Import Costs Weigh On the Minds of Brazil's Supply Chain Execs

July 26, 2010
In Brazil, logistics functions are increasingly outsourced to focus on core competencies and remain competitive. For supply chain executives in Brazil, the greatest challenge is total landed costs of importing products into the country

For supply chain executives in Brazil, the greatest challenge is total landed costs of importing products into the country. These costs include purchase price, freight transportation, insurance and other inbound logistics costs to the port of destination, plus customs duties and other taxes on shipments.

"As Brazilian companies become part of regional and global supply chains, they increasingly are looking to reduce the landed cost of their imports and speed their delivery to markets here," explains Rosberto Croce, general manager of BDP International in Brazil, which recently conducted a study of Brazilian supply chain managers.

These Brazilian companies also appear to be placing higher priority on reducing internal overhead as they turn to third-party logistics providers (3PLs) for better control of inbound shipments and compliance with complex import regulations that can impede cargo clearance and incur highly punitive penalties for documentation irregularities.

"Recognizing the impact of the total landed costs of imports on their profitability and competitiveness, many Brazilian companies are transferring both the process and accountability for import documentation and compliance penalties to third-party service providers," Croce observes.

The survey also found that more than 60% of the respondents are increasingly outsourcing their transportation-related functions, with nearly half reporting greater outsourcing of global logistics and lead logistics provider (LLP) management support as well.

"This trend was already underway prior to last year's global financial crisis, but economic conditions clearly accelerated it as companies refocused on their core businesses, and turned to external resources for their non-core activities," says Croce. "Outsourcing their logistics-related functions not only helps them reduce internal costs, but also manage their global supply chains better through the expertise of lead logistics providers and value-added services such as supply chain visibility and metrics on the performance of upstream origin suppliers, carriers, 3PLs and other players in the supply chain."

Significantly Brazil weathered the global recession considerably better than the U.S. and European economies, due in large measure to vibrant intra-regional trade. While respondents to the survey indicated they import materials from a variety of regions, nearly 70% export primarily to other Latin American countries.

"Through its trade agreements with other Latin American countries as well as China and other countries in Asia, Brazil has managed to make significant progress in reducing its reliance on North America and Europe, insulating itself from the economic volatility affecting those relatively mature markets," notes Croce. "We are moving toward becoming a first-world economy with continued strong growth prospects."

Among the survey's other findings were concerns among supply chain professionals over the readiness of Brazil's infrastructure for the 2014 World Cup and 2016 Summer Olympics, cited by over 90% of the respondents. Many raised doubts that much needed improvements will be completed in time to accommodate the business and consumer demands of national undertakings of this magnitude.

"However it should be noted that our growth acceleration programs, while somewhat behind schedule, are injecting nearly BRL 60 billion (US$35 billion) into infrastructure upgrades," says Croce. "We're admittedly in catch-up mode, but I'm quite confident that a number of the major projects will be completed in time for these events."