Foreseeing Risks is Key for Logistics SuccessWed, 01/22/2020 - 09:26
To survive in the automotive sector, logistics companies need the foresight to expect the unexpected, says Eduardo Mena, Managing Partner at CYF Logistics Querétaro. “The most important factor for a logistics company is to foresee, to be prepared for any eventuality. In the automotive industry, any production line stoppage can be very expensive.”
CYF Logistics specializes in the automotive industry. The company has offices in Mexico and the US and possesses a large supplier network in the region as well as its own equipment to guarantee its operations. “We always have two or three back-up plans in case something does not go as expected. We need to deliver and meet the needs of our clients,” says Rodrigo Mazatan, also a Managing Partner at the company.
Undoubtedly, insecurity has been among the major issues for logistics companies in recent years. In 2018, the National Chamber of Shipment Transportation (CANACAR) pegged the cost of insecurity at MX$92.5 billion (US$4.77 billion), around 0.5 percent of Mexico’s GDP in 2017. This landscape requires detailed planning on the part of logistics companies. “Routes must be planned and we need to identify the regions where the risks are greatest. Guanajuato and Puebla have become much more complicated in recent years and companies cannot easily relocate their plants,” says Mazatan.
Moreover, companies need to be flexible in their scheduling and be prepared to deal with theft. “We have recommended that our clients adjust their delivery times between 6 a.m. to 6 p.m. so that drivers can circulate during the day or even have the option to sleep at the plant,” Mena adds.
The immediate consequence of high insecurity levels is reflected in higher insurance costs, but logistics companies can help ensure a smooth process. “We need to have everything in control so that when something happens, the insurance company can take responsibility for the client’s loss,” says Mazatan. The Mexican Association of Insurance Institutions (AMIS) said that from July 2018 to June 2019, 11,768 heavy vehicles were stolen, leading to a 10.86 percent increase in insurance acquisition while insurance premiums also rose during the same period.
Another important element logistics companies must foresee is the customs process. According to Mena, companies spend a great deal on their carrier services because they want their shipments to arrive on time. “We deal with many shipments labeled ‘critical.’ We do our best to move these as fast as we can, but the stage where it takes the longest is the customs office. There is huge room for improving the overall customs process,” he says. Mazatan suggests the solution for customs delays is in better systems. “Customs systems should be more specialized. Unlike foreign customs systems, the systems in Mexico are prone to mistakes, which means the agents are not solely responsible for delays. Logistics companies need to consider this factor or they will be in serious trouble,” he adds.
To ensure their best performance, specialization is key. Logistics providers specialized in certain routes and regions can deliver better results for a specific industry, like automotive. “We only use federal highways in Mexico and we have developed a broad network of suppliers from Laredo to Puebla to cover the needs of the automotive industry,” says Mena. Adds Mazatan: “Regarding the US, there are very specific routes with carriers and distribution centers.”
Dry ports could also be an option to improve the export and import processes in Mexico. “Mexico needs to develop more dry ports as we have only a very few options,” Mazatan says. “We should also take into account the opportunities railways present, even though we just have two main lines. In doing so, logistics companies can expand their operations by participating in more effective routes.”