Archive for Logistics Trends

Transplace Carlos and IkerTwenty years ago, there was only one railroad in Mexico, which was run by a public agency and broken into three regional classes. At that time, there needed to be tremendous improvements to rail service, engines and cars, and to key infrastructure such as bridges and tracks. Then in 1995, the Mexican government announced that a railroad privatization project would begin.

The private railroad companies that now manage the railroad lines currently have a 50-year concession from the federal government to operate them (while the land that the railroads operate on is still government property). With the private sector’s takeover of railroad operations, dedicated investments started to make real improvements to the entire system. And to date, over 5 Billion U.S. dollars from these private companies have been invested into the Mexican rail system.

Today, the Mexican rail system is expansive and highly efficient. It is currently the best railway system in Latin America in terms of train productivity, and is certainly comparable to other systems around the world. Through private investments, the entire supply chain has been improved. For example, terminals, inland ports and customs facilities have all become much more efficient in the past few years, incorporating electronic systems to speed up processes.

The system is also fully compatible with the U.S. and Canada, with the same standards for both operating the railroads and for building and maintaining them. Thousands of rail cars cross the borders between the U.S., Canada and Mexico each day using this efficient North American/Latin American rail network.

Industry Opens Up Intermodal Opportunities
Rail transportation, including bulk, general cargo and intermodal, has been a key factor in the expansion of trade between the U.S. and Mexico. Currently, the automotive industry and the opportunity for truck to intermodal conversion for non-auto industries are the two highest growth areas for the railroads in Mexico, and are making a significant impact on the system.

  • The automotive industry, which includes all of the parts and components that are manufactured in Mexico and then exported to the U.S., is a very large market, and has paved the way for market growth in other industries. For example, manufacturers and suppliers of floor tiles and home appliances are taking advantage of these efficient rail options and routes already established by the automotive industry.
  • Intermodal has also helped grow the rail network in Mexico, and the already vast intermodal networks throughout North America are continuing to expand. Intermodal succeeds in imbalanced markets, and there is still a large capacity for additional truck freight to be converted to intermodal. The ideal eventual evolution of the supply chain would bring more cargo from over-the-road (OTR) to intermodal — we estimate at least one million loads a year. With the current rail network system in North America, there is no single big market in the U.S., Canada or Mexico that could not be served by an intermodal ramp. Importers and exporters can now receive the benefits of intermodal regardless of their size and industry. Additionally, there were Mexican government programs recently put in place to clear commodities that were previously banned to run on trains and be cleared in a Mexican interior bonded terminal. This will open up new opportunities for intermodal transport benefits.

What Does the Future Bring?
Because of the intermodal boom, there has been a significant investment not only in the Mexican railways, but also in cross-border operations. Intermodal has been a great savings and capacity solution for many cross-border shippers – particularly in light of recent capacity and driver shortages – and no one is expecting traffic across the Mexico-U.S. border to slow down anytime soon. And due to this recent growth and the value-added benefits of intermodal, there will be continuous investments in terms of new corridors, more service options and new terminals.

Investments in better processes, connectivity and operations will continue to increase capacity, expand intermodal ramp operations, improve service and increase train speed within the growing Mexican railroad network. This, combined with the improvements made over the past 20 years, are making rail and intermodal a sustainable, viable and long-term transportation solution for both cross border and intra-Mexico supply chains.

Learn more about shipping and transportation opportunities across the U.S.-Mexico border here.


Carlos Godinez is responsible for P&L management, in-country leadership, profitability growth, business and execution strategy of the recently created intermodal division, branded under Celtic International, one of the largest Intermodal Marketing Companies (IMCs) in the industry. Prior to Transplace, Mr. Godinez held several leadership positions at Schneider National Carriers, Procter and Gamble, Grupo TMM and Lear Corporation. He holds a bachelor’s degree in International Business from ITESM-Monterrey campus; international bachelor studies from the University of Wisconsin-Stout; a diploma in project management from ITESM-Mexico City campus; and more recently he received his MBA in global businesses from the Thunderbird School of Global Management, Glendale, Arizona campus; in partnership with the ITESM.

Iker de Luisa is a consultant specialized on freight and passenger railroad projects. Global Logistics Diploma (California State University – Long Beach), PhD in Development Administration (University of Birmingham, UK), and Business Management (ITAM, Mexico City). He has participated on railroad bypasses projects of several cities in Mexico (Celaya, Córdoba, Irapuato and Morelia). Worked as external consultant for a number of clients, including Guanajuato State Government for the “Intercity passenger train”, for Kansas City Southern de México, Centro SCT Michoacán and a steel service center. He is currently Director General at the Association of Mexican Railroads.

The Pacific Rim trade deal, formally known as the Trans Pacific Partnership (TPP), obtained a great deal of media coverage in June as Congress debated legislation aimed at providing the President with “fast-track” approval authority. The intensity surrounding debates and opinions led me to believe that this proposed multi-lateral trade agreement would soon come to fruition. Not even close.

Source: Office of the US Trade Representative

Source: Office of the US Trade Representative

Examining the Details?
Logistics is inexorably linked to international trade. At ARC, we conduct research on logistics processes and technologies that directly support international supply chains. Some of the technologies include global trade management (GTM) systems, transportation management systems (TMS), and supply chain planning and network design tools. Due to the potential impact of this trade deal on these markets, I decided to dig deeper into the details to obtain insight into the imminent changes slated to occur. The scope and structure of the agreement are available on The Office of the US Trade Representative for those interested in viewing the agreement framework. However, obtaining specific details on the proposals is proving to be more difficult. Although details are not yet available, there are some features worth noting.

Reduction of Trade Barriers and Development of International Supply Chains
The TPP participating countries are working to eliminate many of the tariffs placed on each other’s exports. This will serve as an important step toward increased integration of multi-national supply chains through the reduction in government imposed competitive barriers. Examples of current tariffs outlined on include a 27 percent Vietnamese tariff on US made auto parts, a 40 percent tariff on poultry entering Malaysia, and tariffs from a number of countries on US made textiles.  The removal of government duties such as these is likely to make customs management less complex for companies and will also shift the competitive landscape toward those with comparative advantages and increase international trade volumes. The increase in global trade is likely to increase international sourcing, extend production lead times, and increase demand for supply chain visibility solutions that provide insight into upstream supply chain events and status changes.

Rules of Origin
The elimination of tariffs between TPP countries opens the opportunity for non-participating countries to use TPP countries as a transshipment intermediary, or a “pass through” to avoid tariffs and duties. To assure compliance, the TPP countries are looking to develop a common set of rules of origin to determine whether or not a given product or item originates within the TPP region, and therefore qualifies for preferential treatment.  It is questionable how quickly these rules will be developed, as the WTO harmonization program was originally expected to be completed in 1998, but is still ongoing due to unforeseen complexities.  However, specific rules such as the yarn forward rule of origin is being proposed to assure that only properly sourced items will receive the preferential duty treatment. The complexity of the rules of origin and ongoing updates to the agreement will assure that item classification software will remain a critical application for those companies that produce complex products and engage in substantial international trade activities.

Intellectual Property Rights
The World Economic Forum publishes an annual global competitiveness report leveraging its Global Competitiveness Index (GCI). The Index categorizes the most advances economies to be those driven by innovation. It should therefore be no surprise that the US is seeking strong intellectual property rights and protections to be included in the TPP. Patent, copyright, and trademark infringements are major concerns for companies that invest heavily in research and development. Increased protections will help alleviate theft and counterfeiting concerns and encourage additional investment in product innovation. Pharmaceutical IP provisions are specifically mentioned as an area of focus for the US. Also noted is US-Japan bilateral negotiations on motor vehicle trade, IP rights, and phased out US tariffs on Japanese automotive products.

The Trans Pacific Partnership is still a deal in the making. It is a complex, multi-lateral negotiation that is likely to hit a number of speed bumps going forward. Reduction of trade barriers, standardization of processes, and international supply chain integration are all key tenets of the proposed agreement. NAFTA trade flows increased from $290 billion in 1993 to over $1.1 trillion in 2012 (about 7 percent CAGR by my calculation). If NAFTA trade flows are an accurate barometer, then the TPP shows promise to propel pacific trade forward at a rapid pace.

Categories : Global Trade, Logistics Trends
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Most Popular So Far

The year is half over.  The most popular columns published by ARC Analysts so far this year include:

  1. Best Supply Chain Conferences to Attend in 2015
  2. 5 Supply Chain Predictions for 2015
  3. E-Commerce Growth Brings Last Mile Headaches
  4. Amazon, Google, and Crowdsourcing: The Battle for the Last Mile
  5. The Key Attributes of Supply Chain Leadership


Logistics Viewpoints is supported by our sponsors.  So far this year, these are the most popular columns from our sponsors.

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Categories : Guest Commentary, Logistics Trends
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First-time visitors coming in to Singapore’s Changi Airport often remark on its salubrious surroundings and smooth, efficient processes – a main performance target is to have the first bag on the belt within 12 minutes of aircraft touchdown, for instance. But this is not just for show. Well beyond the airport, world-class infrastructure and high performance in logistics are key elements of Singapore’s efforts to attract people and businesses and build its position as a desired hub for Asia.

Allied with an open and business-friendly economy, it’s a strategy that appears to be working: Singapore ranks first out of 189 countries in ease of doing businesses (World Bank’s Doing Business survey); for the last several years it has topped the Economist Intelligence Unit’s Business Environment Index; and it is second only to Switzerland in the World Economic Forum’s Global Competitiveness Report.

More specifically for logistics,  the World Bank’s latest (2014) Logistics Performance Index – which measures aspects such as efficiency of customs and border clearance, quality of trade and transport infrastructure, and the frequency with which shipments reach consignees within scheduled delivery times – ranks Singapore top in Asia and fifth out of 160 countries globally.

Compared to the airport, the country’ main shipping port, operated by PSA Singapore Terminals, is likely a less familiar example of infrastructure and logistics excellence. But with 33.9 million 20-foot containers (TEU) handled in 2014, globally, it is second only to Shanghai (35.2 million TEUs) in terms of container traffic and is the world’s busiest in terms of transhipment cargo.

PSA pic 1

A successful transhipment hub requires not only high connectivity (Singapore is connected by 200 shipping lines to 600 ports in 123 countries) but also very efficient logistics ­– so that containers can quickly and correctly transfer from incoming to outgoing vessel. And as container volumes have grown over the years and port operations become more complex, PSA has been quick to apply technology – both the information and automation variety – to keep port productivity and efficiency high.

PSA pic 2

Probably most well-known is the world’s first collaborative port community solution, PORTNET, which connects shipping lines, hauliers, freight forwarders and government agencies, helping them to manage information and synchronize complex operational processes. Features of PORTNET include online ordering of port services to facilitate vessel berthing and container handling, and extensive track and trace capability for container status (arrival and discharge timings), vessel location, and reefer container temperature, among others.

Meanwhile, for planning and execution within the port, CITOS (Computer Integrated Terminal Operations System) coordinates and integrates the port’s multiple assets, from prime movers, yard cranes, quay cranes to containers and drivers. It automatically generates ship stowage and yard layout plans such that containers can be stacked in a logical rather than random manner, which maximizes asset utilization and optimizes retrievals.

More directly at the equipment level, innovations include the Flow-Through Gate, a fully automated system that identifies and security-clears incoming container trucks (average traffic flow of 700 trucks per peak hour) and provides drivers with drop-off location instructions – all within 25 seconds . And the ROCC (Remote Crane Operations & Control) system allows operators to be stationed in a control room, rather than on-crane, to remotely monitor and control crane movements.

According to PSA, automation will continue to play a “transformative role” in port operations in the future. As well as implementing a fully-automated yard crane at its newest terminal, automated guided vehicles (AGVs) for handling movement of containers between quay and container yard have been undergoing tests in a pilot project.

Kalmar, part of Cargotec, recently completed the on-board navigation application for PSA’s four prototype AGVs used in the project. Specifically, Kalmar’s software automatically controls the AGVs, guiding the vehicles along their given routes and measuring their positions using transponder navigation. And diagnostics tools provide a remote view of AGV operation of the equipment, as well as storage and call-up of AGV alarms.

AGVs operating 24/7 in this manner are set to be feature at PSA’s container terminals before too long, reducing the need for prime movers and drivers. It’s worth noting that companies operating in Singapore, which has full employment and relies extensively on foreign labor for many of the lower-level manufacturing and logistics tasks, does find automation relatively easy to justify. In fact, the government is currently on a major productivity drive and offering generous grants and tax incentives for appropriate technology investments.

Looking further ahead, consolidation of PSA’s current seven container terminals at four locations (Keppel, Brani, Tanjong Pagar, Pasir Panjang) to a single location in the form of a mega port at Tuas on the western end of the island is set to further boost efficiencies through eliminating inter-terminal haulage and enabling economies of scale.

The new mega port, which is scheduled to open in phases from 2025, has a planned capacity of 65 million TEUs annually – more than 50 percent up on present capacity – and will no doubt be even more highly automated and IT intensive, as Singapore looks to stay extend its long maritime history and remain in the very top tier of global shipping ports for many decades to come.

BuildDirectEarlier this month I attended the Home Delivery World, Click & Collect Show USA, and ETail Show USA joint conference in Atlanta. One of my favorite parts of these conferences is getting a new perspective on an existing problem. And more importantly, I get to learn from my peers who are implementing creative solutions. One such presentation at the conference was from Jim Hourigan, Chief Operating Officer at BuildDirect. BuildDirect is an online retailer where customers can review, sample, and purchase, heavy-weight home improvement products. This includes flooring, decking, building materials, outdoor furniture and landscapes, kitchen and bath accessories, and doors. One problem BuildDirect ran into was deliveries. While many customers enjoy deliveries since the products can be delivered directly to the job site, these deliveries are expensive. The company can generally only make one or two deliveries an hour, and most of the deliveries are a two-man job.

So BuildDirect looked at a new way to fulfill customer orders that is not as commonplace in the heavy-weight home improvement category: click and collect. According to Hourigan, by adding click and collect, the company would be able to adapt their supply chain, optimize warehouse and facility management, and reduce costs while ensuring high customer satisfaction. Many customers would be happy to pick up their orders, as it is something they have most likely done at other retailers (albeit, for an entirely different product category). BuildDirect knew that once they dug into the details that the difficulties would become apparent. For that reason, the first step in the process was a lengthy planning process.

Planning for click and collect is a little different at a warehouse than it is for a traditional brick and mortar retail location. The first consideration had to be a staging area. When designing a staging area, the company had to look at where is the most efficient area for the warehouse as well as the customers. The inside of a warehouse, especially for heavy-weight home improvement products, poses safety concerns for both employees and customers. The company had to make sure that employees could safely perform their tasks while servicing customers, and the customers had to remain safe while picking up their orders.

Next, BuildDirect had to develop time windows for pick-ups. This ensured that normal operations could continue, and that customers had clear expectations of when they could pick up orders. The company also developed standard operating procedures for rush and same day pick-ups. Finally, the company installed clear signage for customers as well as an FAQ on the website to answer any questions they may have about their click and collect order.

Once the processes were developed, BuildDirect developed a mantra for their click and collect processes: “make it easy for the customer.” Aside from ensuring that the warehouse has a standard operating procedure, the company outlined three key ways to make things easy for the customer and ensure a seamless shopping experience: over communicate, set the right expectations, and get feedback.

BuildDirect 1BuildDirect 2BuildDirect 3BuildDirect firmly believes in over communicating with their customers. It is one of the easiest ways to make things easy during the process. For BuildDirect, over communicating involves a lot of signs. When customers pull into the warehouse parking lot, there are signs alerting the customer to where they are and where they need to park. The company places signs on the appropriate door for customers to enter. There are signs inside the warehouse letting the customer know which window is for click and collect purchases. By using these signs, the company is making the experience as simple as possible for the customer.

BuildDirect’s strategy for making things easy for the customer is to set the right expectation with the customer ahead of time. This includes telling the customer exactly what is required when they show up at the warehouse (photo ID and order number). The company also gives a time window for when the order will be ready as well any specific vehicle needs to pick up the products. BuildDirect provides a detailed map from the nearest highway to the right door (which goes along with their over communication philosophy) and a contact phone number in case the customer has any questions.

Finally, BuildDirect solicits feedback from every customer about their click and collect experience. Every BuildDirect employee reads the customer feedback every morning as part of their job. The feedback is shared with the warehouse and used to make improvements. The company aspires to fix every error or bad experience a customer has.

In conclusion, Jim Hourigan, Chief Operating Officer at BuildDirect, outlined how his company is leveraging click and collect capabilities to provide a seamless experience for customers. While it is not the norm for heavy-weight home improvement products to fall into the click and collect category, BuildDirect has developed a strategy to ensure that they manage the process efficiently. By planning at the warehouse level, from staging areas to signage for customers, the company was able to establish firm standard operating procedures. Using its mantra of “make it easy for the customer,” BuildDirect over communicates with customers, sets the right expectations, and uses feedback to make continuous process improvements.