The cross-border supply chain in North America is the equivalent of a master orchestra as it involves the swift and refined coordination between different entities and parties touching a shipment, truck or container.
Normally, a Mexico-US cross-border truckload move involves at least five touches:
- The Mexican carrier taking the load from the Mexican shipping location to the Mexican border
- The Mexican customs broker
- The transfer company crossing the load from one side of the border to the other
- The U.S. customs broker who may clear the trailer without unloading the cargo or may coordinate the transload to a different U.S. trailer
- The U.S. carrier responsible for hauling and delivering the shipment to the final destination
These moves can be complicated, requiring knowledge of security challenges and expertise in regulatory compliance and customs brokerage. The lack of shipment documents for clearing or a miscommunication between players can disrupt the cadence of the move, creating numerous and expensive delays at the border. The issues are further impacted by the increasing imbalance of north-south trade flows between the U.S. and Mexico.
If trade imbalance, driver scarcity and overall tightening of capacity were constant issues before the COVID-19 pandemic, international shippers in North America are now facing one of the most challenging times in transportation history. With truck-to-load ratios at the Laredo border crossing reaching double digits — even as much as an astounding ratio of 20 available shipments ready to ship per one available truck — securing competitive and reliable capacity are constant concerns for international supply chain managers.
When considering other transportation modes, rail and ocean are also facing capacity and velocity issues. Rail capacity is near full with essentially no stacked containers available in terminals. Railroad operators are trying to maximize container utilization on the street to free up containers and chassis equipment while working to improve train speed. In the case of ocean, vessels are sold out with blank sailings across the board, and congested and imbalanced ports in Asia, America and Europe. Lead times have extended, stressed further by the lack of inventories in raw materials and parts across nearly all industries.
Best Practices for Cross Border Logistics
To overcome cross-border challenges, logistics experts need to be open to exploring new ideas. Here are five best practices:
1. Design and implement a mode diversification strategy. With the constant state of disruption, it is extremely risky to rely on only one transportation mode. Truckload and over-the-road transportation are responsible for 70+ percent cargo that moves throughout North America. While some markets are best served by trucks, other modes may be advantageous during uncertain times. Intermodal and ocean are options when lanes and lead times allow for incremental transit time. Not all lanes and SKUs should be treated the same. If the lane has a long length-of-haul, an intermodal ramp near the origin and destination, and the move relates to an inter-plant/replenishment flow, then intermodal can be a great option.
On the other hand, ocean has long been considered a great option for intercontinental shipments. It is now a viable option for Mexico-U.S. moves as there are new short-sea line alternatives connecting the Gulf of Mexico with southeast and northeast ports in the Atlantic U.S., with Florida ports positioned as key hubs for cargo coming from Mexican ports. Ocean carriers are now offering 53’ containers (the most common equipment size used in the TMEC region) in addition to the traditional 20’, 40’ and 45’ containers. The goal is not to convert all the lanes and flows from truck to rail or ocean but to find the right balance and between all modes.
2. Try new borders and crossing points. Laredo is and will continue to be the busiest gateway between Mexico and the U.S. Its geographical location and strategic connection, supported by road and rail infrastructure, has encouraged growth and a leadership position. However, depending on the lane, alternative ports like El Paso, Calexico, Eagle Pass, McAllen and Brownsville are viable and competitive options for loads going to the West Coast and Southeast U.S.
3. Transload as another capacity source. If intermodal, rail or ocean are not options for your product or lanes, transloading may be a viable alternative in your truckload flows. Every year, fewer U.S. carriers are willing to send their assets to the interior of Mexico due to the length of time to get equipment back and the higher cost of return on the equipment. Fortunately, there is a reliable and safe network of cross docks at the border that allow access into Mexico by U.S. regional carriers, while also securing a load-back to return to desirable markets within the U.S. Finding the right cross dock partner with the right product expertise, handling, safety and security protocols is critical to the success of a transload strategy.
4. Maximize the use of technology. Several tools are available to improve load control and bring visibility to the cross-border supply chain. Transportation Management Systems (TMS) are technology platforms that connect all parties involved and allow the shipper to better orchestrate and control the decision-making process through real-time visibility, data analytics, easy-to-use dashboards and business intelligence.
5. Synchronize and build strong partnerships in the cross-border supply chain. Putting together all the pieces takes time, energy and collaboration between players on both sides of the border. The extended team must create a culture of partnership to map out the current process, understand the gaps and define the streamlined future-state. Supported by open dialogue around the shipper’s goals and by listening to their partners’ concerns, challenges and ideas, everyone will understand their part and will have greater commitment and clarity.
By following the best practices, developing a robust business continuity plan and streamlining the overall process, international shippers will strengthen the resilience of their supply chain. These strategies allow shippers to address challenges and the dynamic environment of cross-border logistics.
Carlos Godinez is Vice President, Mexico at Transplace.