Small Carriers Need Greater Decision-Making PowerMon, 09/01/2014 - 11:43
Within the vast network of the transportation sector, a segment that often gets overlooked is that of single owner-operators and SMEs. For Elias Dip Ramé, National President of National Confederation of Mexican Carriers (CONATRAM), this situation is incongruous, bearing in mind the portion of the sector these microplayers make up. One of his priorities at CONATRAM is to make sure this under-represented crowd is better included in the industry’s decision-making. “This hive of SMEs and single owner-operators manages around 80% of the national cargo, while the large transportation companies that claim all the attention manage just 20% of the cargo.” Some 10,000 companies operate within this segment and CONATRAM has kept itself busy helping them to evolve to their greatest potential. This change in mentality was needed for these small companies to survive in the competitive market. Dip Ramé says that CONATRAM’s training model was based on innovations being made in the US, such as reducing lead times, warehousing, and proper inventories. “The results were very effective. For example, ‘just-in-time’ services were unknown among owner-operators. Previously, it took three days to transport cargo from Monterrey to Mexico City, but after the implementation of proper processes, it just takes a couple of hours,” he adds. Demand from the automotive industry was another driver for change. Dip Ramé explains that the logistics needs of automotive companies railroaded carriers into adopting specific strategies. “A leading supplier might give an 11-hour deadline to its transportation company of choice, regardless of its size. It is then up to the company to figure out how to achieve this service within the given time constraint.”
For CONATRAM, the development of smaller carriers depends on three main strategies: modernizing the vehicle park, incorporating new technology into operations, and personnel training. Among these, fleet renewal is already a pressing topic in the heavy duty sector, which becomes a particularly challenging undertaking for smaller players. To support companies in this process, CONATRAM has established strong ties with the automotive industry in order to obtain favorable costs for fleet renewals. “CONATRAM is bigger than any large fleet company. This enables us to purchase a great number of units, which can be passed on to owner-operators and SMEs.
This allows them to benefit from the same prices offered to large fleet owners,” says Dip Ramé. This pushing for favourable costs has been important, given the disparity that existed in the past. According to Dip Ramé, an OEM might charge 5% interest to a big fleet company buying 50 trucks but hits owner-operators with an interest rate of 18%, putting them off buying new vehicles. He states that this differential treatment has had a major consequence: the purchasing of obsolete trucks from the US has risen, slowing down the domestic market. Beyond giving the same prices to all companies, CONATRAM is pushing for equality in other areas. Access to financing for smaller firms represents a serious challenge. OEMs have begun to provide financial services, but they are more reserved in offering credit to owner-operators that are seen as less trustworthy. Therefore, CONATRAM believes that a different level of financial support should come from the government and NAFINSA. “Congress must allocate a budget for the renovation of the vehicle park, and this should be a priority,” states Dip Ramé. “The government must take a more proactive role in financing developments in the transportation segment.” Authorities have taken steps to implement scrapping programs, but CONATRAM feels these could be improved. A petition of CONATRAM members has been given to the government, requesting that units affected by scrapping programs should be given a value of US$19,040 and be considered as collateral on the purchase of new trucks. Dip Ramé says such a scheme would make it far easier for smaller companies to renew their fleets, without feeling they were losing out financially. CONATRAM is not alone in this fight, as ANPACT and CANAPAT have joined it in its fleet renewal mission, but Dip Ramé says progress remains slow. “It is imperative that the government becomes more agile in its decisionmaking. It is not just about renewing the vehicle park, as doing so would reduce pollution and improve healthcare, leading to millions in savings for the country.”
The recently initiated Fiscal Reform is being viewed with wary eyes by the automotive and transportation sectors alike. “The manner in which it was approved by Congress has only increased stagnation for SMEs and single owner-operators,” explains Dip Ramé. He predicts severe consequences as a result of Congress having approved the reform without fully understanding the dynamics of the market or the industry. “Ultimately, this reform benefits those that are already better off, but will push small, formal companies back to being informal. There will now certainly be small carrier companies that cease to exist. With its Fiscal Reform, the government has negatively impacted Mexico’s transportation sector,” he concludes.