An analysis of operational experience in the US/Mexico production sharing (maquiladora) program

Abstract There have been few empirical studies on the successful implementation of the specific components of integrative production systems by multinational firms [1–3]. This study addresses the implementation challenges of offshore manufacturing encountered by multinational firms within a specific setting. The focus of this study is on the cooperative operational program known as “production sharing”, as developed in the US/Mexico border zone and in designated regions of the Mexican interior. This program is also known by the common Spanish name of “maquiladora” (meaning “contract milling”) industry. Despite the dramatic increase in the number ofmaquiladoras and their growing economic importance, research focusing on operational and startup issues has been limited and fragmentary. This study was designed to begin to fill this gap. The main purposes of the study were to: - explore the organizational issues characteristic of offshore manufacturing as specifically present in the maquiladora program, - determine the severity and duration of the technical and nontechnical challenges encountered in maquiladora operations, - assess the applicability, value, and extent of use of a variety of performance-enhancing programs and actions over different time frames, and - explore the long-term strategic advantages and challenges present in the maquiladora program. Survey questionnaires were mailed to a target sample of 425 facilities. The bilingual (English/Spanish) questionnaire was comprised of four major sections. The first section gathered background information regarding company size, organizational structure, international experience, and product/process technology. The second section assessed the types, duration and severity of difficulties faced in establishing and operating maquiladora facilities. The third section determined the usefulness of a number of performance-enhancing programs/actions. The last section of the questionnaire asked for respondents' comments regarding their maquiladora experiences. The findings reported here are based on questionnaire data collected by mail, covering 28 different companies and 58 different facilities. Given the purposes of this study and its focus on describing industry practices, data were analyzed by tabulating frequency distributions for each item in the first three sections of the questionnaire. A content analysis was performed for responses to the open-ended questions in the last section. Overall, there is no single, dominant operational function that may be considered as “the” key to success. The consistent and combined application of a number of fundamental manufacturing management programs on training, scheduling, simplification, flexibility, and gainsharing is the actual requisite for the achievement of success. Some of the key methodologies and technologies of manufacturing management have proven to be, in effect, largely transcultural, and transferable into this industry and its socioeconomic environment. Four general conclusions that can be derived from this study are: (a) core manufacturing management programs can be transferred, implemented and still retain validity within the different socioeconomic environments of US and Mexico, (b) “conventional wisdom” on offshore manufacturing must be adjusted in the key fields of organization, competitive rationale, innovativeness, comparative advantages, quality, personnel and logistics when operating within the US/Mexico maquiladora program, (c) substantial benefits can be realized in offshore manufacturing by exploiting combined competitive and comparative advantages through integrative operations planning and control and human resources management, and (d) there already exists a high level of organizational and managerial integration between the US and Mexico, with the potential facilitation that this represents for future North American economic integration.