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Ten Things to Include in Your 2023 Supply/Value Chains Operations

By Carlos Canseco - Queretaro Innovation Logistics Cluster (CILQRO)
Director

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By Carlos Canseco | Director - Thu, 02/23/2023 - 12:00

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The second half of 2022 brought us back to normal activities, and I’m pretty sure that we are working in the post-COVID era on pre-COVID activities. We have learned a lot about how to match our supply chains through collaboration. Here are 10 points to consider when approaching  a logistics: 

 

  1. Collaborative rates: We are in a carrier market.  Rate negotiations with shippers are still rough, but focused on the supply of the equipment. Savings, among the most important elements of  the logistics cost KPI, are secondary as the industries work hard to assure  equipment availability in their supply/value chains. 

Remember that the highest cost in a logistics process is the failure to  deliver to the client, or to deliver with delays. 

  1. S&OP: Forecasting is the new king of supply chains. A correct number brings us closer to a reliable operation that translates to  our suppliers. Right now, agile operations are very well accepted among suppliers. That will make it easier to place materials, and project for people, warehousing, and transportation equipment. 

  2. Female drivers: We are still short of truck drivers. In Mexico, according to our Department of Transportation,, we need 50,000 drivers; the US needs 150,000 drivers, and Canada also requires 50,000 drivers. In the USMCA region alone, 250,000 professional driving experts are needed. 

Given these numbers, the most important transportation companies in Mexico are developing driver careers for women and they are seeing very successful results. In the US and Canada, this is a common practice. 

  1. Digital brokers: Technology is obligatory if you want an agile operation. A digital broker is a dream come true for the Transportation Sourcing Department. Why? Because you only have to manage one transportation contract, not, in the best of cases, 25 transportation contracts. Shippers deliver their operations to a trustworthy logistics company and they focus on strategic planification of their value chains, looking for better lead times and logistics costs, which is their main job. 

  2. Shorter payment terms: Rates are very important, but payments are the oil of our logistic chains; if we don’t grease the chains, they will rust. Right now, an appropriate payment term is 30 days, and a perfect payment term is below 15 days. 

Factoring in post-COVID era costs is not very well accepted by the supply chain suppliers, who are increasing their original prices by that percentage to absorb that impact. 

  1. Nearshoring: Everybody talks about nearshoring, and it’s a great opportunity to develop industry in Mexico, but the new companies that established in our country are looking for proximity to the US. But our entire north border region lacks new industrial zones. We have to convince companies  to locate their plants in the Bajio and Pacific regions to benefit from our intermodal corridors. Remember that for one import freight, we need eight export freights; intermodal transportation will help to minimize that statistic. 

  2. Clusters: Logistics equals specialization and collaboration, so we have to create professional associations that develop logistics solutions in their area of influence. One of the best examples in the country is Queretaro’s Cluster Network, which is conformed by the automotive, aerospace and manufacturing industries, IT developers, medical professionals, energy experts, wine producers, data chain centers, and obviously, logistics companies. All these clusters together bring important investments to the state and the Bajio area. 

There is an active  logistics country alliance cluster that works very closely with the US through Texas A&M University. This network is conformed by Queretaro, Guanajuato, San Luis Potosi, Monterrey, and Tamaulipas. Don’t hesitate to become part of a cluster.

  1. Presidential elections 2024: We have to be prepared for the 2024 presidential elections in Mexico. The 2018 elections were very difficult for the industry in the country. It seems that in 2024, we will be working with the same political group, so we have to develop our logistics strategies for an era of  control and austerity. The industry’s growth will depend on the individual strategy of each company.

  2. Lead times: If we want better rates in our value chains, we have to work faster in our operations. The full logistics cycle begins with the purchase order and ends with the payment of the service. Within this process, we have many players, like raw material providers, transportation companies, manufacturing, client deliveries,  evidence of deliveries, devolutions, and reverse logistics. They are a whole operation that must be collaborative and focused on the company’s results. Logistics for companies is a cost, regularly the second-most important after payrolls, and this cost is included in the final price to customers. 

  3. Scorecards: How do we know that our supply/value chain is improving? With measurements. The key performance indicators in chains are Fill Rate, Optimal Inventory Levels, Forecast Accuracy, and Logistics Cost. Within each, we have more KPIs, but these four are the ones we have to look at daily to become a proactive and not a reactive chain. 

Have you considered these trends in your 2023 logistics strategy? 

Photo by:   Carlos Canseco

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