Antonio Tejedo
Vice President of Investor Relations
Expert Contributor

A Technological and Asset-Light Approach to Logistics

By Antonio Tejedo | Wed, 08/24/2022 - 10:00

The nearshoring trend and e-commerce penetration in Mexico have generated an unprecedented increase in logistics activity. Mexico’s geographic location, together with its considerable installed manufacturing capacity, have been the main drivers of a shift in supply chains from Asia. The country is not only the most important trade partner of the US but it has a tremendous footprint in several industries as well.

Such increased activity has fueled the need for more dynamic logistics services, most of which are driven by technology. Those companies that embrace such understanding in a swift manner will be able to properly seize market share and become relevant players.

Technology reduces costs, increases efficiency, and provides more transparency, visibility, and precision, while minimizing the capital intensity that is necessary to grow. With that in mind, logistics processes are optimized, resulting in a higher-quality service for clients that are increasingly more sophisticated. Most importantly, proper technology prompts the development of asset-light ventures.

At TRAXIÓN, top management grasped this mindset well before the COVID-19 pandemic was declared. The company was properly prepared and positioned to capture the opportunities brought by the contingency. The key: an asset-light approach coupled with state-of-the-art technologies. This basically means to conduct business using third-party assets. It is not an easy task, as companies need to ensure high-quality services and, thus, carefully select the right suppliers, while considering a series of different variables that could potentially affect the outcome.

Within TRAXIÓN, the asset-light approach is carried out through a fully independent business segment: Logistics and Technology, a division that oversees three lines: 4PL-3PL services, digital apps, and last-mile solutions. This segment is expected to become a major part of the business in the midterm and it is where most of the disruptive development within the company is focused.

One of the most promising business lines currently under growth is TRAXPORTA, an internally developed App that connects shippers with carriers, thus creating an efficient marketplace for road cargo. Shippers submit their loads in the app, while carriers select those shipments that better suit their capabilities and specifications. TRAXIÓN connects them, provides a range of logistics support services, and other value-added features, and charges a percentage of the published fare.

This endeavor allows for smaller, well-established carriers to access larger clients that often need increased capacity due to their seasonality. For TRAXIÓN, this represents a 100 percent asset-light activity through which the company makes money with significantly lower investment requirements.

On the other hand, e-commerce activity increased significantly during the pandemic, especially in Mexico, where this channel was underpenetrated. There were several stages in the supply chains that served online shopping that were severely underdeveloped in Mexico. Such a lag needed to be addressed on many fronts, but certainly, having modern and robust technological resources was the key to seizing opportunities brought by increased demand. Technology improves quality service, expands capacities, and allows a better understanding of market dynamics.

For TRAXIÓN, technology has been a fundamental piece of the e-commerce business. It is precisely our platform that enabled the company to be well positioned to directly capture the significant expansion of such channels during the pandemic. Through technology, TRAXIÓN has been able to build an extensive operational network that includes automated sorting, multicarrier fulfillment, cross-border facilities, middle- and last-mile solutions, and reverse logistics.

E-commerce will continue to penetrate and expand in Mexico. The omnichannel will increasingly gain relevance, marketplaces will carry on growing, more small and medium enterprises will enter the ecosystem, fintech tools will be of paramount importance, and cross-border activity will increase as a result. Technology will continue to play a fundamental role for such matters to materialize.

In terms of 4PL and 3PL logistics, technology plays a key function in properly addressing clients’ needs; in fact, it is the backbone of such operations. Many customers across several industries have increased their logistics demands, while others have been arriving in Mexico as a result of the nearshoring trend. Clients are more seasoned and informed; they demand total visibility and require more complex and advanced solutions.

On these business lines, TRAXIÓN has built a 4PL, 100 percent digital platform, TRAXIÓN Logistics, whose aim is to coordinate the different stages of the supply chain within the company. This platform has increased cross-selling, while maximizing the utilization of the company’s infrastructure, both commercial and operating.

In terms of 3PL logistics, TRAXIÓN is one of the largest players in Mexico. Again, technology was the fundamental element to grow with clients. The company operates the latest Warehouse Management Systems (WMS), which render 100 percent visibility for clients and eliminates human errors, thus providing a nearly unique, value-added service.

Digitalization in logistics is now a reality in Mexico. Logistics, transportation, and mobility are essential activities for the global economy. It is hard to fathom how complex it is for supply chains to properly function. There are a lot of moving parts and several processes that require almost surgical precision. In conclusion, technology is the backbone of modern logistics and asset-light businesses will unleash greater amounts of value, as investment requirements are extremely low.

Photo by:   Antonio Tejedo