Logistics and Intermodal Transportation Sectors in Mexico

A Hot Tip about Transportation and Storage in Mexico

Posted on: 12 Jan 2010

Summary

 

The efficiency of the transportation and logistical sectors is a key factor in a country’s global competiveness. As part of Mexico’s commitment to improve efficiency in these sectors, important projects are being developed by private and public organizations that will offer good opportunities for U.S. exporters.

 

Background

 

A report published by the Global Competitiveness Network of the World Economic Forum in 2009, gives Mexico a logistical development score of 2.87 out of 5 points, and ranking it 56th out of 150 countries. In comparison to other countries like the United States who’s logistical and transportation costs are 9.5% of GDP, Mexico’s costs are close to 13.5% of GDP. On average, logistic costs represent 12.6 % of companies’ sales, of which 40 % are transportation costs and 60 % correspond to other logistical components such as warehousing, inventory control, orders processing, operations management , etc. Although Mexico is in a better position than Brazil and China, it is still far from the average cost in the U.S. and Europe, where the logistics costs are about 10 % of sales value.

 

The Logistical Competiveness Agenda 2008-2012 prepared by the Mexican Secretariat of Economy identified as some of the main logistics problems faced by Mexican companies to be the following:

 

- Lack of quality infrastructure.

- Railroad transportation is the cheapest form of transportation for distances over 450 kilometers. However railroads are not extensively used due to the lack of enough intermodal connections with railroads in maritime ports and inland distribution centers.

- Maritime ports have not developed enough infrastructure for an efficient connection with railroad and truck transportation systems. In addition to this, the lack of efficiency in customs inspection means that the average stay of containers in Mexican ports is double the international average.

- Trucking transportation dominates intermodal transportation in Mexico, but costs are expensive due to highway fees and to the structure of the trucking industry. About 90 percent of truck transportation companies only have five or less vehicles and the average age of 51 percent of the fleet is 20 years.

- There is an inefficient use of resources, as private fleets are not allowed to use their excess capacity to service third companies.

- The lack of a border crossing agreement for trucks causes delays and inefficiency in import/export processes.

- Too many regulations, import/export procedures, and required documents make international trade very slow and costly.

- The lack of trained staff means that companies cannot estimate correctly their inventory and cargo movements according to customer demand.

- Lack of coordination between the different participants in the supply chain.

 

- Although large corporations in Mexico, mainly in the electronic and automotive sectors, have efficient, modern and world class logistics systems, the majority of small companies do not exceed 84-88 percent of logistics efficiency ( for complete, on-time deliveries).

- A high crime and insecurity index, both in facilities and transportation systems.

- The efficiency of the customs system is very low, reaching only 2.5 of a five-grade evaluation prepared by the World Bank.

- Little use of information technologies by small and medium-sized companies. Most of them see the technologies as an expense, instead of as a tool or investment. There is not much promotion on the benefits of using advanced technologies, and there is a backlog in affordable staff training for small companies.

- Lack of diversified offerings of logistics services and lack of logistics performance indicators or evaluation systems that help companies to identify their best options.

- Lack of certainty in the business environment inhibits investments and project development and stifles the country’s efficiency and economic growth.

- Air transport of cargo is almost nonexistent in Mexico although it is greatly used in other countries like the US, Canada, France, and China. It is estimated that air transport in Mexico could triple in the next 10 years, principally in transporting auto parts and electronic components. Because this is a relatively new option in Mexico, most air transportation only offers connections with trucking companies, but not with railroads. Therefore this method of transportation suffers from a lack of connectivity options.

 

Intermodal infrastructure

 

Mexico currently has eleven multimodal corridors that have linked the main ports with consumer-distribution centers in Mexico and border crossings that offer connections with the U.S. and Canada.

 

- Lázaro Cárdenas-Querétaro-San Luis Potosí-Monterrey-San Antonio Texas (EUA)

- Lázaro Cárdenas-Veracruz

- Lázaro Cárdenas-Ciudad de México

- Manzanillo-Gómez Palacio-Monterrey

- Manzanillo-Guadalajara-Ciudad de México

- Veracruz-Ciudad de México

- Veracruz-Querétaro

- Veracruz-Tizayuca

- Altamira-Monterrey

- México-Guadalajara-Ciudad de México

- Salina Cruz-Coatzacoalcos

 

There are also 74 intermodal terminals operating, divided into the following categories; 30 interior multimodal terminals, 18 railroad terminals, 18 port terminals, and 8 private automotive terminals. By 2012 the government plan is to have 9 new interior cargo terminals, 2 new port terminals, 1 new private automotive terminal, and 10 new multimodal corridors.

 

In 2008, within Mexico there were 876 million tons of transported goods; 493.8 million tons transported by highways, 101.9 million tons by railroad, 279.7 million tons by ocean, and .6 million tons transported by air.

 

Action plans

 

In order to improve the transportation and logistical situation in Mexico, the Federal Government has implemented different action plans and programs designed to improve the quality and the productivity of the logistics systems, in order to support international commerce and the different supply chains in the country. The main objective is to develop world-class logistics services in Mexico and to improve the country’s competitiveness. These actions include:

 

On July 18, 2007, President Calderon announced a National Infrastructure Plan for the period 2007-2012, describing the projects that will receive priority during his presidential term. The plan proposed investments of 6 billion USD for the construction of five new ports (some are new terminals in current ports) and the modernization of 22 port facilities. It also includes projects for new cargo facilities at several airports, the construction and modernization of 17,000 kilometers of roadways, USD 4 billion to increase rail track speeds from 25 to 40 km/hour on key routes, the implementation of 10 new multimodal corridors, the construction of 12 new intermodal terminals and the modernization of existing terminals.

 

In 2008, the Secretariat of Economy implemented the Competiveness Program for Logistics and Supply Centers (PROLOGYCA) whose goal is to help Mexico become a global logistics leader by developing projects and doing research into how to increase the efficiency and reduce costs of transportation in Mexico. In its first year of operation, with a 7.8 million dollar budget , PROLOGYCA funded 69 projects, 49 of which went to improve logistics and 20 that helped improved supply chains within Mexico. In September 2009 the Secretary of Economy promised to increase the budget of this project by 45% percent.

 

Together, Prologyca, the Secretariat of Economy, the Universidad Anahuac and a group of private companies implemented the website “Diagnostico Net Anahuac en Logistik” or “DNA en Logistik” that is focused on helping companies to analyze their logistics processes and determine where they have problems and how they can increase their efficiency. It provides: a methodology for analysis, diagnostic, planning, designing, and execution of logistical projects, an online evaluation method that is public and free, an academic section for the training of executives in the logistical field based on the methods of DNA, and a place where different experts in the field can share their different ideas to collaborate on improving logistical efficiency.

 

With the support of the U.S. Trade and Development Agency, the Secretariat of Communications and Transportation is preparing a Master Plan for Developing Multimodal Corridors in Mexico. This document will analyze the current corridors, the origin and destination of cargo, current obstacles to improved efficiency, and potential for the future. Based on this document, that should be finished by February 2010, the federal authorities will determine which corridors will receive priority support to improve the efficiency of the cargo transportation network.

 

Also in 2008, the Secretariat of Economy prepared the Logistical Competiveness Agenda 2008-2012, which proposes the following strategies to increase the efficiency and competitiveness of the logistics sector in Mexico:

 

- Increase automation and standardization of the custom processes in Mexico.

- Increase automation and standardization of the activities developed by custom agents.

- Develop campaigns to increase the logistic culture in small-and medium-sized companies.

- Develop educational systems in logistics at all levels, to support the training of staff at the technical, operational and professional levels in Mexico.

- Implement programs to increase the use of information technologies in the logistics sector.

- Implement systems that allow a good geographical organization of logistics services.

- Increase the variety, quality and amount of logistics service providers in Mexico.

- Implement a program to certify the quality of logistics operators in Mexico.

- Implement programs to increase the outsourcing of logistics services, in order that companies can focus on their specialization and leave the logistics to the specialized providers.

- Improve the regulatory system in order to eliminate unnecessary processes and facilitate commerce.

- Continue working to increase security in Mexico.

 

 

Although many of these programs will be implemented by public sector organizations, they represent an opportunity for U.S. companies that have the expertise and want to participate in these activities.

 

By Alicia Herrera

 

Read the full market research report


Posted: 12 January 2010

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