How Are You Overcoming the Logistics Hurdles in Mexico?Thu, 09/07/2017 - 09:48
Mexico is the 14th largest country in the world, making distribution and transportation a logistical challenge. Added to its vastness is its reputation for insecurity, an issue companies must overcome to successfully transport goods. These issues not only pose logistical hurdles but can also contribute to higher expenses. Mexico Health Review asked relevant players from the logistics industry how they are tackling these and other challenges while delivering services and products in health and pharma in Mexico.
José Alberto Peña
One of the greatest challenges we face is Mexico’s size, so we must ensure we provide an effective, efficient and continuous service. Security is a hot topic that requires care. We are a low-margin industry, so all additional costs immediately impact our profitability. We need to be prudent about how we manage additional expenses, which, ideally, we should not have. The health industry in Mexico is also a complex and fragmented one that requires different skillsets. I truly believe that Mexico is one of the most complex healthcare markets. 2017 will be a challenge from an exchange-rate perspective. For us, another key component is gasoline, which has a direct impact on our expenses. The exchange rate will have an impact on the industry as a whole because 90 percent of material used to produce medicines is imported.
In Mexico, many products are transported over land but a challenge that is not usually considered is the number of times a package can be exposed along the transport cycle. Before picking up a UPS Temperature True shipment, UPS works with its customers to provide a comprehensive analysis of shipping options and procedures, such as routing, type of transportation required, who will come into contact with the shipment, what type of carriers are acceptable for that type of shipment and set up of contingency shipment plans. Everything is defined beforehand, so when we do pick up a shipment, we know exactly how it is going to move, from where to where and who needs to be notified.
The greatest risk is the loss or damage of the client’s assets. NOM-059, ratified in August 2016, is also important for us. It stipulates that to transport pharma goods within Mexico, a company must use vehicles specifically for this purpose and cannot transport anything but pharma goods. As we are already dedicated to this and have a cold chain in place, this norm has benefited us. Beginning a project is often the most difficult phase because companies do not have the full scope of the project. The private sector is more demanding due to their corporate governance and compliance structures and procedures. The tolerable margin of error is extremely narrow. Governments often do not have standardized procedures or high standards when dealing with pharma goods and their warehouses in most cases do not comply with any NOM rules or regulations, nor do their vehicles.
Protests do not affect us much. What does impact us greatly is the Hoy No Circula (No Drive Day). In 2016, 40 percent of our vehicles could not circulate on any given day. With one No Drive Day per week, 20 percent of our vehicles are idle but with the double measure, two of every five are out of action. Distributing medicine becomes much more difficult. There are also security issues and areas we cannot enter because drivers are asked to pay bribes. We do not enter areas where the driver will be at risk, or when the risk is larger than the reward. If we were to push this, then we would be putting the health of the driver and the good condition of the medicine at risk. We are investing in R&D to allow our customers to buy from us online. In the first month, sales were laughable, but by March 2017 online sales represented 9 percent of our total.
Cost-efficiency is the most pressing issue. We must make our routes more profitable because many new, bigger competitors are entering the business attracted to the segment because distribution in the pharmaceutical sector is one of the best remunerated. However, for a company like Majicarga it is difficult to compete against fleets of thousands of units and the entrance of these new competitors. The prices we must offer are much lower than three years ago. Businesses must find sustainable strategies that help growing companies maintain or even further develop so as not to be bought out or absorbed by larger ones. Insecurity is another significant challenge. Although we have a sophisticated monitoring system, the existent technology is limited. No distributor or technology company in the security market can fully guarantee that a unit carrying a client’s product will not get lost or robbed.
José Eric Delgado
The main problem is the lack of logistics regulation for the transportation of laboratory samples and other types of materials. Those in charge of shipments are often unaware of the logistical intricacies involved and delivery companies can be blamed for any problems. We are addressing this by providing more training for our staff and we have established certain internal rules. For example, if the container provided by our client to transport a sample is inappropriate, we would reject the order or use one of our available containers. Even though a value cannot be placed on samples, an inappropriate protocol can translate to a loss of millions of dollars for clinical laboratories. The samples we transport can be essential to a patient’s health so our mission is to deliver it in the right way and as quickly as possible.
Due to quality and security concerns with land transportation services, the industry has increased the volume of pharma products transported by air. We have been offering specialized services for the domestic market for the last three years and our market penetration has grown over 100 percent each year. Today, we transport around 12,000 tons of pharma products every year, which represents 90 percent of the domestic air pharma market. Our biggest strength is Aeroméxico’s security processes, which make us the most secure airline to fly with. We have invested a lot of resources over the past three years to make sure that 100 percent of our cargo is screened and sterile, which makes us the preferred carrier for most agencies.