Mauro González
Managing Director
Kuehne + Nagel Mexico
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View from the Top

One-Stop Shop for Automotive Logistics

Mon, 09/01/2014 - 13:02

Q: What role has the automotive industry played in Kuehne + Nagel’s double digit growth?

A: More and more OEMs are confirming or planning on opening manufacturing plants in Mexico. The biggest growth that Kuehne + Nagel will see for 2014 and 2015 will be from the automotive division. The main concerns involve government reforms and the obscurity surrounding the taxes on imports, as these will certainly change the game on the cash flow side. One of the areas of opportunity that needs to be addressed is the development of human resources. The government’s strategies for developing human resources in the automotive industry are very coherent. But other sectors, like logistics, are seeing a widening gap between the government, universities, and logistics companies. The lack of specialized human resources has created a high turnover rate within the logistics industry, which is unhealthy. If local talent is not fully developed, then logistics companies will continue to bring people from abroad to fill this gap.

Q: What is Kuehne + Nagel’s strategy to maintain its current client base while looking for new clients?

A: We changed our business model in 2014 to focus on our existing customers. These customers are expecting huge growth and we want to be there to support them. We are cherry-picking new customers as we want to create synergies in our client base. For example, if they are going to the same destination or have similar structures, we can combine their volumes and reduce their logistics costs. By analyzing the end-to-end supply chain, we find these synergies and create economies of scale. We have a wide range of customers, like Getrag and Volkswagen, while we are also finalizing an approach with Ford and other companies. We have a very strong proposal for over-land shipment in North America. If we are importing something for a company to the Chicago and Michigan area, we want to offer the same service to other importing or exporting companies that are going to the same destinations. This will help us to close the loop and offer a strong circuit dedicated to the automotive industry.

Q: How sophisticated is the logistics industry in terms of technology and process automation in Mexico?

A: Kuehne + Nagel has a unique operational system that is used worldwide for the end-to-end supply chain and it also has a unique financial system. Kuehne + Nagel does not work with third parties, which is a competitive advantage. In the local market, only 10-15% of logistics companies fully use the benefits of technology; the rest are yet to optimize and automatize their processes. Technology increases competitiveness and offers full visibility, enabling a company to pre-plan shipments, manage warehousing, and handle customs and urgent shipments. There is still a huge gap in the Mexican logistics industry, and technology will be the great leveler. Logistics is like an iceberg, and most companies focus on visible aspects like transportation costs and transit times. But there are many factors below the surface such as technology, security, liabilities, customer satisfaction, packaging, and so on. There is much that is yet to be explored in Mexico and Kuehne + Nagel is focusing on technology in order to uncover these areas.

Q: What demand are you seeing from the automotive industry for warehousing in terms of size, location, and provision?

A: The demand depends on the location and the type of company, whether it works in production, distribution or aftermarket. The biggest demand for warehousing is in the Bajio region. There is a rising demand in the north from nearshoring companies trying to take advantage of the proximity to the US in towns like Saltillo, Mexicali, Chihuahua, and Monterrey. We have two main logistics models in terms of warehousing. One is called “Share,” which incorporates warehouses for multiple customers in the biggest cities of the country. The “Dedicate” warehouses are built-tosuit and depend on each customer’s requirements. For example, Pirelli has a built-to-suit warehouse inside its Guanajuato plant, which was built with our expertise and design. “Dedicate” can cluster up to three companies in one warehouse, or it can be fully dedicated to one company. The location of the warehouses depends on the logistics trends and the location of the customers. Mexico lacks Class A warehouses but there is no more land available in Mexico City. You have to go further out to build, and the country has to invest in these facilities.

Q: How willing are automotive companies to completely outsource their logistics management to companies like Kuehne + Nagel?

A: This willingness to outsource logistics management depends on which part of the supply chain the focus is on. OEMs tend to retain control over their logistics and only outsource certain parts, especially since the current tendency for OEMs is integration and the adoption of the 4PL (fourth-party logistics) system. Tier 1 and 2 companies outsource far more in terms of management as they are more focused on the production side. Kuehne + Nagel specializes in Tier 1 and 2 suppliers but it wants to become stronger in its links to OEMs by offering them integrated solutions.

We have strategic discussions with our customers every six months to discuss their future outlook and needs. These discussions tend to include not only the logistics and production staff, but also sales, financing, and marketing as these teams can come up with ideas or solutions that impact logistics. It is important to have these discussions given how quickly the scope of the automotive industry is changing. Some of these companies are growing so quickly that we need to develop a network analysis every eight months, since whatever was presented eight months prior in terms of national distribution might no longer be applicable to their needs. 

Q: How has Kuehne + Nagel adapted its services to the changes taking place in the automotive industry’s global manufacturing and procurement strategies?

A: Historically, the logistics services for the automotive industry were fragmented as the sector was very pricedriven. There are now new trends that are opening up the industry, allowing for, more integration and synchronization of the supply chain. For example, we are consolidating many services for Hella Automotive, such as international forwarding, custom clearance, warehousing, and distribution. We are not only servicing one plant but multiple ones in Mexico. This integration has an additional layer of complexity because you need the right infrastructure and IT resources. What distinguishes Kuehne + Nagel from its competitors is its CIEL system, which offers greater visibility across the entire supply chain to the customer. This allows us to combine several services like air and sea freight, customs clearance, reverse logistics, distribution, and warehousing. On top of that we are offering 4PL, which Kuehne + Nagel calls Integrated Logistics, where we create different logistical models by analyzing distribution networks and end-to-end freight audits. We also present improvement projects to our clients as an added value service. This lets us decide on one set of goals per industry, such as zero line shutdowns for the automotive industry. Essentially, all of our commodities and products are aligned with the KPIs the customer is looking for; we combine various services into one single solution for our customers.