Working to Overcome Cross-Border Logistics BarriersTue, 09/01/2015 - 12:19
One of the main challenges for logistics companies is how to navigate the strange waters of Mexican bureaucracy. Regulations are constantly changing, so the many new companies entering the market are all trying to find the most effective way to manage their freight operations. However, after 13 years in the market and having successfully managed BMW’s auto parts export shipments for more than 40 suppliers, Senator International is now well versed on these matters.
Senator is a family-owned company that offers a more fluent process for its clients, providing customized logistics solutions and personalized service. Approximately, 60% of the automotive business managed by Senator is consigned via air freights, while the other 40% travels by sea. As well as recently including truck services, its primary strategy over the last two years has been the implementation of an effective emergency concept. “Most companies in the automotive industry work with yearly contracts or requests for quotations, so the ability to adapt those services to the timescale of an urgent request is a huge competitive advantage for any logistics company,” explains Luis Gómez, General Manager of Senator International. “However, this has posed certain challenges for Senator, especially regarding road-based operations.”
Currently, Mexico uses the same customs procedures for rail and sea logistics. However, three years ago, the Mexican customs office has made considerable efforts to align and digitalize all the paperwork for these procedures through VUCEM, which is a unique single window for mexican foreign trade. Now, every importer and exporter is forced to digitalize their documents before issuing the import declaration. There are special import programs that allow the merchandise to enter without passing through customs, declaring every item on arrival at the warehouse. However, companies need to comply with highly specific requirements in order to enter this program. Additionally, the military or other transportation authorities are entitled to inspect the merchandise if they desire. Between Laredo and Mexico City there are several checkpoints where truckers can be stopped to have the cargo or the paperwork inspected. Despite these complications, free trade zones (FTZs) help Senator International and similar companies ease their logistics operations and attract new investment. Without a doubt, the process has been simplified, but it remains a complicated operation, according to Gómez. “The best way to avoid these potential delays while importing cargo is for a company to have their own warehouse or ‘fiscal strategic location’,” he explains. “This would allow companies to declare the cargo in their own facilities and create a personal FTZ.” Senator is not yet looking to move into that area, but the company has seen the need to be much more present in FTZs, keeping a direct communication with customers regarding the status of every cargo inspection.
A much more significant challenge is the restriction of Mexican drivers in US territory, which sometimes means there are no available drivers in the US, despite having Mexicans available to cover them. As most companies work under a just-in-time program, these regulations have the potential to put a real dent in the whole process. “Ironically, US drivers are allowed to enter Mexico,” states Gómez. “This is a long-standing political matter, but something has to be changed to create a more dynamic logistic framework for the customers.” In addition, even though Senator subcontracts all its trucking services, the company still has to compete with these players for the customers’ attention. It is a problematic situation given that profit margins are exceedingly tight, making it impossible for Senator to match these companies’ prices.
Since BMW made the decision to come to San Luis Potosi, Senator has been liaising with this OEM as they seek new collaborative projects. Ambitiously, the company now intends to oversee Audi’s individual automotive accounts with third-party logistics (3PL) and fourth-party logistics (4PL) at the new plant in San Jose Chiapa. Senator has also acquired new business with Volkswagen, starting import and export truck operations between Volkswagen Puebla and Volkswagen Alabama. In light of such impressive partnerships, it is surprising that the company began operations only five years ago with a staff of 12 people. Now, the staff has grown to a total of 40, leading to the inauguration of a new office in Puebla at the end of 2014, as well as a hopeful expansion plan to include new branches in Guadalajara, Queretaro, Leon, Silao, and San Luis Potosi. Furthermore, the company is working with a customer that wants to establish its new operations in Silao or Leon in order to supply Nissan in Aguascalientes. “Senator wants to offer the best solutions for our clients, focusing on core opportunities and exploring options for re-engineering their current logistics processes,” concludes Gómez.