Across the Border: A Mexican LTL model enhances cross border trade

In July, the Mexican division of Con-Way Transportation Services (www.conway.com) expanded from three to six facilities in as many different cities. Along with expansion, Con-Way Mexico has begun offering such services as cross docking, make bulk/break bulk, pool consolidation and distribution, and shortterm warehousing.

Unlike its U. S. operations, in which Con-Way operates as a carrier with logistics support services, in Mexico the company has operated since its founding in 1992 as a stand-alone provider of logistics services. Following a trend of the early 1990s — when U. S. carriers discovered that their Mexican counterparts had little or no experience with less-thantruckload (LTL) business — Con-Way devoted its efforts to advising customers on this particular market niche.

There is little doubt the 1994 North American Free Trade Agreement (NAFTA) helped Con-Way grow. "Until then, the perception of LTL in the Mexican market was limited," says company director Jose Antonio Gonz·lez, who has been with Con-Way Mexico since its beginnings. "However, NAFTA brought changes to Mexico in terms of how to move freight. At the outset we had to conduct a lot of mentoring and education of our customers to help them understand concepts familiarly used by LTL carriers in the U.S. and Canada."

The idea of LTL shipping took some Mexican manufacturers and carriers by surprise. But with a mindset bent toward change and globalization, adapting to new working systems was not tremendously difficult. Forward-thinking Mexican entrepreneurs had gotten fed up with the "maÒana" mentality that no longer had a place in a world calling for timely deliveries.

Mexican shippers ended up taking quite well to the idea of LTL shipping, Gonz·lez notes. They've been able to reduce inventories through application of Con-Way's "justintime" (JIT) delivery, a concept that was still fairly unknown in Mexico in the early 1990s.

In Mexico, Con-Way has neither participated directly in the cargo market nor owned any assets, choosing to outsource instead.

As González explains, "Our 'no' is a total 'no.' We operate as a trucking company only within the boundaries of the U.S." Today, Con-Way Mexico is solely a third-party logistics provider (3PL), owning no trucks or trailers."

This market approach has kept Con-Way out of shooting range of Mexico's National Cargo Carriers Chamber (Canacar), which has doggedly attacked those U. S. companies that came into the Mexican market by investing in trucks and doing cabotage — carrying under the "neutral investment" law that allows a Mexican company to operate on behalf of a foreign company. Canacar has fought against this law since its inception in 1992. Though Mexico's Congress has not done away with it, Canacar's attacks on those companies seeking protection under the law have been unceasing, fast and furious (to understate the case).

Con-Way Mexico's business plan calls for continually contracting with carriers who are active members of Canacar. This approach keeps Canacar happy since it is exactly the way the organization wants foreign-owned companies to operate in the country. Other companies — including M.S. Carriers and Schneider National — went it alone and found themselves in troubled waters during the 1990s, until Schneider ultimately gave up truck ownership while M.S. Carriers nearly went under.

Until it expanded services last month, Con-Way provided customers service to and from the U.S. border, focusing mainly, but not exclusively, on northern Mexico City and Monterrey.

"At first we operated from within the U. S.," Gonz·lez recalls. "I made calls on companies seeking to handle their cargo and offering the same technology and service standards that Con-Way provides in the U.S."

There was immediate strong response to the carrier's offerings, particularly from those multinational companies already operating under JIT systems and understanding the value of LTL. Automotive and high-tech electronics manufacturers, in particular, quickly entered into long-term agreements with Con-Way.

As with other carriers, Con-Way stops at the border where all freight faces myriad small surmountable problems, all of which, however, are time consuming.

"At the border, Customs operations present variables," says Gonz·lez. "As a logistics provider we have to deal with these realities and our customers also have to manage some pieces of the transportation puzzle. We work very closely with the [Customs] broker community. We serve as a link for our customers in expediting freight movement and together with the broker, as well."

Generally in dealing with Customs agents on both sides of the border, the owner of the merchandise is directly responsible to governmental agencies for duties. Logistics operators like Con-Way do not involve themselves in these dealings, instead devoting efforts to leaving cargo at one Customs facility, then picking it up on the other side of the border.

"The Customs brokers deal with taxes and duties, and we don't get involved with the legalities of the import or export process," explains González.

Mexican shippers have embraced the concept of LTL, says Con-Way Mexico's Jose Antonio González


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