Relocating $53 million specialty fastener manufacturing company from Thailand to Mexico
The Company: A 3rd generation family-owned privately held US precision fastener manufacturer with 32 distributors across 21 countries needed to meet several challenges established by the Made-in-USA requirements. Marabek was selected to review the product pricing, COGS, HTS Codes, lead times and customer requirements before recommending strategic solutions. Priority was to identify customer’s long-lead-times components, local raw material supply and high-volume parts made in Thailand that are sold globally.
The client consistently grew sales by 20% YoY (year-over-year) since 2021 and recently faced challenges in tooling and machinery prices from China. Distributors accounted for 40% of sales, OEMs represented 35% of gross revenues and direct sales to retail and online sales summed up the rest. The fastest growth was from OEMs looking to consolidate their suppliers across China and Mexico.
- Revs. FYE’24- $53,000,000
- 3 facilities across China, Mexico and Thailand
- 226 employees worldwide
- 42% international sales / 58% NAFTA market
- CAGR averaged over 20% YoY
- EBITDA was steady at 17% since 2021
The Situation: The client had to make a strategic decision by Q3’24. Shut down in Thailand would require potentially sacrificing non-Chinese sales in Australia/EMEA, terminate 68 employees. Operating margins in Thailand was comparable to their Mexican facility. Labor was 14% cheaper in Thailand than Mexico and 7% higher than China. Over 51 finished metal fasteners for the computer, medical, electronics and telecom equipment were made there.
The Solution: “Relocate and consolidate product mix”
Over the course of 4 months, Marabek was able to provide key data with suggested ideas that could meet customer needs and help consolidate parts with specialized coatings. Eliminate products with low volume and demand. Ultimately, the ownership had to decide the CapEx would be worth the opportunity cost or risk competitors taking market share from them in the US/Mexico/Canada markets. The CEO and CFO sat with the sales organization to draft a scenario-based plan with contingencies and variables. Marabek provided the essential data and roadmap.
Within the first 50 days, the executive team decided to execute Marabek’s recommendation to relocate to Mexico. In doing so, purchase more automated machinery from Germany, add engineers and specialized technicians to oversee the transfer from Thailand. Marabek was able to advise management to build safety stock to minimize sales disruptions, recertify parts at the Mexican facility, create a reliable forecast and secure key customer orders.
By Feb. 2025, Marabek the client quickly grew its sales to equipment manufacturers in the data center and computing space, integrated networking and telecom equipment manufactures. Forecast for the next 5 years should hit 30% CAGR and EBITDA should grow to 24% as COGS will improve with economies of scale in Mexico.
Reach out to us and ask us how we can help.
