José Antonio Lorca
CEO
SIL Logistics
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View from the Top

Warehousing Allows Companies to Focus on Their Core Business

Tue, 09/01/2015 - 11:54

Q: Where did SIL Logistics originate and what have been its principal recent developments?

A: We entered the market ten years ago with an investment for what is now the biggest warehouse in San Luis Potosi. We provide efficient services in terms of logistics, quality inspections, and outsourcing. We are located on the most important highway of Mexico, 1.5km away from BMW facilities and 4km away from GM. Most companies come to Mexico planning to begin with 50% of their capacity from their home countries and to acquire the other 50% once they are established. We offer warehouse management to these companies, receiving and delivering their materials in a timely manner, so that they can concentrate on other core business activities, and accordingly operate at lower costs. We have received considerable demand for our industrial park after the announcement of BMW’s new plant. We are also receiving business from Japanese companies, ten of whom are already working with us, with 25 more that will arrive in the next three years.

Q: What major achievements have been the company highlights since it was established?

A: Our first client was a French automotive company that held MX$150 million (US$10 million) in stock per month divided between 32 suppliers. We presented a five year plan which would save them MX$120 million (US$8 million) monthly by operating eight delivery windows per day, seven days a week. Specifically with a US automotive company, we grew from employing eight people to 400 people and managing 4,000m2 of storage for chemical products and raw material in the first two years of collaboration. In terms of racks and height, with 26,000m2 of storage space, SIL Logistics is the most efficient warehouse company in San Luis Potosi. We use double density racks and have double reach forklifts, which gives us an advantage of 33% against any other warehouse. Height gives us another 20% advantage, given that most warehouse heights in San Luis Potosi reach only 6m while we offer 10.5m at our lowest point.

Q: Between local and international competition, which would you consider to be SIL Logistics’ biggest threat?

A: To date, a total of 18 companies are operating in San Luis Potosi, 14 of which are local and four international.The international competitors lease a facility to provide services to their clients, but do not operate with low costs, making it difficult for them to close contracts with Tier 2 or Tier 3 companies. SIL is competitive on price, service quality, and local customer adaptability so we are currently transitioning toward gaining larger contracts.

Five years ago we were working with 140 customers, around 75% of which were small companies. However, we realized that having such a large customer base was not cost effective, so we decided to target fewer customers with higher requirements. Three years ago, we had only six customers filling our entire capacity, but this presented more risk, and when two of them built their own warehouses, we changed our strategy once again. Now, we aim to manage 25 clients at a time, and to strengthen long term business relationships with all of them. Around 50% of our business is currently directed at the automotive sector since SIL began with a complete focus on automotive but have diversified since then.

Q: Why would you advise against companies building their own warehouse facilities?

A: In terms of cost reductions, cost avoidance and working capital reduction, the advantages of specialization are clear. Warehousing is complex, consumes space, and implies more liabilities such as leasing forklifts. We are concentrating on warehouse services, so our floor may be 100 times cheaper than on-site facilities. To assist automotive companies, we are focusing on those that are already customers and are introducing assembly lines into the state. When we achieve this, we will be at 85% capacity, which is our maximum limit. We also plan to develop our industrial park, to offer warehousing, delivery, and shipping services to the manufacturers established there. Over the next five years, we expect to be managing five small- to medium-sized Tier 3 automotive companies with warehousing space of between 5,000m2 and 8,000m2. We currently offer the same logistics services in Aguascalientes and we have been exploring options for expansion in Guanajuato. We have already acquired 3 hectares in Aguascalientes, located 2.5km away from the nearest Nissan facility.