FEMSA seeks best practices in supply chain logistics By Graeme Stewart
For some, the progress of logistics in Mexico isn’t moving fast enough while for others, it has advanced at an astonishing rate.
Firmly in the latter camp is Ramiro Delgado of Femsa Logistica who at the Logistics Summit said that improvements to logistics and the supply chain in Mexico over the past five years have been nothing short of incredible and that there is more to come as companies continue to invest in technology.
FEMSA, or Fomento Economico Mexicano, S.A.B. de C.V., based in Monterrey, Nuevo Leon, is the largest beverage company in Mexico and Latin America, so the company has been at the vanguard of research, analysis and operational systems of both logistics and the supply chain.
Delgado laid out his arguments for a greater use of technology, sea ports and a greater co-operation with the Mexican government in improving intermodal services, even though FEMSA has yet to invest in either 3PL or Intermodal Stations.
Delgado said: “Logistics in Mexico has been improving dramatically. Our companies are continually looking for best practices and we are continuing to integrate those into our operational capacity. So, for example, regarding technology, we have taken a quantum leap over the past five years and we are now able to bring those elements into our supply chain. There is a big change in the offerings that we are building up for our customers.”
“That is one element. The second element is the authorities in Mexico. They have just realized that our activities are an important element in building up value for our country so we are now working together with the Government to improve border customs and freight by rail and by sea.”
“For me, in the last few years the supply chain in Mexico has progressed at a rate at which would normally have taken 10 years. For example, we are reducing the age of the fleet, since right now we have an important regulation for the maximum weight on our trucks on the roads, allowing us to move more cargo, and we have seen an increase in cargo by sea, following in the footsteps of the United States which has increased ocean-going cargo.”
On road freight, he said: “Moving freight from Mexico to the United States is not an issue but moving freight from the United States to Mexico is. But that is being dealt with and easier movement between the United States and Mexico is an asset for our customers. So I think the majority of the logistics companies are moving in the right direction.”
“We have been improving freight by road. My company has been training drivers and training is a very important part of improving logistics in Mexico. It is exactly the same as what happened in Europe 10 years ago. In 2005, the UK was importing drivers from abroad and teaching them how to drive in the UK because of a shortage of British truck drivers. And we are doing exactly the same thing here in Mexico now. We are training drivers so they can drive in the United States. It is small things like that which can make a difference.”
Since 2009, Texas A&M Transportation Institute’s Center for International Intelligent Transportation Research (CIITR) has studied freight activities of U.S.-Mexico Point of Entries (POEs) in Texas, California, Arizona, and New Mexico. CIITR researchers have identified trends and quantified variations in freight movement across the border.
Better understanding what is being shipped where, the method for moving it, and how freight movement affects local and national economies, the environment, and congestion at traditional bottlenecks (i.e., border crossings) can help stakeholders make more informed decisions impacted by and involving border trade. These beneficiaries include but aren’t limited to:
- Shippers, who can reschedule or reroute freight to avoid congestion, which is particularly important for just-in-time freight movement (e.g., produce).
- Policy makers, who can make more data-based decisions regarding, for example, allotting the state department of transportation’s limited resources to facilitate trade (e.g., prioritizing the repair of roads used by long-haul trucks).
- Commuters and other members of the driving public, who can plan leisure and business travel across the border to avoid peak bottleneck times associated with freight movement.
- Environmental regulatory agencies, which can better manage border-town air pollution caused by long waits at border crossings through knowing when and where these impacts occur.
In particular, knowing which interior U.S. states trade most with Mexico can help inform policy makers and other stakeholders in these states to better prioritize border-related transportation infrastructure needs, thereby maximizing the economic benefits of efficient trade for those states and the nation as a whole.
From 1995 to 2012, surface trade between the United States and Mexico increased from approximately US$100 billion to US$400 billion. Essentially, trade had quadrupled despite the recession of the early 2000s and the global financial crisis of 2007. Imports from Mexico consistently exceeded U.S. exports by 15 to 20 percent higher during that period. Approximately 44 per cent of trade represents exports to Mexico compared to 56 per cent going to the United States.
Products moved by trucks are estimated at an aggregate freight value four to five times higher than products carried by rail, though both modes increased steadily over time, economic downturns notwithstanding. Texas enjoys the most trade with Mexico of any state. Freight activities at Texas POEs, particularly Laredo, are considerably higher than in the other three states combined. In fact, Texas is home to three of the top five POEs - Laredo, Hidalgo, and El Paso. Researchers classified commodities in six groups: food, minerals, wood, metals, manufactured goods, and “other”. Manufactured goods represented, by far, the commodity shipped most often across the border, both ways.
FEMSA was keeping a close eye on the development of 3PL and Intermodal Stations and Delgado explained: “We are well aware of 3PL and intermodal stations and there are some players in Mexico that are investing a lot of money in them. FEMSA is not investing in them at the moment but we have been working with the Secretary of the Economy and looking at the best places to locate warehouses across the country in order to improve the supply chain and lower costs. We have been attempting to get some local companies to invest in those projects. As I said, so far FEMSA is not investing in 3PL or intermodal stations but we continue to analyze the situation.”
“It is a continuous evolution. We hold those meetings with the Secretary of the Economy three times a year, the last one was only last week, and they have proved to be very helpful in our continuing project to improve logistics and the supply chain.”
Border crossings were a problem, he admitted and added: “As for Border crossings, there has to be about 1,000 Customs agents on the Border but perhaps there are only about 100 good ones. So I think it is not about the amount of Border crossings we have, it is about the quality of the Border agents.”
“But for me, the most important element in improving logistics and the supply chain in Mexico is technology. It is vitally important that we embrace as much technology as we can to create visibility, better tracking of goods and improve security. That has been happening and that is why we have seen such a leap forward over the past five years.”
And on rail freight he had this to say: “There has been a change in Government legislation that now allows private users to lease Mexico’s rail tracks and that will be very helpful but there is a great need to invest in the railways to increase capacity for freight. Right now the capacity is something like 70 per cent so there is a demand for increased capacity.”
“I strongly disagree with those who say that investing in the railways is a waste of time and that more money should be spent on increasing the number of lanes on the highways. I think we have to concentrate on multimodal services and that includes rail, road and sea. Mexico has two very long coastlines and we have to work with the authorities to build up our sea ports and connect them with rail lines and highways. Multimodal is very important.”
“But, as I said, the supply chain and all the logistics solutions in Mexico over the past five to 10 years have been moving forward very fast and now I feel we have the experience and knowledge to introduce the most advanced technology into our supply chain and logistics operations. We will be working on that in the very short term.”