Going with the flow in Mexico

July 12, 2005
In the 1990s, truckload carrier Schneider National Mexico found itself entangled in a seven-year legal and political feud with the powerful Mexican National

In the 1990s, truckload carrier Schneider National Mexico found itself entangled in a seven-year legal and political feud with the powerful Mexican National Cargo Carriers Chamber (Canacar). This was because as a foreign (i.e., U.S.-based) trucking company it was offering cabotage services within Mexico under a 1992 "neutral investment" law that rightfully permitted such actions. Regardless of legality, Canacar chose to play hardball with the company until, in 2000, Schneider gave up the fight and decided to pull out of the Mexican trucking business.

The question, as Schneider Mexico director general Armando Beltran recalls, "was to determine what we would have to do to make a profit?"

Beltran, however, had an answer. Under NAFTA, the cross border market had grown exponentially. With that in mind, it was decided to turn the company into solely a logistics operator, not one engaged in the hauling business.

The move proved to be the right one. Schneider moved from carrying one load a month (its initial level of activity when it entered the Mexican market in 1991) to today's current level of handling 500 loads per day.

"We're growing at an annual rate of 20%," Beltran notes. That growth has come, he says, from the company's increased line of services. Schneider Mexico's truckload division extends from freighters to dedicated fleets. It also conducts a significant amount of intermodal business with the railroads. "We have an offering called Schneider Transportation Management that serves shippers outsourcing needs, mostly for capacity," Beltran adds. "We're able to supplement capacity for customers by using third-party providers, optimizing and load-building through technology, then managing the relationship."

The company's day-today hands-on experience serves it well. U.S.-based Schneider trucks haul trailers to the border where they are dropped, then hooked up to a Mexican truck. The company has established a working relationship with a large number of Mexican carriers who are happy to get a share of the business while letting Schneider manage Customs proceedings as well as load management.

The situation is a bit different for loads moving from Mexico to the U.S. "We don't own trucks and don't have drivers in Mexico," emphasizes Beltran. Instead, Beltran and his team have created a group of core carriers in which they concentrate 80% of their total business.-Schneider now enjoys the sort of peace it hoped for during the contentious 1990s. It is no longer at odds with Mexican carriers.

Having no trucks as assets has left Beltran free to devote the company's efforts to join a market that was just becoming highly competitive at the turn of the new millennium. The arena includes global providers such as Exel, Ryder, UPS and a number of smaller companies.

"Thanks to its location, Mexico has a logistics advantage over many nations," notes Beltran. "For shippers, it's possible to achieve significant service improvements by choosing the right network for distribution, the right modes of transportation and connecting with the right partners. I believe the role of logistics in our Mexican economy is fundamental and that there are tremendous opportunities available."

Today in Mexico, Beltran observes, there are three logistical flows. "There is the flow of goods, which is really physical transportation. There is the flow of information, which, in my opinion, is the most valuable because it provides critical visibility. Then there's the flow of funds. Being able to manage these three fundamental flows appropriately and unifying them gives shippers what they need to compete."

Mexican shippers need to be able to manage the flow of goods,
information and funds to be competitive, says Schneider's Armando Beltran

In Mexico, Schneider is constantly following and analyzing market trends. For instance, trade with the U.S. continues to grow significantly under NAFTA. Nevertheless, the nature of "flows" has changed radically over the past 10 years." Back in the mid-1990s," Beltran recalls, "there were more imports to Mexico from the U.S. than there were exports. However, the export manufacturing model changed in Mexico, and now flows are reversed with much more northbound trade than southbound, which poses a challenge.

"Companies willing to import or source from Mexico to the U.S. or Canada don't have an easy time," he adds, "because it's difficult to get capacity."

Another change from the 1990s, of course, is the increased threat of international terrorism. At the border, Schneider National and other carriers now deal with new and stiffer regulations and must work to prevent Customs requirements from becoming a deterrent to efficiency. Even with the changed environment, Schneider has had no problem adjusting to the new regulations, Beltran claims. One way Schneider remains current is through constant training of staff, he says, which leads to continuous improvement.

Looking to the future, Beltran notes, "One of the critical items we are working on is to complete the evolution from truckload carrier to a true logistics solutions provider. In terms of process technology the skill levels of the people needed to make that transition work require different levels of sophistication than previously. It's a totally different business."