Trends Shaping the Future of Freight Forwarding

As Mexico solidifies its position as a nearshoring hub, the freight forwarding industry faces a transformative phase marked by significant challenges and opportunities, as companies are striving  for resilient, efficient, scalable, sustainable, and more technologically driven global supply chains. To take advantage of these opportunities and remain positioned as a logistics hub and top trading partner of the United States, Mexico needs a robust logistics backbone.

Globally, reliability in terms of time and costs is determining competitiveness in the sector. Freight forwarders, facing the need to adapt to changes, are participating in new regionalized supply chains, aiming for greater resilience and sustainability, says Gaston Cedillo, Technical Director, the National Laboratory Mexican Institute of Transportation.

On the other hand, attraction and innovation are crucial, says Ricardo Rochman, CEO, WEPORT. The focus should be on decision-making centers that can scale customer cargo operations through technological investment, he adds. It is also essential for customers to be willing to embrace innovation and adapt to technologies.

On average, manufactured goods from Mexico carry 40% of US content, while Canada's contain 25%. A report by the US Trade Department states that Canada and Mexico, the United States' largest trading partners, will be critical partners in strengthening secure manufacturing supply chains in North America. 

Balancing future-focused innovation with present needs is crucial for functionality. Over the past seven years, Mexico has witnessed a revolution in logistics technology, particularly in areas like AI, tracking systems, real-time data interpretation, and predictive analytics. Freight forwarders must then prioritize technological advances to address the limitations of digital transformation and infrastructure challenges and to enhance the efficiency and scalability of e-commerce operations. Technologies like AI and data analytics hold immense potential to optimize route inventories, minimize human errors, and even prevent cargo theft.

“The main challenge lies between using technology for efficient digitalization and the resistance to its integration due to costs and established processes. The key is not identifying new technologies but integrating them into daily operations,” says Álvaro Villar López, Regional Director NA, Nowports.

For the logistics industry to be more resilient, it must prioritize cybersecurity and perform comprehensive risk analyses that consider everything from manufacturing inventory to the final product, says Astrid Karam, Marine Cargo & Logistics and Aviation Vice President, Marsh Latin America.

Companies are also finding many opportunities in warehousing and distribution, especially for investment in industrial areas and equipment. Being a freight forwarder company with assets enables it to provide a much more personalized service. According to the Ministry of Economy (SE), FDI reached US$18.6 billion during 1Q23, 48% more than the figure registered in the same period in 2022. Most of the investment was concentrated in Mexico City and Nuevo Leon, two states that require the most industrial spaces. 

In 2022, industrial parks reported occupation rates of 97.9% and 30% growth in developed inventory. In this sense, the Northern, Bajio, and Western markets reported a 35% increase in inventory, while Mexico City's metropolitan area reported only a 17% growth rate. 

According to a report by the Inter-American Development Bank (IDB), nearshoring has the potential to contribute an additional annual revenue of US$78 billion to exports of goods and services in Latin America and the Caribbean. While Mexico and Brazil stand to gain the most, all countries in the region would benefit from nearshoring. 

Manuel Diaz, President, Grupo Ei Consultores/Supply Chain de México, highlighted the importance of understanding Mexico's current scenario, with 140 lost investments in Texas attributed to security issues, bureaucracy, and the fact that nearshoring is not materializing there. Legal frameworks also need attention, while integrating technology becomes challenging due to security concerns. Collaboration is crucial, and businesses need to involve experts to implement solutions successfully.

The growing influx of companies entering Mexico is expected to bring substantial resources to the country. However, this sparks concerns regarding the lack of available industrial space to meet the surging industrial demand. In 2022, occupancy in the Mexican industrial market accounted for over 73 million m², placing it as the largest industrial market in Latin America.

Lack of coordination leads to wasted capacity and resources. Logistic culture is fundamental, considering the environmental impact. By mid-2023, industrial space demand grew, concentrated in the northeast and Bajío regions, mentions Cedillo.

Adapting to technological innovations, addressing infrastructural challenges, and implementing sustainable practices will be key to navigating the future successfully. As the industry transforms, strategic partnerships, technological investments, and a commitment to sustainability will define the success of freight forwarders in Mexico.