, the region”, according to Dr. Alejandrina Barajas, a professor of economics at CETYS University. 

Solutions

Recessions take time to buff themselves and no one solution is likely to immediately fix problems in CaliBaja or the larger nation of Mexico. However, well-thought-out relief strategies may serve to speed the process up, and better protect the country from experiencing similar issues later down the line. 

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Part of the problem could potentially be addressed by more adaptive Covid mitigation procedures. By equipping industrial communities in particular with tailored solutions for handling surges, worker shortages and supply line disruptions may be reduced the next time there is an uptick in cases. 

Unfortunately, this alone will not likely be enough for CaliBaja or indeed Mexico. 

To cement supply line security deep in the future, CaliBaja may benefit from adaptive analytic technology paired with artificial intelligence to improve resource management and expedite processes. 

As Covid demonstrated to countries all over the world how fragile supply lines can be, analytics-driven technology was able to step in and improve the situation. “Covid has come to reinforce the dynamics of the region, which have generated a scenario of rapid recovery and have shown the interdependence between both economies, both California and Baja California”, said Dr. Barajas. 

Analytics paired with algorithms are able to:

  • Monitor supplies and staffing statuses. Big Data applications have the potential to monitor industrial conditions such as supply and employee management closer than humans can manually. By knowing exactly what sort of resources a company has on hand, data can help anticipate and eliminate threats before they occur. 
  • Manage routes. Big data also has the potential to make the transportation of parts and goods more streamlined. On the micro-level, fleet management technology allows the transportation sect to do everything from easily maintaining their vehicles to ensuring that their drivers always select the most efficient routes. On a broader level, it can improve the distribution of global goods by monitoring weather conditions and other factors that contribute to supply chain disruptions. 
  • Detect potential threats in advance. Big data can also help anticipate supply chain threats. For example, algorithms may be able to accurately predict weather events that might disrupt the transportation or manufacturing of goods. This advanced reporting allows industrialized communities like CaliBaja to make different manufacturing decisions. If a parts supplier in Canada is likely to experience a disruption, a manufacturing plant in CaliBaja might pivot to a more local supplier. 
Article and permission to publish here provided by Mikayla Faber. Originally written for Supply Chain Game Changer and published on March 24, 2022.

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