Industry in Nuevo León

Authorities in Nuevo León step up efforts to implement Industry 4.0

Manufacturing has been a primary growth driver in Nuevo León for a long time. However, the sector has lately been experiencing a slight slowdown, as illustrated by the decline of its share in state GDP from 24.84% in 2014 to 23.17% in 2015, resulting in part from less robust demand from the US and subsequently lower exports.

With its sights set on long-term growth, the integration of higher added-value supply chains, greater productivity and competitiveness in the face of global competition, the government is making a push for the introduction of Industry 4.0 in Nuevo León’s manufacturing sector.

Defining Industry 4.0

Launched in April 2016 a report supported by the Ministry of Economy and Labour (Secretaría de Economía y Trabajo, SEDET), and other sector stakeholders entitled “Crafting the Future: A Roadmap for Industry 4.0 in Mexico” defines Industry 4.0 as follows: “The cross-cutting impact of ICT, especially the internet of things (IoT), in various industrial sectors translates itself into a phenomenon that specialists have defined as the fourth industrial revolution: Industry 4.0 or I4.0.”

“Its purpose”, the roadmap goes on to explain, “is to revolutionise the industry through ‘smart factories’ that will allow greater flexibility in production needs, efficient allocation of resources and integration of processes; from equipment monitoring to final delivery through the use of technologies, such as integration of cyber-physical systems, IoT and internet of services, and the real-time interaction between machinery, software and individuals”.

Government Push

Introducing this concept to manufacturing in Nuevo León is seen as a way of bolstering a sector of central importance to the state. “The state government views Industry 4.0 as an opportunity to support and hopefully relaunch Nuevo León’s manufacturing industry with a 4.0 focus,” Julio Aguilar Valencia, an Industry 4.0 expert at SEDET, told OBG. “That is why it is drawing up a sector support plan comprising two stages.”

According to Aguilar Valencia, the first stage, which runs through to the end of 2017, aims to raise awareness about the concept, engaging key actors and stakeholders in various industrial sectors, such as the automotive industry, the agro-industry, the education and health care sectors, and the electronic appliances sector. “The government’s initiative is premised on the creation of mini-consortia that will take the lead in developing Industry 4.0 applications in each field, but above all, in integrating projects, initiatives and problems of Nuevo Leon’s industry.” Aguilar Valencia told OBG.

The government will play a coordinating role in the implementation of the project and has established a fund of between MXN100m ($6.3m) and MXN120m ($7.2m). Private companies are then expected to top this up by investing in their respective sectors and projects. In a second stage, Nuevo León may look towards alternative sources of funding and create the base needed to develop the 4.0 ecosystem in the state. For now, however, the priority is to establish the institutional structure for the sector plan, as well as the roadmap for its execution.

Taking The Lead

Nuevo León’s burgeoning strategic cluster architecture (the state currently has 13 clusters in total) has arguably helped to spread this concept to the various actors and stakeholders concerned. According to Jesús Vázquez Hernández, a professor of engineering management at the Universidad de Monterrey, the automotive industry is taking the lead in this process. He has been working closely with a range of clusters in Nuevo León on Industry 4.0 issues, bringing academic expertise to the fold. “The promotion of Industry 4.0 in the automotive sector was initiated in the Autumn of 2016. It started off with a number of outreach and awareness-raising initiatives in November 2016, with more scheduled to take place in February 2017, albeit at a decision-making level now, as opposed to previous contacts with middle management.”

According to Vázquez Hernández, companies are starting to look at the identification of gaps and required skills, and the elaboration of project proposals. Potential, practical applications currently under consideration range from business analytic and drone logistics to advanced robotics.

Manuel Montoya, general manager of the Automotive Cluster of Nuevo León (Clúster Automotriz de Nuevo León, CLAUT), had similar things to say regarding the industry’s willingness to jump on board with Industry 4.0. “In 2016 our members reached a consensus on the importance of supporting Industry 4.0. Car firms are looking at the identification of projects and funding for Industry 4.0 applications.”

According to Vázquez Hernández the ideal time-line for the implementation of Industry 4.0 in Nuevo León would involve developing new technologies in 2017 and adopting practical applications in 2018, with the view to being Industry 4.0 ready by 2020.

Bumps In The Road

However, the road to the integration of Industry 4.0 is not without its challenges, as a lack of understanding of the concept, insufficient funding and the potential to fall behind global competitors present significant hurdles.

For Aguilar Valencia, one of the greatest challenges lies in the negative effect that the transformation of manufacturing will have on the labour market. “While the impact of Industry 4.0 is expected to be largely positive, one cannot ignore its effect on the labour markets, especially given the estimated loss of jobs,” he told OBG.

According to new research – the first of its kind – carried out by the World Economic Forum (WEF), the fourth industrial revolution, combined with other socioeconomic and demographic changes, is set to transform labour markets in the next five years, leading to a net loss of 5m jobs in 15 major developed and emerging economies, including Mexico. According to WEF’s findings, every industry is expected to be affected to some extent by skills and job displacement, but it has also said that such losses may be offset by job growth in key areas.

Adapting To Change

While the state government does not currently have estimates on the impact Industry 4.0 applications will have on the job market in Nuevo León, it is nonetheless aware of potential downside effects and is beginning to take action to minimise them through, for example, revising technical training programmes. Alternatively, Vázquez Hernández, a certified professional in supply chain and project management, advocates adopting a holistic and dynamic view to the design, development and implementation of the advanced value chain for Industry 4.0 projects, based on foresight studies and strategic management. This implies training personnel in necessary technology skills and competences as a starting point to the adoption of Industry 4.0 practical applications.

In this context, Vázquez Hernández is employing the Delphi method – a collaborative approach to the development of a strategy and achievement of a goal. “CEO-level managers and human resources departments have so far proven the most interested in this approach at the workshops, which focus primarily on developing design thinking for innovation, critical thinking, problem-solving, conflict management, generational thinking, collaboration and digital literacy,” he told OBG.

Getting Students On Board

Apart from the involvement of scholars in clusters working to advance Industry 4.0 applications, other actors in academia also have a role to play, including students. “In universities students are being prompted to think and work with business software released in the past five years, in addition to the traditional tools established over the past 20 years or so, as best practice,” Vázquez Hernández told OBG. “The underlying idea is to equip students to deal with the challenges brought on by the adoption of new technologies and concepts, like Industry 4.0, but also to develop a disruptive and divergent attitude that can help them challenge the status quo, and promote the learning of new techniques and tools for this new way of living, a dynamic adaptation to the advanced value chain.”

Investing In Innovation

Needless to say, investment in research and development (R&D) and innovation is key to the promotion of Industry 4.0 in Nuevo León. For Jaime Parada, director-general of the Institute for Innovation and Technology Transfer, Industry 4.0 is all about ensuring greater productivity and competitiveness, areas in which R&D and innovation play a key role. “The main goal of Industry 4.0 is to connect production processes and decision makers looking to maximise efficiency and optimise production costs. Industry 4.0 gives any company a competitive advantage over traditional manufacturing practices.”

Tech Outreach

The Chamber of Industry of Nuevo León (Camara de la Industria de Transformacion de Nuevo León, CAINTRA), the state’s chief industrial association and lobby is keenly aware of this, having promoted investment in innovation, in part through the creation of the Centre for Technological Outreach, located in the Technological Research and Innovation Park (Parque de Investigación e Innovación Tecnológica, PIIT).

Inaugurated in March 2013 the centre cost MXN27m ($1.6m). According to Mario Parga, an economic analysis and legislative affairs officer at CAINTRA, the chamber was also instrumental in the recovery in 2016 of a fiscal stimulus initiative of MXN1.5bn in favour of the promotion of R&D, with an estimated multiplying effect of 1.48.

More specifically, in the automotive industry R&D investment is being led by the creation of a new purpose-built innovation centre. Inaugurated in March 2016 the Automotive Centre for Technological Development and Talent, known as the Driven-CLAUT Innovation Centre, is the first of its kind in Nuevo León. Located at PIIT, the centre represents an investment of approximately MXN30m ($1.8m) in its first stage, according to Montoya. SEDET provided 50% of the financing for the project, with the rest supplied by five CLAUT member companies.

In It For The Long Haul

Despite the concerted push to promote Industry 4.0 applications in Nuevo León, the process is likely to be gradual and possibly bumpy. Even in the automotive industry, which is taking the lead, there are concerned voices. While Industry 4.0, and in particular full automation, may be a growing global trend in this subsector, there is still some scepticism regarding the benefits that the concept can bring to Mexico, particularly in light of the fact that one of the chief advantages of the Mexican manufacturing industry lies in its comparatively low labour costs.

Notwithstanding this, as firms begin to adopt new applications, competitiveness is generally expected to increase. The gathering momentum behind the government’s push for Industry 4.0 will surely contribute to increasing the speed of its implementation and development in the state. The interest demonstrated by foreign companies may be taken as a positive indicator going forward. Indeed, as Aguilar Valencia told OBG, “The government’s support of the development of Industry 4.0 in Nuevo León is drawing attention from big foreign companies, such as Siemens and General Electric, which should in time help attract investment to this sector.”


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The Report: Mexico 2017

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