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What Has Happened Within Supply Chains?

By Antonio Tejedo - Grupo Traxión
Vice President of Investor Relations


By Antonio Tejedo | VP investor Relations - Thu, 05/05/2022 - 11:00

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It is well known that there is a crisis within supply chains. There are several issues affecting every stage of the chain: from driver scarcity to congestions at ports, to pricing issues in distribution and last-mile deliveries. Moreover, every country faces different problems due to geographic and climate conditions that have made such chains even more challenging. Lastly, the semiconductor crisis has brought many further disruptions within most industries globally.

The pandemic caused an unprecedented increase in demand that led to bottlenecks in many processes. The e-commerce channel experienced a quantum leap of sorts, especially in Mexico, whose penetration was significantly lower at that time. Demand patterns shifted, and logistics operators needed to react accordingly; however, there was lack of development in many stages of the supply chain that needed to be addressed swiftly.

In the case of TRAXIÓN, the company was very well positioned to capture the eventual growth of e-commerce. Particularly, at the end of 2019, when budgeting for 2020, management determined that an eventual penetration of this channel was imminent, mainly driven by natural market forces; however, they never imagined that there was going to be a pandemic that would accelerate things and cause a permanent paradigm shift. One of the many effects of this phenomenon was that consumers became increasingly more sophisticated, thus requiring a whole new level of service.

TRAXIÓN was founded on three main pillars: diversification, technological innovation, and financial discipline. It was precisely the combination of these three backbones that allowed TRAXIÓN to make the most out of the pandemic.

Throughout the sanitary contingency, state-of-the-art technology enabled TRAXIÓN to grow, strengthen, and leverage its capacities, both operational and commercial, in order to seize the opportunities efficiently. Diversification of clients, services, and sectors of the economy helped to cope with dynamic demand patterns and swift relocation of fleet and resources. Finally, financial discipline allowed us to maintain a comfortable cash position that ensured that the company kept operating normally with no financial disruption.

Everyone at TRAXIÓN learned many valuable insights during the pandemic. Perhaps the most important is that we cannot predict human behavior but can be prepared to react promptly when things happen.

As a result of the pandemic, TRAXIÓN not only grew and seized opportunities but significantly strengthened its logistics position. The company is now one of the key players for 4PL, 3PL, and last-mile solutions, and we continue to be the largest providers of mobility in the country, both in cargo and personnel transportation.

TRAXIÓN’s top management strongly believes that technological development is key to success in asset-light-driven businesses, including most of the logistics services that are underdeveloped in Mexico and need to thrive for other channels to expand, including e-commerce.

As a result of increased demand and consumer sophistication in the e-commerce channel, TRAXIÓN has implemented state-of-the-art technology to provide clients with 100 percent visibility of the product, reduced transit times, efficiencies at the border, and tailor-made last-mile solutions.

Technology is by far our most significant competitive advantage and represents perhaps the highest barrier of entry in our sector. Our clients typically are less sensitive to price and more so to high-quality service. Furthermore, clients have also become more and more sophisticated. Years ago, the freight business was just about transporting cargo from point A to point B. Today, it is about providing a solution across the supply chain for our clients; that is, from A to Z.

Driven by our use of technology, TRAXIÓN has become a much more specialized company in terms of services rendered, customer satisfaction, disruptive development, and industry benchmark. Technology has provided us with rich commercial and operating intelligence that has enabled the company to be one step ahead of the competition and client needs.

Furthermore, there are several considerations that we believe will continue to drive our business. The first is the 4PL services penetration in Mexico, which is still very low compared to more developed countries. As the second-largest 3PL player and one of the most modern 4PL platforms, TRAXIÓN has tremendous growth potential in this arena. The second is Mexico’s manufacturing platform. Our country has one of the largest installed capacities for manufacturing in the region, if not perhaps the largest. With highly specialized and competitive labor in several industries, and a privileged geographic location, with access to two oceans and a border with the US, Mexico is very well positioned to capture growth from the nearshoring trend. Finally, the third is internal consumption. There is a demographic bonus and an emerging middle class in the country that fuel internal consumption. We believe that the combination of these three considerations represents the biggest engine that will drive our business in the future.

Photo by:   Antonio Tejedo

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