Local Focus, Diversification to Hedge RisksSat, 09/01/2018 - 11:17
Although companies tend to focus their business on other players from their home country when they invest in Mexico, Kevin Schoberth, General Manager of Dietrich Logistics, says these businesses are missing an opportunity to grow in a fast-developing market.
“When we first started operating in Mexico, most of our business came from our Germany-based headquarters and the tenders in which the company participated,” says Schoberth. Being a German company, Dietrich Logistics has traditionally worked with German automotive companies. The company managed freight-forwarding needs for Continental, Volkswagen, Porsche and Daimler but eventually, relying solely on these companies appeared to be a bad business call. “Depending on tenders is dangerous because losing one can mean running out of work,” he says.
To counter this risk, Dietrich Logistics started approaching local companies to diversify its source of business. “As of June 2018, Dietrich Logistics generates around 80 percent of its business locally,” says Schoberth. The company reached this level of diversification by delivering quality services regardless of the size of its client, while including new services in its logistics offering. “Most logistics companies only focus on the volumes clients manage and often lose interest with shipments under 50 seaborn containers and 20 ton for aerial transportation,” says Schoberth. Dietrich Logistics, on the contrary, did not shy away from these clients.
Dietrich Logistics also relied on the good relationship it had established with airlines to ensure flexibility in case of emergency shipments. Variations in aerial transportation tariffs, however, can make contract negotiations challenging. “Aerial transportation tariffs are normally low when contracts are awarded and these usually last three years without changes in the initially accorded costs,” says Schoberth. While this scheme offers logistics operators security in their operations for some time, it also puts financial pressure due to variations in the price of airborne cargo. In those cases, logistics operators must ship goods on flights that fit the assigned budget, which rarely happens without connections.
The company also stopped focusing only on airborne and seaborne logistics to integrate customs procedures. “We added these services to become a freight-forwarder that can support its clients in all variety of logistics situations,” he says. For Schoberth, a key issue in Mexico is that logistics companies often do not collaborate with customs agents nor do they send alerts to clients when their products arrive at ports or airports. Dietrich Logistics always notifies its clients when and how their products will be delivered. In addition, the company helps its clients with their customs processes when needed to make sure their products are cleared swiftly and are not fined by the Mexican Tax Administration Service. “By going the extra mile, Dietrich Logistics has earned the trust of big players in the Bajio area, supporting them with aerial exports as well as seaborn and land-based freight-forwarding,” says Schoberth.
Dietrich Logistics has taken advantage of its expertise in Mexican laws and norms, as well as its personalized service to stand out in the Mexican logistics market, according to Schoberth. “We do not see ourselves as a logistics service supplier but as a company that operates as the in-house logistics department of its clients,” he says. “Most large logistics players usually cannot offer such personalized attention due to the substantial amount of work they have.” The company bets on transparency and flexibility to remain competitive, as well as close collaboration with customs agents to make sure all products are classified and ready to be processed prior to their arrival at a port or airport. As a result, they can be cleared once they cross the border.
“Being transparent in customs processes is important so clients do not face problems if they are audited by Mexico’s fiscal authorities,” says Schoberth. Mismanagement of a shipment in a customs office can mean having past, present and future shipments revised by the Mexican Tax Administration Service, as well as fines for the client. “Dietrich Logistics offers clients an integral service where all customs clearing processes are taken care of either directly or by connecting clients with our partner customs agent to prevent problems,” he adds.