On June 11-13, Armstrong & Associates sponsored a conference in Dallas on the growth of “nearshoring” in Mexico. Although I did not attend, representatives from Stifel Financial Group were in attendance and reported on the major takeaways from the conference:
Nearshoring appears to be increasing. There are several advantages, e.g., labor, lower transportation costs, productivity, and more importantly, Mexico has free trade agreements covering over fifty countries. Foreign direct investments have increased significantly, and one speaker indicated that the Mexican macro economy has not been this good in thirty years.
Border crossings by truck still are very complicated. With customs, equipment transfers and other delays, northbound trucks take about 3.5 hours to cross, with southbound loads taking about 2.5 hours. C-TPAT and FAST help some, but the process remains complicated.
Intermodal shipping has not taken hold. Although it is cheaper and faster, Mexican shippers still have not taken advantage of intermodal shipping. Speakers at the conference believe that this is because of personal relationships with the parties to truck shipments and a general lack of education on the advantages of intermodal.
Mexican ports are under-utilized. This could change as shippers from foreign suppliers increase; but there still seems to be a reluctance to use them for traffic into the United States.
Logistics outsourcing in Mexico is growing at 2 to 3 times the rate of growth in the U.S. It was also interesting to note that Transportation Management Systems have not been widely adopted in Mexico.
Security remains a priority. U.S.-based truckload carriers operating in Mexico are very cautious. In addition to the standard GPS, they have a separate system to monitor security. Reports are issued every two minutes and monitors and dispatchers can hear everything that goes on in the cabs. The Kansas City Railroad security team has 1186 agents, 593 guard points, 117 vehicles, and 5 dogs on KCS lines in Mexico.
Based on Stifel’s report and other feedback there appears to be growing enthusiasm for manufacturing in Mexico as well as for LSP activity. Mexico would be a particularly strong market for TMS, although some education would no doubt be necessary.
It was also noteworthy to see Armstrong & Associates conducting such a meeting. This is a departure from their usual line of business, and it will be interesting to see if it’s a signal of a revised business model for them.