Infrastructure Goes Beyonr Bricks and Morta

Infrastructure.

Just a thought about that word conjures images of “Spaghetti Bowl”- like highway interchanges. Ports of entry hum with every “gee-whiz” visible and invisible technology as legal trade zips through from producer to customer. Miles-long snaking lines of commercial and private vehicles become relegated to where they should be: A history lesson from a more inefficient time.

So much for associating “infrastructure” with bricks and mortar, IT or whatever becomes invented next week.

However, as moderator Gary Schwebel of IBC Laredo noted at the outset of the “Infrastructure for More Efficient Trade” panel at the recent Mexico Logistics Forum in that nation’s capital, “We also need to look at human infrastructure, we need to look at those elements that are out there that allow that facilitation to continue to grow and flow, at the same time have a balance with the eras of security.”

Waving documents from the U.S. General Accountability Of- fice and Bloomberg concerning wait times and effects on people and trade, Schwebel let his panel have at it – at themes that never seem to fade away.

“SLOW BUT SURE’ ON TECHNOLOGY”

Erik Markeset, president of the Council of Supply Chain Management Professional Roundtable in Mexico, opened the bidding by citing a “slow but sure adoption of technology. I think that what Mexican companies are doing is taking advantage of the technology to improve visibility, control and reduce costs. It’s more diffi- cult to sell technology in Mexico than it is in the United States. I think part of the reason could be that the value proposition often around technology is reduction in labor costs. So if Mexico already has a reduced labor cost versus the United States then that value proposition is diminished. We have to emphasize other elements such as the control that technology will give you.”

Markeset used the example of a warehouse management system to know what inventory is received, when, where is it located within the warehouse, where is it to be picked and then ultimately shipped. “It’s surprising to me to see that sometimes the lack of technology adoption in those areas. I try to convince folks that there’s value. We do see that. I think Mexico is behind some other Latin American countries — Brazil and Argentina — in terms of technology adoption.”

He continued by explaining the value proposition that companies seek: control and visibility. “That’s on the warehouse side. On the transportation side, we work a number of transportation management systems that help link a company to the transportation services providers to help plan transportation more efficiently, consolidate freight where you can, therefore reduce cost on the transportation side. On the transportation trucking company side we do see there’s always innovation around security.”

Markeset shared his observation of increased innovation around the location of the vehicles, transmitting that through GPS and then making that information available through the cell phone networks. “The idea is to have “dashboards’ where companies can identify exactly where their freight is. Security is a chronic issue in Mexico so knowing where the trucks are and if they’re off route, if they’ve deviated. That would create an alert for a company. That type of technology has been around for a while and I’d say we continue to see a positive trend toward the adoption of technology.

DIFFERING INFRASTRUCTURE

Miguel Perez, director of International Customer Logistics, Ryder, looked at his experiences of attending customers in the ports of Matamoros, Reynosa, Laredo, Ciudad Juarez, Mexicali and Tijuana. He used the word, “frustrations” and explained why: “Different ports have different infrastructure. They have different capacities. We see that some ports at some peak hours don’t have enough booths open, and then on non-peak hours they have way too many.”

“In other instances in other ports the FAST Lane doesn’t really become fast until you hit the import lot booth on the U.S. side because of the lack of infrastructure on the Mexican side. We have lack of infrastructure in procedures, lack of infrastructure in physical infrastructure, personnel, fast track programs and so on.”

Perez emphasized that while the U.S. and Mexican governments are working very diligently to solve these issues as a team, the exponential rate of growth of trade is a huge challenge. “Combined with the economic factors of where certain funds get allocated to may also be a challenge that they face. They have to now think “out of the box’ and that’s where the public-private partnerships are coming about.”

He said technology – including the current – could be used better to learn how to measure wait times. “We know that some port directors use physical points but like the GAO report stated, what happens when the line is beyond your field of view?”

Perez envisioned access to the actual carriers GPS system: “CBP can measure from point A to point B how much time it is taking to cross.”

“RELOADED TRIGGER’

If NAFTA was the most important trigger for industrial capacity in Mexico over the past two decades, stand by for the “reloaded” trigger coming soon.

Jaime Roberts, president of the Mexican Association of Industrial Parks (AMPIP) used that metaphor in pointing toward the Trans-Pacific Partnership (TPP), a multilateral free-trade agreement currently under negotiation and designed to promote comprehensive economic integration among Pacific Rim countries. Mexico has been invited to TPP negotiations. Advocates say the goal is to sign a “twenty-first century agreement” that covers critical trade-related issues.

Roberts set the stage for his remarks on infrastructure by noting that labor costs between Mexico and China have evened. He cited statistics showing U.S. content of materials or products used in Chinese manufacturing at only 5 percent, compared to NAFTA partners Canada at 25 percent and Mexico had an integrated product content of the U.S. of 40 percent.

Roberts explained, “The TPP will be a logistic platform for trade and to integrate productive change that will be highly effective.” He said taking into account the labor costs and the content, his group is activating the industrial market of industrial parks in Mexico under two important trends: industrial parks are becoming specialized and certified. “In Queretaro we have parks specialized in aerospace, Guanajuato has specialized in the automotive industry. In northern Mexico we have industrial parks for electronics — the trend is to have specialized industrial parks.”

He noted that industrial parks are being certified by industry type his group is attracting into Mexico. “A certified industry in their own line of businesses wants to work with these certified parks in Mexico.

“If we have the capacity to offer the right amount of spaces and real estate for these foreign investments in Mexico, the answer is not necessarily on the demand side for industrial infrastructure but rather in capital for us to have enough resources to build at the right time and in the right place.”

Looking at infrastructure from the logistic perspective, Roberts recalled, “Mexico, when it lost competitiveness versus China, realized that if it was closest to the largest consumer of the world it still had an advantage. China in 21 days had a product in Chicago and it took us the same amount of days to have a product in Chicago but we could not even think that we could have the product from the southern part of Mexico.”

Roberts said a more recent study benchmarked best countries in logistics, in order to encourage Mexico to compete and determine the required infrastructure. “Mexico needs to have an infrastructure interlinked with everything.”

He lauded the linkage of Mazatlan with Matamoros; “They call it the Northern Industrial Corridor so there’s going to be an important change of logistics and our products will go through the Mazatlan-Durango highway. The central states of the low lands in Mexico did the same through Lazaro Cardenas and Manzanillo to Veracruz.”

While it is easier to point to Tier-1 producers’ impact and capacity needs, Roberts raised the question of capacity to have industrial space for Tier-2 and Tier-3 suppliers, where the numbers of suppliers is far greater. “Developers of industrial parks are analyzing the demand of this type of suppliers to locate in the Bajio. In the north part of Mexico we have to do with an image of violence that that area has had. We in Mexico AMPIP need some time to change that view. We’re working with a testimonial program in northern Mexico to promote the northern border as an area of success. As you can see Mexico has still many opportunities in industrial models.”

Optimistic as the opportunities may sound, Roberts did raise some eyebrows when he said, “in many areas of the country where we want to open industrial parks the prices of the plots have dramatically increased, so that makes it hard to invest in infrastructure.”

“DRY’ OR INLAND PORTS IN PICTURE”

“Inland ports or “dry ports’ are fundamental not only for the north-south trade but also trade coming from other countries come through seaports into the United States,” declared Jorge Canavati, vice-president of International Logistics, Port of San Antonio.

According to Canavati, the inland ports help relieve congestion. It calls for moving the cargo immediately from the entry port and take it into the trade where the inland ports should be. “Here we have all these services of customs, intermodal railroad, physical presence, distribution. This is how we define an inland port and this is a port of entry because I can have a container from the seaport and go through Customs in the inland port. In the United States the economies of scale are different. I have a population in my area and neighboring areas of 3 million inhabitants approximately. That’s the market, that’s where the market is located where we have manufacturing consumption.”

Canavati noted the most important inland port for the United States is Chicago with the Burlington people. He predicted that next year it will be the third largest container port in the United States after Newport and Long Island. “We cannot have an inland port without a market, you need to have to have all those services because the idea is to immediately take out the cargo from the seaport or from the crossing point and to manipulate it and take it to the facilities of your inland port.”

“The foreign trade presence is very important, not only to manage your inventory but also to provide an added value to your cargo and to re-export it, that’s very important. You will assemble it with parts of different countries and you re-export it, all of this is being done in inland ports in the United States and I think it’s where we have the future for integrated logistics of inland ports.”

He explained San Antonio has all the different elements of what is an inland port, including distribution centers for gas and oil areas. “We have the railroad, we have bulk service and we have all these services and once more inland ports of main importance need to have a market.”

Concerning nearby Mexico, he acknowledged that everyone wants to have an inland port in every state, but that’s not possible. “Some| intermodal terminals for these ports need to be efficient for that they need to have a market. The issue is to move the cargo immediately into its destination to market, to manipulate it, to add value and also to export it. It needs to be taken out from the congestion points, from the crossing points, and from seaports.”