What’s Driving Growth in Trade Between Mexico?

By: Supply Chain Brain | September 2014

Supply Chain host Russell Goodman interview commercial officer at XPO Logistics in Kansas City Julie A. Luna, addresses what’s driving growth in trade between Mexico.

Three key factors that is driving growth in trade between Mexico and U.S.

The first is just the growth of Mexico as a competitive factor and world of manufacturing. Fifteen or twenty years ago in Mexico there was probably 20 percent deficit versus how competitive China was on the labor wedges and you look at it now they are probably 2 or 3 percent. And certainly the nearness of Mexico to the US market makes them very attractive. The second key factor has to do with Mexico focus from a government perspective on trade. They have more free trade agreement than any other country. By 2019 they should be a larger trade partner for the U.S. than China again speaking on the growth and focus that they have on insuring that they are very attractive in an investment perspective. And then the third key insuring that Mexico exploded is the focus on infrastructure. Mexican government have invested literally billions of dollar in infrastructure.

Clearly that is very attractive than 30 days on the water.

Services that are most demand for cross boarded are really everything from packets to cross truck, LTL when you don’t have a full truck load to over the road highway intermodals have got to be more attractive because it travels the board trade warmore quickly, an then even when the supply chain does break down. Because even though Mexico is that much closer to the U.S. it still can be eighteen hundred miles from Mexico City to Detroit.

The key we have found that work in Mexico is having people that really understand the market, that understand the move across boarder. Everything from the paper work and being a broker also the freight payment seeing how all those pieces work together. XPO has put 25 people in every ramp there is also has investing in container and trucking. There is a shortage in drivers just like here so those relationships are extremely important. And then underpinning it’s the IT investment. In 2014 XPO invest over 120 million dollar in IT, having the system in place is knowing where every pallet is at every moment.What’s Driving Growth in Trade Between Mexico?
{Photo Source: Depositphotos.com/Devon}

There are a lot of factors that drive the desire to convert form over the road to intermodal. The first one is savings. It’s pretty well documented that you can save 15 to 20 percent on a door to door move versus highway in intermodal. Also the time, you can move across the border in hour if you do it on rail versus it can take 24 hour if you are going over the road. The biggest impediment we have seen is people like to talk about inter-modals but the sales factor and the conversion can be months just because of education. That why the key is having the right people on the border. XPO has 30 years of experience in intermodal though Mexico.

But after all this Julie thinks the number one world trade trend is e-commerce, it’s a tremendous change of what one use to buy at the store twenty years ago and what can someone buy online is a big change. They are trillion dollars spend on e-commerce.