Optimas Solutions provides distribution services from locations across the globe, but its manufacturing operations have long been centered on just two: its headquarters in suburban Chicago, and a plant in the west of England.
Next year, however, that is scheduled to change.
The company announced at this year’s International Fastener Expo in Las Vegas that it would open a third cold-form manufacturing facility — this one located in northern Mexico.
Daniel Harms, the chief executive of Optimas’ Americas operations, recently spoke with ID about the company’s decision to expand south of the border, and what it means for its U.S. customers.
This interview has been lightly edited for clarity.
Industrial Distribution: What prompted the decision for Optimas to expand to a third plant?
Daniel Harms: I think it really goes back to supporting our overall transformation that Optimas has been going through the last couple of years. This has been something that’s been on the docket as we’ve looked at our “Forward Faster” transformation initiative that we launched a few years ago. We’ve really been focusing on rebalancing our supply chains over the last couple years, with a focus on getting closer to our customers.
I think one of the things that is unique about Optimas is we have this large global reach, but we really focus on a local presence with our customers and our supply base, so, as we started evaluating alternatives and ways that we could do that, certainly Mexico was an area that I felt was underutilized for us as an organization.
We have a plant, we have a distribution center, too, located down in Mexico; we launched our Mexico Center of Excellence last year down there, really just leveraging the incredible talent base that we have in that Monterrey corridor. It was more about the right timing rather than the right strategy. As we look at “why nearshoring” and “why now,” I think the balance between resiliency and continuity versus price continues to be kind of normalized. Obviously, there’s always been a premium on price and – given the last several years with disruptions from the pandemic and geopolitical events that continue to rock the world today – I think everyone came out of this with an acknowledgment of the fragility of our global supply chain. So nearshoring became a focus for us as we focus on continuity being closer to our customers.
ID: You mentioned a little bit about why Mexico and why Monterrey; is this targeted specifically to Mexico? How does it fit within North America?
DH: Mexico is really like a sleeping giant that I feel is just getting ready to to wake up.
As people are looking at where we want to nearshore, for us, there’s the obvious benefits of avoiding tariffs and minimizing tariffs coming out of China. You have the benefit of avoiding some of the disruptions and logistics and geopolitical events. But I think when you look at why it’s really attractive for us and, in particular, that Nuevo Leon area: obviously the proximity to our current customer base, but also, as we look at Optimas’ growth initiatives over the next several years, I see Mexico as an opportunity to really double in size for us from a footprint standpoint.
Also, automotive is an area that we’re really focusing on as we look to continue to expand our diversification of our verticals; it’s something that we are really successful with in our international space and Europe, and it’s something that we’ve been probably underutilizing: our abilities to support that in the North American market. Automotive is one of the areas that is really positioned for growth, and in Mexico, particularly that Nuevo Leon area ... Tesla’s opening up another “giga” plant in that same area, and with that will come a lot of other automotive-tier suppliers.
We have a good partnership base that already exists in that area and is servicing an industry segment that we want to grow. We want to be on the front end of this and the back end; I think there’s going to be a lot of “fast” followers that come down to this area, and, knowing it was something that we wanted to do, the time becomes now. And I think it positions us well to continue to have that local reach, but also to really take advantage of a growing market and industry.
ID: As far as your customer base goes, in addition to growing in automotive, is that something you’re seeing from them, as well — their interest in Mexico as a way to bring their operations closer to the U.S.?
DH: We’ve had great receptivity since the announcement, and we were already engaged in conversations with some of our current customer base before the announcement.
Two things: we have a great customer base already located in both Monterrey and further south in Querétaro, Mexico, and with that, we’re primarily servicing them through distribution today and parts we manufacture in the U.S. and in the U.K., but having in-country, for-country manufacturing is really important — and in many countries. And so a lot of our customers were excited to hear that we were looking to expand; not just in the automotive segment, but in all of our other current verticals that we support today. And we view this as an advantage to our [current] supply partners as well, because it gives them access to capacity that maybe they don’t have today. We do have partners that take advantage of that.
ID: Optimas said in the announcement of the new plant that it will complement current plants in Illinois and in the U.K. Can you talk about what you are going to produce there and what distinctions there might be?
DH: In terms of being complementary, the same foundational premise for what we make in those plants will be here in this plant. I think we’re going to start off with a much smaller scale and then really approach this from a “crawl, walk, run” type of implementation.
We’ll start with five main categories with smaller diameter, smaller complexity tooling needed to really get this up and [running]. We’re going into a new market, right? As always, there are things you anticipate, and there are things you don’t anticipate. So we want to go into this on the right type of timeline with the right focus.
The range of products will be much smaller initially, but the expectation and the roadmap is that as we build this out over the next three to five years, it will mimic the same types of product profiles that we have in both the U.K. and in the U.S. I think initially we’re going to be starting with smaller diameter screws, sheet metals, caps, double-end studs, rivets, those types of things — again, just those low-complexity parts, that is where we’re going to start today, but with the same type of quality procedures. The same type of secondary processing, all the things that our customers expect from us, will be there. It’s really just going to be the type of part that will be much more focused and concentrated initially.
ID: Looking longer-term: is that the expansion strategy you’re going to continue to pursue, to localize those supply chains globally?
DH: It is certainly part of a longer roadmap, strategic initiative for us. We’re excited to get the Mexico plant up and running in the second half of next year. The other two existing plants that have been in Optimas’ wheelhouse have existed for years, so this will be a large strategic initiative for us. But in terms of our looking at additional locations of where this may make sense, yes, those conversations and planning are going on both within North America and in our other, global footprint. So, yes, I would say it’s definitely something that we will use as a proof-of-concept for why it makes sense. We expect to continue to build this out in other other parts of the world.
It’s well within Optimas and our value proposition to our customers. Every executive is trying to toil with, “How do we right-size our supply chains in today’s ever-shifting world?” and having options is what Optimas brings to the table.
