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A lack of high-quality infrastructure doesn't seem to be stopping companies from forging state-of-the-art supply chains in Latin America.
For all the talk of antiquated ports, narrow roads, inadequate airports and state bureaucracies, companies are making few if any compromises on service in Latin America. The region is host to the same quality of logistics services, if fewer in number, than in more developed parts of the world.
General Motors has assembly plants in Santos and Sao Paulo, Brazil that are every bit the equal of its operations in the U.S. and Europe. It maintains a just-in-time supply line with minimal tolerance for error at any point in the process. APL Ltd., the container and logistics arm of Singapore's Neptune Orient Lines Ltd., carries GM's time-sensitive parts and equipment between the U.S. and Brazil, and within Latin America.
Shippers complain of continuing restrictions on imports into Brazil, and high duties on certain consumer items that act as a virtual ban on foreign products. All the same, many are sourcing production there, for sale to the U.S. and within Latin America's own growing consumer market. Companies such as Procter & Gamble, Sony and General Electric are seeing exponential growth in regional sales. Others such as GM, Volkswagen and Lucent are finding in Latin America fertile territory for efficient manufacturing operations.
Such successes are migrating beyond the traditional Latin American markets of Mexico and Brazil into Chile, Venezuela, Argentina and elsewhere. The horrifying inflation of the 1970s and 1980s is gone; in its place are privatization, economic development and partnerships with world-class logistics providers. And while Latin America still has a long way to go before offering consistently reliable infrastructure, much of the continent appears to be traveling irreversibly in that direction.
Asia's recent currency crisis had a serious ripple effect on Latin American economies. On the positive side, instability in Asia caused many companies to look at manufacturing closer to the lucrative U.S. consumer market. NAFTA has provided a further incentive, in the form of duty-free treatment for components assembled and sold within Canada, the U.S. and Mexico.
Moreover, the advent of high-tech communications, particularly the internet, has presented Latin American countries with a relatively inexpensive means of connecting with the rest of the world. For the first time, companies doing business in the region can track finished goods and raw materials throughout their supply chains. APL says it is handling more than 70,000 electronic transmissions per month, on behalf of customers in Latin America.
Even the most seasoned multinationals are turning to established logistics providers in order to gain a foothold in Latin American markets. For 3PLs, the trick is to combine local knowledge with the kind of management expertise that is honed in more developed trades. As a result, many logistics partnerships are still engaged in the agonizing process of trial and error. But there have been plenty of success stories along the way.
Delphi: A Piecemeal Approach to Marriage
The most comprehensive partnerships don't always start out that way. Ryder Systems Inc. took over the cross-border warehousing and transportation business of Delphi Packard Electric Systems in pieces.
Delphi had been using another provider to manage dedicated distribution centers in El Paso and Laredo, Tex., its two gateways for parts flowing between the U.S. and Mexico. Ryder had been hired to handle inbound and outbound transportation.
Either way, it was a big contract. Based in Warren, Ohio, Delphi Packard makes power and signal distribution systems for the world's 20 largest automakers. While its core business remains trucks and automobiles, it recently has expanded into non-automotive products such as smoke alarms and computers.
|"Once you get to the Customs inspector,|
it's quick. It's getting there that's the
-Jorge Salas of Ryder Systems
|Within six months, the average number of days that GE products spent in transport went from 20 to fewer than 10.|
|Sony trained warehouse personnel on|
Thursday, transferred inventory on
Saturday, and shipped the first order on Monday..
|Lucent had just been spun off by AT&T Corp. and needed to prove itself as an|
|By convincing truckers to eliminate|
overland charges to Jacksonville,
Robinson saved Danaven $1.5m a year..
Perhaps mindful of its experience with P&G in Mexico, GATX provides the customer with monthly reports on its performance, including full cost of operation. It tracks key metrics on both a daily and monthly basis, and has achieved nearly 100-percent inventory accuracy, claims Duque.
Chile's geography presents logistics planners with unique challenges. The long, narrow country runs nearly 4,000 miles from north to south. Nearly half the nation's population lives around Santiago, with the rest scattered in remote areas. The north consists mostly of desert, while land in the south breaks up into a series of fjords.
Freight costs can be high because the tight concentration of population presents carriers with few backhaul opportunities, says Erana. When product is available for hauling in the opposite direction, it often consists of agricultural, mining or seafood items, which are incompatible with consumer products.
For P&G, some of those disadvantages are offset by the presence of Gillette in the same Santiago warehouse. Duque says GATX has been working to build more full pallets to stores around Chile for better economies of scale. It can combine shipments by the two customers for even greater efficiencies - an idea that remains novel in the supposedly advanced U.S.
P&G currently arranges transportation into and out of the Santiago warehouse, but that could change as the company becomes more accustomed to outsourcing in Chile. Duque says the company is already reaching beyond the country's borders, exporting small amounts of product to Peru, Bolivia and Venezuela.
Erana says Chile will play an important role in regional distribution. Its port infrastructure is in good condition, and with the development of roads running in an east-west direction, "it would be the door into [South America's] southern cone."
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