Challenges, Best Practices in Cross-Border Supply ChainBy Carlos Godinez | Wed, 07/07/2021 - 09:06
The cross-border supply chain in North America is the equivalent of a master orchestra as it involves the swift coordination between different entities and parties “touching” a shipment, truck or container.
Normally, a Mexico-US cross-border truckload move would involve at least five “touches:” the Mexican carrier, taking the load from the Mexican shipping location to the Mexican border; the Mexican customs broker; the transfer company, crossing the load from one side to the other side, at least in the case of Laredo – one the busiest gateways in the world with more than 35,000 truck crossings every day; the US customs broker, who may clear the same trailer, without unloading the cargo, or coordinate the transload to a different US trailer; and the US carrier, which is responsible for hauling and delivering the shipment to the final destination.
This requires a lot of control and “syntony” among all parties involved. The lack of shipment documents to clear or a miscommunication between players can disrupt the “cadence” of the move, resulting in high and expensive delays at the border. All this is naturally impacted by the huge and increasing imbalance between north-south trade flows between our economies. If the trade imbalance, driver scarcity and overall capacity crunch was a constant issue before COVID times, international shippers in North America are facing one of the most challenging times in transportation history after the COVID recovery. With truck to load ratios at Laredo reaching double digits and in excess of 14 or even 20 to one (20 available shipments ready to ship per one available truck) finding and securing competitive and reliable capacity is what keeps international supply chain managers up at night.
That’s when other transportation modes or options come into play. Unfortunately, rail and ocean also face capacity and other particular issues. Rail capacity is almost at full, with practically no stacked containers in terminals, and railroads are trying to maximize container utilization on the street to free up equipment (containers and chassis) while improving train speed. Efficiency and productivity is the name of the game. In the case of Ocean, the story is not very different; vessels are normally sold out, with black sailings across the board, with congested and imbalanced ports in Asia, America and Europe. Lead times have extended, stressed out by the lack of inventories in raw materials and parts that are impacting almost every industry.
Certainly, navigating through the cross-border storm is not easy and logistics experts need to be creative and disruptive in trying new ideas. Although there is no “secret recipe,” here are some of the recommendations and best practices that, in combination, will help companies to better face and solve these challenges:
- Design and implement a mode diversification strategy. There is too much risk in relying on only one transportation mode. Truckload and over the road transportation represent +70 percent of how cargo moves in North America. Yes, there are natural and conducive markets to trucks but when possible, see what other modes could do for you. Intermodal and ocean are certainly an option when the lane and lead time allows for incremental transit time. The goal is not to convert all the lanes and flows from truck to rail or ocean, but to find the right balance and sweet spot between all modes. Not all lanes and SKUs should be treated the same. If the lane has a long length-of-haul, an intermodal ramp is nearby the origin and destination, and the move relates to an inter-plant/replenishment flow, then intermodal can be a great option.
On the other hand, ocean has normally been considered a great option for intercontinental shipments; however, it is a viable option now for Mexico-US moves as there are new short-sea line alternatives connecting especially the Gulf of Mexico with southeast and northeast ports in the Atlantic US. Florida ports are positioning as key hubs for cargo coming from Mexican ports and ocean carriers are now offering not only the traditional 20’, 40’ and 45’ containers but also 53’ containers (the most common equipment size used in the TMEC region).
- Try new borders and crossing points. Laredo is and will remain the busiest gateway between Mexico and the US. Its geographical location and strategic connection, supported by road and rail infrastructure, has encouraged this growth and leadership position. However, depending on the lane, other options might be available, representing access to Mexico and US carriers not available in Laredo. Alterative ports like El Paso, Calexico, Eagle Pass, McCallen and Brownsville are also viable and competitive options for loads going to the West Coast and the Southeast.
- Transload as another capacity source. If intermodal, rail or ocean are not an option for your product or lanes, then try to incorporate transload as an alternative in your truckload flows. Every year, fewer US carriers are willing or interested in sending their assets to the interior of Mexico due to the additional time to get the equipment back, but also because of the higher return on the equipment and attractive rates paid in the US domestic market. There is a reliable and safe network of cross docks at the border, allowing access to US regional carriers that want to secure a load-back to return to desirable markets within the US. Finding the right cross dock partner with the right product expertise, handling, safety and security protocols is critical in the success of a transload strategy.
- Maximize the use of technology. There are several tools available in the market to improve load control and bring “light” to the cross-border supply chain. TMS, or Transportation Management Systems, are technology platforms to connect all the different parties involved and get the shippers back into the “driver seat” to better orchestrate the decision-making process through hard data, dashboards and business intelligence.
- Synchronize and build strong partnerships in the cross-border supply chain. Putting together all the pieces takes time, energy and a clear desire to collaborate and create synergies and collaboration between the different players on both sides of the border. Creating a partnership mentality throughout the chain will pay out. Getting the team together in the same room, now that people are slowly coming back for face-to-face meetings, to map out the current process, understand the gaps and define the streamlined future state, supported by open dialogue on the company’s vision, goals and objectives and listening to their partners’ concerns, challenges and ideas drive engagement, commitment, clarity and alignment between all players.
By combining all the different strategies described above, developing a robust Business Continuity Plan, putting technology in shippers’ favor and streamlining the overall process (from documentation and information to security, financial and the physical move of the products), international shippers will strengthen the resilience of their supply chain and be in a better position to sort out the inherent challenges and dynamic environment of cross-border logistics. In the end, all these actions should help to develop a more cohesive and “synchronized” cross-border supply chain, acting in syntony as a best-in-class orchestra.