Executive Briefings

Making a Successful Expansion Into Latin America

As the global economic landscape evolves and shifts, companies seek out new sourcing locations and growth opportunities in worldwide markets. Global expansion brings about new supply chain challenges and complexity that can vary by market and country. In North America, companies are looking for closer sourcing locations, greater efficiency, and opportunities to grow their export business. Latin America, due to its proximity, emerging market growth, and attractive free-trade agreements (FTA), as well as preferential agreements with the U.S. has made it a desirable trade region.

Making a Successful Expansion Into Latin America

This growth region, as well as other emerging markets, is gaining greater attention as a sourcing location due to companies pursuing alternatives to rising labor and production costs in China.  Near-shoring has also become a recent trend that puts a greater focus on Central and South American locations.  With near-sourcing, North American companies expedite speed to market and are able to work easily within the same time zone.  Countries, such as Mexico, Brazil, Costa Rica and Colombia, offer the benefit of highly qualified, lower-cost labor.

For exports, Latin America is a top destination due to its fast-growing emerging markets, rising middle class, and Brazil's strong economic growth with accompanying infrastructure investment.  Brazil is one of the new economic powerhouse BRIC (Brazil, Russia, India and China) countries.   The economic rewards are great in Latin America, but there are supply chain challenges and complexities that must be addressed and managed effectively for performance success.  An effective solution for tackling supply chain challenges is to engage an experienced, global third-party logistics provider who can quickly help a company find their way as they expand globally.

The unique conditions in each new market require companies to immediately adapt to the merits and trials of each country destination.  By evaluating and managing the various factors that impact supply chains, global shippers can ensure a smooth running supply chain.  What factors impact supply chains?  They include: unforeseen risk, cultural differences, regulatory and legal requirements, local customs, and infrastructure challenges.  Infrastructure shortcomings can have a severe impact on global supply chains.  Factors such as port congestion, and insufficient road, rail, port and airport connections can have an adverse effect on the reliable movement of products to final destination.  Environmentally sustainable infrastructure solutions, such as rail connections to main ports, will receive greater attention in the future.  Global logistics management specialists with an established network of dependable, local partner vendors with expertise in navigating the unique challenges of a marketplace can assist in the smooth, secure flow of products.

In Latin America, a wide range of organizational challenges require creativity, perseverance, investment, good partnerships and strong local relationships.  Some of the market challenges and opportunities companies face are as follows:

Labor productivity across the region is impacted by local labor rules and regulations.  In 2012, port strikes resulted in major losses for shippers due to delays, especially for fresh produce, and carriers found it necessary to reroute cargo to new trade routes or delay cargo in-transit while they waited for the strike to end.

Additional transportation infrastructure development is needed in Latin America.  Although there is investment, the pace is relatively slow in the transportation sector.  Because Panama, Colombia and Uruguay have established free-trade zones, they've attracted heavy transportation and distribution-related investment. In Panama, logistics hub development is booming due to the canal expansion.  Many industrial parks are being built along with expansion of the ports system.  In the future, post-Panamax vessels will likely be deployed on the long haul Asia-Panama route and a feeder vessel network will be utilized to distribute cargo from ports in Panama to Central and South America destinations.

Supply chain risk is receiving more attention today due to recent natural disasters and their considerable impact.  Supply chain risk planning and management is an extremely important aspect of global expansion.  Latin America is particularly susceptible to natural disaster as it is the second-most prone region to extreme flooding, landslides, earthquakes and droughts.  Approximately 90 to 100 natural disasters occur in Latin America each year.  Most are a result of heavy rains, which result in flooding and landslides.  Transportation in the continent is highly impacted by these natural disasters, which highlights the need for secondary transportation assets for times of disaster but also simply as contingency routes.  Working with a flexible logistics organization with local knowledge and expertise helps companies effectively address unexpected disruptions to their supply chains and develop contingency plans to deal with supply chain risk.

Another area of risk that has a considerable effect on Latin American supply chains is security.  Crime is pervasive throughout Latin America, and takes a heavy toll.  Brazil, El Salvador and northern cities in Mexico are among the most dangerous.  Crime is becoming more sophisticated and as a result logistics services providers are investing heavily in increasing the standards and technical capabilities of their security systems and procedures.  The most difficult supply chain security risk area in Latin America is surface transportation, which is vulnerable to theft.  This is most common in Central America.  To address security challenges in these high crime areas, companies are working with logistics partners with security certifications.  Some of the ways that these LSPs are managing security risk is through retention of private security forces to escort trucks, carefully verifying the backgrounds and credentials of their supplier network, and consistently evaluating the values and stability of their partners in the region.  Additionally, a new trend is the use of state-of-the-art GPS tracking systems on trucks in high-crime areas, especially in Brazil and Mexico, to monitor truck and cargo assets to prevent theft.   Technology plays a critical role in delivering supply chain visibility for better control of freight and for timely response to unexpected supply chain disruptions.

With experienced global logistics partners, the challenges and increased supply chain complexity that comes from global expansion receives the careful management and planning companies need to succeed.  In Latin America, or any emerging market, exciting growth opportunities are waiting.

Source: Damco


Keywords: international trade, supply chain, supply chain management, logistics services, logistics management, logistics in Latin America, supply chain risk management

This growth region, as well as other emerging markets, is gaining greater attention as a sourcing location due to companies pursuing alternatives to rising labor and production costs in China.  Near-shoring has also become a recent trend that puts a greater focus on Central and South American locations.  With near-sourcing, North American companies expedite speed to market and are able to work easily within the same time zone.  Countries, such as Mexico, Brazil, Costa Rica and Colombia, offer the benefit of highly qualified, lower-cost labor.

For exports, Latin America is a top destination due to its fast-growing emerging markets, rising middle class, and Brazil's strong economic growth with accompanying infrastructure investment.  Brazil is one of the new economic powerhouse BRIC (Brazil, Russia, India and China) countries.   The economic rewards are great in Latin America, but there are supply chain challenges and complexities that must be addressed and managed effectively for performance success.  An effective solution for tackling supply chain challenges is to engage an experienced, global third-party logistics provider who can quickly help a company find their way as they expand globally.

The unique conditions in each new market require companies to immediately adapt to the merits and trials of each country destination.  By evaluating and managing the various factors that impact supply chains, global shippers can ensure a smooth running supply chain.  What factors impact supply chains?  They include: unforeseen risk, cultural differences, regulatory and legal requirements, local customs, and infrastructure challenges.  Infrastructure shortcomings can have a severe impact on global supply chains.  Factors such as port congestion, and insufficient road, rail, port and airport connections can have an adverse effect on the reliable movement of products to final destination.  Environmentally sustainable infrastructure solutions, such as rail connections to main ports, will receive greater attention in the future.  Global logistics management specialists with an established network of dependable, local partner vendors with expertise in navigating the unique challenges of a marketplace can assist in the smooth, secure flow of products.

In Latin America, a wide range of organizational challenges require creativity, perseverance, investment, good partnerships and strong local relationships.  Some of the market challenges and opportunities companies face are as follows:

Labor productivity across the region is impacted by local labor rules and regulations.  In 2012, port strikes resulted in major losses for shippers due to delays, especially for fresh produce, and carriers found it necessary to reroute cargo to new trade routes or delay cargo in-transit while they waited for the strike to end.

Additional transportation infrastructure development is needed in Latin America.  Although there is investment, the pace is relatively slow in the transportation sector.  Because Panama, Colombia and Uruguay have established free-trade zones, they've attracted heavy transportation and distribution-related investment. In Panama, logistics hub development is booming due to the canal expansion.  Many industrial parks are being built along with expansion of the ports system.  In the future, post-Panamax vessels will likely be deployed on the long haul Asia-Panama route and a feeder vessel network will be utilized to distribute cargo from ports in Panama to Central and South America destinations.

Supply chain risk is receiving more attention today due to recent natural disasters and their considerable impact.  Supply chain risk planning and management is an extremely important aspect of global expansion.  Latin America is particularly susceptible to natural disaster as it is the second-most prone region to extreme flooding, landslides, earthquakes and droughts.  Approximately 90 to 100 natural disasters occur in Latin America each year.  Most are a result of heavy rains, which result in flooding and landslides.  Transportation in the continent is highly impacted by these natural disasters, which highlights the need for secondary transportation assets for times of disaster but also simply as contingency routes.  Working with a flexible logistics organization with local knowledge and expertise helps companies effectively address unexpected disruptions to their supply chains and develop contingency plans to deal with supply chain risk.

Another area of risk that has a considerable effect on Latin American supply chains is security.  Crime is pervasive throughout Latin America, and takes a heavy toll.  Brazil, El Salvador and northern cities in Mexico are among the most dangerous.  Crime is becoming more sophisticated and as a result logistics services providers are investing heavily in increasing the standards and technical capabilities of their security systems and procedures.  The most difficult supply chain security risk area in Latin America is surface transportation, which is vulnerable to theft.  This is most common in Central America.  To address security challenges in these high crime areas, companies are working with logistics partners with security certifications.  Some of the ways that these LSPs are managing security risk is through retention of private security forces to escort trucks, carefully verifying the backgrounds and credentials of their supplier network, and consistently evaluating the values and stability of their partners in the region.  Additionally, a new trend is the use of state-of-the-art GPS tracking systems on trucks in high-crime areas, especially in Brazil and Mexico, to monitor truck and cargo assets to prevent theft.   Technology plays a critical role in delivering supply chain visibility for better control of freight and for timely response to unexpected supply chain disruptions.

With experienced global logistics partners, the challenges and increased supply chain complexity that comes from global expansion receives the careful management and planning companies need to succeed.  In Latin America, or any emerging market, exciting growth opportunities are waiting.

Source: Damco


Keywords: international trade, supply chain, supply chain management, logistics services, logistics management, logistics in Latin America, supply chain risk management

Making a Successful Expansion Into Latin America