Executive Briefings

Mexican Logistics Expert Discusses NAFTA Roadblocks and Cross-Border Trucking Restrictions

Enrique Almanza Hernandez, logistics expert and former central Mexico regional director at Autotransportes de Carga Tresguerras SA de CV, discusses key issues surrounding effective North American supply chain management and explores the state of fully integrated North American logistics - including the evolution of some Mexican carriers into true 3PL providers. Hernandez spoke with Danny Slaton, SMC ³ executive vice president of business and product development.

SLATON: Your company is a Mexican nationwide less-than-truckload and full truckload carrier. You maintain interchange freight agreements with U.S carriers and offer border crossing and full service coverage throughout the United States and Canada. What are your thoughts on how NAFTA or other U.S. or Mexican transportation legislation might affect your long-term opportunities and prospects?

HERNANDEZ: Ground transportation is of significant economic and strategic importance to North American trade - especially as reshoring and nearshoring start to take hold. In 1995, NAFTA was set up to liberalize freight transport across Mexico, the United States and Canada; encourage infrastructure investment; and secure speedy, efficient flow of goods across North America. But NAFTA's limited success has led to a partial and inadequate integration of the supply chains between Mexico and the rest of North America, where goods do circulate, but without the necessary speed or efficiency.

Today, transporting a product amongst the NAFTA countries can easily involve freight handling or information exchange between three to four different stakeholders (carriers, brokers, custom-house agents, etc.), each of which adds to delays and higher supply chain costs. This ultimately increases overall inventory levels and the final product prices. These repercussions affect both the competitiveness of the products transported between NAFTA regions and the transportation services; impede opportunities to reach new markets; and eliminate the incentives for transport companies to be more efficient, innovative and competitive - a goal any company should strive towards if they want to excel in a larger market with tougher competition.

SLATON: What are you seeing in U.S./Mexican or Mexican/U.S. freight flow, multimodal and 3PL trends?

HERNANDEZ: As fuel costs continue to rise, transportation represents the single highest cost within the supply chain. At the same time, today's competitive environment demands better service levels. Therefore, today's transportation trends focus on initiatives that aim to achieve cost reductions while improving service levels. Advanced distribution schemes - like postponement, merge-in-transit and cross-docking - are increasingly used, and have proven to be extremely helpful in improving on-time delivery and faster order-to-delivery cycles; reducing stock-outs; and diminishing inventories.

However, these advanced distribution schemes require new capacities from transportation companies that enable improved collaboration, better information systems integration and total supply chain visibility. This information not only provides shipment tracking but actually helps to make supply chain improvements.

SLATON: What are the best growth opportunities for carriers and 3PLs in U.S./Mexican transportation - including "hidden" areas that people in the U.S. aren't aware of yet?

HERNANDEZ: I believe that the opportunity for carrier and 3PL provider growth in both America and Mexico is dependent on removing political roadblocks to promote the free flow of goods and services across North America - just as it was intended in NAFTA in 1995. Removing restrictions on cross-border trucking would not only greatly benefit American and Mexican transportation and 3PL companies - enabling them to operate within a bigger market - but also make the North American region more appealing as a trade zone due to the competitiveness and efficiency of their logistics services and processes.

SLATON: What are some of the opportunities for Mexican carriers operating between the United States and Mexico (for example, interlining with U.S. carriers, equipment exchange, etc.)?

HERNANDEZ: Carriers operating between Mexico and the United States would benefit from a better cooperation with U.S. companies in many ways (for example, commercial agreements for sharing information about clients who could send cargo back to Mexico to reduce empty miles and vice versa, trailer exchange to improve capacity utilization and agreements to share infrastructure to safeguard and repair trucks).

SLATON: What new ways can Mexican and U.S. carriers and shippers work together to reduce transportation costs and increase the efficiency of cross-border ground transportation?

HERNANDEZ: Collaboration between U.S. and Mexican businesses would substantially reduce transport costs and increase supply chain efficiency - based on meeting the following objectives:

Total Visibility: Full integration of information systems can provide not only shipment tracking but also disruption management and supply chain improvement through the advanced use of analytics.

Flexibility: These integrated information systems must support the new, advanced distribution schemes like merge-in-transit, postponement and cross-docking.

Reliability: Ideally, we need reduction of both "mechanical" and human costs (fuel control, fleet maintenance, driver rotation, etc.)

Lead-Time Competitiveness: Accurate lead times - with no variability - enable companies to better manage demand variations, without increasing inventory or using more expensive modes of transportation.

SLATON: Are there any Mexican organizations that provide similar services to those of U.S. 3PLs, and do they make your life easier or more difficult?

HERNANDEZ: The consolidation of 3PL companies as providers of integrated logistics services is far more advanced in the United States than in Mexico. However, many Mexican carriers have evolved to diversify their services and formed strategic alliances with U.S. and Canadian companies to operate as true 3PL providers. These companies simplify the operation and significantly reduce the administrative costs of many clients, because they can manage all the transactions from their supply chain operation through one contact.

Source: SMC3


Keywords: international trade, supply chain, supply chain management, 3PL, third party logistics, global logistics, transportation management, logistics services, U.S.-Mexico trade, NAFTA trade volumes

SLATON: Your company is a Mexican nationwide less-than-truckload and full truckload carrier. You maintain interchange freight agreements with U.S carriers and offer border crossing and full service coverage throughout the United States and Canada. What are your thoughts on how NAFTA or other U.S. or Mexican transportation legislation might affect your long-term opportunities and prospects?

HERNANDEZ: Ground transportation is of significant economic and strategic importance to North American trade - especially as reshoring and nearshoring start to take hold. In 1995, NAFTA was set up to liberalize freight transport across Mexico, the United States and Canada; encourage infrastructure investment; and secure speedy, efficient flow of goods across North America. But NAFTA's limited success has led to a partial and inadequate integration of the supply chains between Mexico and the rest of North America, where goods do circulate, but without the necessary speed or efficiency.

Today, transporting a product amongst the NAFTA countries can easily involve freight handling or information exchange between three to four different stakeholders (carriers, brokers, custom-house agents, etc.), each of which adds to delays and higher supply chain costs. This ultimately increases overall inventory levels and the final product prices. These repercussions affect both the competitiveness of the products transported between NAFTA regions and the transportation services; impede opportunities to reach new markets; and eliminate the incentives for transport companies to be more efficient, innovative and competitive - a goal any company should strive towards if they want to excel in a larger market with tougher competition.

SLATON: What are you seeing in U.S./Mexican or Mexican/U.S. freight flow, multimodal and 3PL trends?

HERNANDEZ: As fuel costs continue to rise, transportation represents the single highest cost within the supply chain. At the same time, today's competitive environment demands better service levels. Therefore, today's transportation trends focus on initiatives that aim to achieve cost reductions while improving service levels. Advanced distribution schemes - like postponement, merge-in-transit and cross-docking - are increasingly used, and have proven to be extremely helpful in improving on-time delivery and faster order-to-delivery cycles; reducing stock-outs; and diminishing inventories.

However, these advanced distribution schemes require new capacities from transportation companies that enable improved collaboration, better information systems integration and total supply chain visibility. This information not only provides shipment tracking but actually helps to make supply chain improvements.

SLATON: What are the best growth opportunities for carriers and 3PLs in U.S./Mexican transportation - including "hidden" areas that people in the U.S. aren't aware of yet?

HERNANDEZ: I believe that the opportunity for carrier and 3PL provider growth in both America and Mexico is dependent on removing political roadblocks to promote the free flow of goods and services across North America - just as it was intended in NAFTA in 1995. Removing restrictions on cross-border trucking would not only greatly benefit American and Mexican transportation and 3PL companies - enabling them to operate within a bigger market - but also make the North American region more appealing as a trade zone due to the competitiveness and efficiency of their logistics services and processes.

SLATON: What are some of the opportunities for Mexican carriers operating between the United States and Mexico (for example, interlining with U.S. carriers, equipment exchange, etc.)?

HERNANDEZ: Carriers operating between Mexico and the United States would benefit from a better cooperation with U.S. companies in many ways (for example, commercial agreements for sharing information about clients who could send cargo back to Mexico to reduce empty miles and vice versa, trailer exchange to improve capacity utilization and agreements to share infrastructure to safeguard and repair trucks).

SLATON: What new ways can Mexican and U.S. carriers and shippers work together to reduce transportation costs and increase the efficiency of cross-border ground transportation?

HERNANDEZ: Collaboration between U.S. and Mexican businesses would substantially reduce transport costs and increase supply chain efficiency - based on meeting the following objectives:

Total Visibility: Full integration of information systems can provide not only shipment tracking but also disruption management and supply chain improvement through the advanced use of analytics.

Flexibility: These integrated information systems must support the new, advanced distribution schemes like merge-in-transit, postponement and cross-docking.

Reliability: Ideally, we need reduction of both "mechanical" and human costs (fuel control, fleet maintenance, driver rotation, etc.)

Lead-Time Competitiveness: Accurate lead times - with no variability - enable companies to better manage demand variations, without increasing inventory or using more expensive modes of transportation.

SLATON: Are there any Mexican organizations that provide similar services to those of U.S. 3PLs, and do they make your life easier or more difficult?

HERNANDEZ: The consolidation of 3PL companies as providers of integrated logistics services is far more advanced in the United States than in Mexico. However, many Mexican carriers have evolved to diversify their services and formed strategic alliances with U.S. and Canadian companies to operate as true 3PL providers. These companies simplify the operation and significantly reduce the administrative costs of many clients, because they can manage all the transactions from their supply chain operation through one contact.

Source: SMC3


Keywords: international trade, supply chain, supply chain management, 3PL, third party logistics, global logistics, transportation management, logistics services, U.S.-Mexico trade, NAFTA trade volumes