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Analysis

Logistics Progress Made but More Needs to Be Done

Sat, 09/01/2018 - 10:27

Insufficient infrastructure, security risks and an outdated regulatory framework for the logistics sector are just a few of the hurdles logistics operators face in Mexico. However, the implementation of digital solutions and best international practices can help companies increase their operational efficiency to the customers’ benefit. The World Economic Forum’s Global Competitiveness Report 2017-2018, ranked Mexico 71st of 137 countries in terms of the quality of its infrastructure, with railroad, port and air transport infrastructure as the areas where the country has lagged the most.
What to address first is a topic of discussion. Arlette Lua, Director of Automotive Industry Vertical – Mexico at US-based operator Crane Worldwide Logistics, says Mexico’s roads are the most important area of opportunity for the country to improve its logistics competitiveness. On the other hand, Miguel Muñoz, Managing Director of Geodis México, says the country’s logistics infrastructure presents a similar challenge for all industries and underlines that Mexico’s port infrastructure has been overwhelmed.
President Enrique Peña Nieto’s administration laid out an action plan to develop the country’s infrastructure but this support has fallen behind. The Mexican Chamber of the Construction Industry (CMIC) estimates the country will have advanced 80 percent of Mexico’s National Infrastructure Plan 2014-2018 by the end of the Peña Nieto government in the communications and transports sectors, including ports, airports, roads and railroads. President-elect Andrés Manuel López Obrador has vowed to allocate resources equivalent to around 4.2 percent of Mexico’s GDP to financing infrastructure projects with regional impact as well as priority social programs in his Nation Project 2018-2024. The construction, modernization and preservation of Mexico’s roads will play a key role in this process. Ramiro Delgado, Global Commercial and Marketing Director at Solistica, says logistics operators in Mexico also need to work with the public sector to guarantee that investments in infrastructure are aligned with the industry’s needs. “Construction of multimodal logistics centers is key,” he says.
Security has also become a major concern for companies in Mexico. According to data from CANACAR, over 10,200 truck robberies were reported in 2017 compared to 5,435 robberies in 2015, which means an 87.7 percent increase in two years. The association highlights that the sum of direct and indirect costs of truck robberies in 2017 amounted to MX$92.5 billion (US$4.9 billion), which equaled more than 0.5 percent of Mexico’s GDP in that year. State of Mexico, Puebla, Michoacan and Tlaxcala concentrated 75 percent of all truck thefts. Train robberies also increased in 2017. Mexico’s Railroad Transportation Regulatory Agency (ARTF) reported a total 1,278 incidents where cargo was stolen in 2017 and at least 135 cases of train robberies involving automotive products, particularly assembled vehicles. Close to 50 percent of all these robberies took place in Veracruz, Puebla, Guanajuato and Queretaro.
Alexander Katsouris, Automotive Logistics Director at Europartners México, says security is a key concern for both automotive companies and freight-forwarders. Muñoz agrees: “Security issues in Mexico are a factor that should not be overlooked since logistics operators help automotive clients transport goods that are highly susceptible to theft.” Moreover, according to Francesco Petrelli, Automotive Specialist at Ventana Serra, security issues along Mexican railroads have disincentivized their use among logistics operators.
Several technology companies have identified the needs of logistics companies in terms of security and efficiency and have developed digital solutions to support these players. “Being unable to effectively control costs can prevent carriers from offering competitive prices,” says Fernando Segovia, Operations Director at Mexican software company SÄKTESI. Several global freight-forwarding and logistics players have also developed their own platforms as a strategy to offer clients in the automotive and other industries transparency. “Digitalization has been a key element in bridging the gap between clients and forwarders,” says Katsouris.