Phillips celebrated its 95th anniversary as well as 15 years in Mexico last week with the grand opening of its two production facilities in Arteaga, Mexico, totaling 500,000 square feet. The ceremony, which included a ribbon cutting and plant tour, was held in front of 1,300 Phillips employees, Phillips customers, Governor Miguel Angel Riquelme and Arteaga Mayor Ramiro Duran Garcia.
The newest building, completed in 2022 and totaling 380,000 square feet, will now house all Phillips Industries manufacturing operations, including those already in Mexico, and all production lines relocated from their former location in Santa Fe Springs, CA. The original Arteaga building, with 120,000 square feet of floor space, has been reconfigured to manufacture, test, and ship electronic telematics products for the Phillips Connect business.
Phillips first came to Mexico to produce wiring harnesses in 2007 and moved to a larger location in Arteaga in 2015 to meet growing product demand from OEM customers. The new campus will produce products for the company’s customers in North America. Ultimately, the company plans to relocate its manufacturing from China to Mexico, says Phillips Industries and Phillips Connect president and chief executive officer Rob Phillips.
“Our experience in Mexico has proven to me that it’s the absolute best place to manufacture Phillips and Phillips Connect products,” Rob says. “The facility is the cleanest, most well-organized, and the best managed we have anywhere in the world. Most importantly, the people are outstanding. Our current workforce and those ready to come to work for us can be relied upon to carry our success forward. We depend on that as we continue to expand here in Mexico.”
Bob Phillips, the company’s chairman of the board, says Phillips products can be found on “virtually every Class 7 and 8 truck in North America and over 80% of every trailer.”
“We have over 3,500 dealers, and parts distributors from Central America to Alaska and Canada who are stocking parts and keeping the heavy-duty trucks on the road,” Bob says. “People often ask: ‘Have you ever thought the company would get this large?’ And I say, ‘You have to be kidding. How could I have known?’”
By the end of 2023, Phillips expects to employ 2,100 people in Arteaga.
Phillips headquarters will remain in California and serve as the base for customer service, accounting, research development, and other support functions for North America, Europe, Phillips Connect, and Phillips Innovations.
New Phillips Industries facility boosts capacity
With the move to the larger facility, Phillips upgraded several pieces of equipment, including three new high-speed wire and cable extruders, 36 new injection molding machines, and various other applicators to prepare the factory for increased production capacity. This building includes 28 production lines–some in support of the company’s OEM trucks business and some in support of its aftermarket business. According to Phillips Production Manager Gilberto Mena, the facility currently has the capacity to produce 11,000 pieces per week for its OEM business and 28,000 pieces per week for its aftermarket business.
“However, by the end of Q2, max capacity will be 20,000 per week for trucks [OEM] and 40,000 per week for aftermarket,” he says.
Mena says Phillips invested more than $1 million in the last two years in new equipment for the trucks and aftermarket businesses.
In addition, Phillips invested an additional $2 million in the last two years into its trailer production lines, of which there are 16. These lines can produce as many as 38,000 pieces per day, according to Operations Manager Samuel Robledo.
This facility also has two running production lines for its lights business, with the capacity to expand to four if demand requires. The machinery and equipment are already available for expansion in the plant. The two running lines can produce up to 5,500 pieces for penny lights and up to 6,800 pieces for stop/tail/turn & mid-turn lights per week.
There is also a mold tool shop located in the building with three CNC machines capable of producing over 300 different molds exclusive to Phillips Industries, according to Materials Manager Ana Ibarra.
In late Q2, Phillips plans to upgrade and expand its extrusion capabilities via a $3.5 million investment in this facility. The company currently has extruders at its California plant, but Manufacturing Manager Eduardo Fuentes says the investment will increase yearly capacity from 140 million feet of cable to 211 million feet.
Phillips also built in an additional 50,000 square feet of empty space for possible future production line expansion.
Phillips Connect ‘smart’ products to benefit
Phillips Connect manufacturing currently happens in a Chinese facility, but Rob says he hopes that will all move to Mexico soon. The move is mainly due to supply-chain challenges in China, which include issues with component availability, high freight costs, long lead times, tariffs, high inventory carrying costs, a lack of manufacturing control and continuing COVID impacts on the Chinese workforce.
“Every product that we’ve delivered, close to 190,000 smart trailer solutions, close to a million sensors, they’ve all come out of China. Most of those have been air-freighted because we’re selling faster than we anticipated. We can’t keep up,” Rob says. “So, we’ve been investing to set up all of our manufacturing in Mexico, to really buy into Mexico. We’ve got so many good things working in our favor. Instead of manufacturing in China, shipping on a boat or more frequently shipping on airplanes and having all the other stuff to deal with, we’re going to have full control over all of our manufacturing.”
Rob says the shift to Mexico is also due to ongoing workforce challenges in the U.S.
“At Phillips, we’ve flexed our manufacturing labor for years. We have a 24-hour lead time. We take the order today, we build it tomorrow, we ship it tomorrow night. That’s what we’ve done for years, but we’ve had challenges the last three years because we can’t get employees like we used to. We would order 30 temporary employees on a daily basis,” he says. “That’s how we were able to flex and meet the order demand. But now if we lose anybody in California, we can’t get anybody back.”
Today, the Phillips Connect facility in Mexico is only partially operational, with Rob saying it is about 30-40% of the way to full capacity. He believes the company will have two full production lines complete by the end of Q2.
At full capacity, the company will manufacture a range of telematics and smart trailer products, including SolarNet, StealthNet, Smart7 and Smart Break-Away boxes. These products will connect to the company’s Connect1 dashboard for fleet reporting, notifications, maintenance and geofencing.
Rob says he believes a distinct advantage of Phillips Connect products is that the installation process is very fast compared to the company’s competitors. The StealthNet product, for example, has an advertised installation time of 60 minutes per trailer.
“One of our competitors has a product that they just launched and they were advertising it takes eight hours to install. No one’s going to do it. No one’s got eight hours to do it. If you’ve got four trailers, maybe. But the fleets we’re talking to have 4,000 to 40,000 trailers. It’s never going to happen,” Rob says. “For us, we had to develop a product that’s easy to install at the OEM.”
The new Phillips Connect facility includes an ESD SAFE room–a room used for controlling electrostatic discharge–featuring 21,000 square feet of a controlled ambient environment which includes conductive flooring and restricted access due to the electronic assembly that will take place. Production capabilities of the new facility include in-circuit device programming, automatic fully automated glue dispensing, and assembly using S-Y and 6-axis robots, automated torque drivers, leak detection systems, functional testing, and customer acceptance testing.
All test stations are connected to a custom-made SCADA system, used for controlling, monitoring and analyzing industrial devices and processes, that retains information for every unit to help ensure control and traceability on a sub-assembly level. Eventually, this facility will also include a battery charging station that will charge the two-, four- and six-cell batteries that are used in all Phillips Connect products.
Rob says Phillips Connect has about 130 employees, up from 16 just a couple of years ago. The company is expecting to have 15 line operators “in the very near term” and has five more skilled positions to fill.