CONALOG: Industry 4.0 Tech Ensures Visibility

Q: How does ConaLog help its members improve their logistics processes?

A: ConaLog aims at developing the competitiveness of Mexico’s logistics sector through the exchange of the best practices developed by its many associates. ConaLog focuses on linking academic institutions, the logistics industry and the public sector by establishing impartial triple-helix strategies that benefit all players. For instance, the Council is promoting a working plan based on an assessment of warehousing and logistics needs that was developed in association with the International Youth Foundation and a large logistics provider. This research impacted the academic plans at CONALEP, thus allowing 300 warehouse technicians to graduate with skills endorsed by the industry.

Q: How should logistics operators and their clients work together to maximize logistics efficiency in the automotive industry?

A: Collaboration is the name of the game. This means mapping all players and their contribution to the value chain. For Mexico to play a significant role as a logistics hub, the country needs to develop its infrastructure, as well as lean and agile corporations that live up to the demands of the logistics market in terms of reaction speed and efficiency. Next comes technology. It is impossible to have a collaborative economic environment if there are no technical platforms that generate the visibility that the value chain needs. Being aware of what is going on everywhere at all times is necessary to maximize efficiency. Visibility is achieved when a supply chain in any sector can integrate all Industry 4.0 technologies to ensure total traceability. To that end, blockchain could be a great addition for its ability to decentralize and democratize data so all members of the chain can use it to meet their goals.

This level of integration is commonly found in the consumer goods sector, where many companies and brands have an active and direct communication with consumers. In the case of the automotive industry, it is important for client demands to trickle down the supply chain so component suppliers can know what is behind changes in technical specifications. The automotive industry is at the forefront of supply chain integration given OEMs’ communication with Tier 1 and Tier 2 suppliers.

Q: What role does Big Data play in increasing the efficiency of the logistics chain?

A: Goods, information and monetary resources are the three elements flowing across the supply chain and we need tools that ensure visibility and connectivity to keep track of them. This includes everything from ERP and Customer Relationship Management (CRM) software to Warehouse and Transport Management Systems (WMS and TMS). We also need strategic tools that help companies design their supply chains and transform data into useful information. Technologies such as IoT come in handy for the latter. All internal and external data from a company needs to work together efficiently and Big Data analytics, together with artificial intelligence, enable organizations to process information to ensure the needed visibility and make agile and efficient decisions.

The first step toward adopting these technologies is to have reliable data mining based on strong data governance. This means being able to identify the source that generated every piece of data and the owner of that source. It is also important that data is generated by technologies like master data management (MDM) systems that do not depend on humans logging data. This ensures greater information consistency and a lower margin of error. Next, it is key to offer visibility to understand what happened in the logistics process and why it happened. Many companies that are adopting Industry 4.0 practices are already working on this step.

Adopting predictive models based on external data that can affect the process comes next. This leads to a stage of adaptation and learning where companies have already earned solid experience and can formulate scenarios to anticipate changes in the market to generate innovation and evolve their business. This optimizes processes and ensures the elimination of operational barriers.

Q: What are ConaLog members doing to overcome the challenge that truck robberies pose to the supply chain?

A: ConaLog promotes discussion among its members. It is important to recognize the problems that insecurity represents so we can share best practices to reduce the risk of facing these incidents. According to the National Security System, between 2014 and 2017 transport robberies increased 418 percent. Meanwhile, truck robberies increased to 32 daily events in 2018 from seven in 2017. Companies and industry associations are demanding that public authorities implement effective plans to reduce crime rates. But, since government action usually is not enough to create a safe logistics corridor, companies often need to make huge investments to ensure the security of their shipments.

Companies need to develop their own security and reaction protocols and introduce technologies to reduce the likelihood of one of their trucks being robbed. Companies getting the best results are those that engage in preventive measures, such as controlling information about what is shipped. It is also important to make theft a harder job for criminals by using technology to protect trucks. Preventing criminals from accessing goods by avoiding unscheduled vehicle stops is important, too.

Q: How could the next federal administration promote logistics efficiency in Mexico?

A: The new government needs to lay out a strategic infrastructure plan that focuses on solving three issues. First, it is necessary to guarantee Mexico’s multimodality. Around MX$80 billion (US$3.9 billion) was invested during the Peña Nieto administration to increase Mexico’s port capacity. Yet, railway multimodality that ensures goods are transported from those ports onward was not developed, which created logistics bottlenecks outside ports. It is necessary to create the multimodal infrastructure that allows goods to flow efficiently, thus keeping Mexico an attractive bridge for international trade.

The new government must also focus on developing projects that will allow us to compete regionally. For instance, a railway that crosses the Tehuantepec Isthmus would enable Mexico to compete against the Panama Canal and promote the economic and social development that southeastern Mexico needs. Finally, security issues are an area that the new administration must prioritize. It is impossible to have an efficient road or railway network if there is no guarantee that shipments will be safe.

Q: What kind of transportation companies are more likely to adopt clean-energy motorizations in their fleets?

A: SCT data from 2017 show there are close to 500,000 truck units in Mexico. About 15 percent of these belong to large transportation companies, have an average age of under 10 years and employ highly efficient diesel engines. The problem is in the remaining 85 percent. It will be very difficult for these companies to adopt more sustainable practices due to the tariff restrictions that they continue to face. CONALOG has noticed that companies with their own transportation fleets, such as Solistica’s or Bimbo’s, are more likely to adopt hybrid and electric motorizations as their adoption is due to a corporate sustainability interest. These vehicles are normally used for dedicated operations, although the falling prices of electrification technologies have allowed for greater diffusion. This is still a minimal segment of the truck market, though, and the majority of transportation operations face a serious problem to control their emissions.

The collaboration models that will help transportation companies adopt more sustainable technologies will not be in place until cargo users reach an agreement with their logistics suppliers. Tenders to award transportation contracts must be done strategically. These contracts are usually awarded by route, so companies bid based on the historic volume of a route and a simple statistical estimation for the future, so transportation companies must compete in terms of price rather than added value. Instead, transportation bids should be awarded strategically so logistics suppliers know volume projections and can commit to transport a certain amount of cargo while being able to invest in sustainable vehicles, operator training and the technology necessary to ensure a collaborative model.

The National Council of Logistics and Supply Chain Executives (ConaLog) is a nonprofit organization that aims to boost the integration, development and competitiveness of Mexico’s logistics sector through common best practices