Supermarket sorrows continue to mount in Mexico

Supermarket sorrows continue to mount in Mexico

For Mexican suppliers, unwarranted delays in receiving merchandise and processing invoices at supermarket distribution centers (DCs) has become a key issue.

According to Isauro Gutierrez of the Gigante (www.gigante.com.mx) chain, the delays are “one of those operational problems which we are trying to change along with issues in the redistribution process.”

One potential solution for Gigante is underway as the company is building a giant DC just north of Mexico City, through which it hopes to resolve issues within the Mexico City metroplex. “We have no choice — we have to bring the DCs closer to the city,” says Gutierrez, speaking at a recent Council of Logistics Management (CLM) Mexico City roundtable meeting.

Several suppliers spoke of having to pay “a bite,” as bribery is known in Mexico, to have invoice processing expedited. Carlos Ramos of Comercial Mexicana (www.comercialmexicana.com.mx) acknowledges the problem, noting there are delays in receiving merchandise. He feels the only real solution is to have suppliers and company executives work together to clean up the mess and make operations more efficient.

It was apparent that these problems don't exist at Wal-Mart Mexico (www.walmartmexico.com.mx), Mexico's largest retailer and employer. Timely merchandise delivery on an appointment basis is — beyond bulk purchasing — a major competitive edge Wal-Mart enjoys over the other Mexican supermarket chains.

In the long haul, delays affect cost effectiveness. According to Jorge Cruz Sanches, vehicle manager for Bimbo (www.bimbo.com.mx) — Latin America's largest bakery — “It costs us $25 an hour to have a truck just sitting there waiting.” Bimbo, like many other suppliers, has a large private distribution fleet.

On the issue of delivery-by-appointment, the consensus is that if the receiving end of the delivery is not expeditious, appointments do no good.

Comercial Mexicana, Gigante and another retail chain, Soriana have drawn fire from many suppliers who question why the retailers have joined together for making bulk purchases. Last December the chains were sued through the antitrust office of the Mexican Federal Competition Commission by 43 major suppliers who claimed the company formed by the three, Sinergia, was seeking to fix prices. The three chains denied the charge, but the suit remains unresolved with the Federal Competition Commission.

Gigante's Gutierrez says the formation of Sinergia was not aimed at Mexican suppliers, but rather was for imports.

“This is a delicate issue and there has been misunderstanding,” admits Gutierrez. “Purchases we want to do in tandem usually come from one foreign supplier. Buying separately, each of us must use our own transportation and customs brokers. For example, we all buy Christmas lights from the same supplier in Hong Kong. Buying together, we can make a high volume purchase with great savings that we can pass on to consumers. This is what Sinergia is about, not about fixing prices.” LT

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July, 2004

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