How TMS Solutions Manage Complexity in South America
In my recent blog post, Global TMS Solutions Find a Home in South America, I explained why transportation management system (TMS) technology is becoming a vital tool for helping shippers manage the complexity of supply chains in this part of the world.
This week, I take a closer look at how TMS solutions are being put into practice in South America.
One of the distinctive characteristics of the region is how new markets continue to open up, even at a time when economic growth in constrained in many countries across the world. However, the vastness and geographic diversity of South America mean that these new markets can be in places that pose major logistics challenges.
Perhaps the poster child for this type of complexity is Manaus, in the northern part of Brazil. Located in the Amazon Jungle, it is an unlikely place for a manufacturing hub, yet this is what is being created there. The government of Brazil is keen to promote under-developed regions of the country, and Manaus is flourishing as a manufacturing center and free trade zone.
The logistics challenges are not for the fainthearted! Take, for example, a company that wants to source components in Asia and produce finished product in Manaus for distribution to customers in Brazil. The components might be shipped from suppliers in China through the Panama Canal to Brazil, transloaded and transported up the Amazon River to Manaus. Finished product is moved by boat to the Port of Recife, where the cargo is loaded on coastal vessels and transported to the large Brazilian Port of Santos. From there it is shipped to distribution centers for final delivery to customers.
This complex route is vulnerable to all manner of delays, and a TMS that is set up to anticipate, detect, and track snafus, and suggest alternative routings or modes, is worth its weight in gold. From a more global perspective, a TMS geared to managing supply chains that span countries, such as the Control Towers™ operated by TMS, are invaluable in this type of operation. For example, regional systems in South America and Asia can link up to give shipper 360-degree visibility to this complex supply chain. Difficult tasks like integrating the activities of intermediaries—freight forwarders, for instance—are much easier with this level of visibility. Consolidating the information into a consistent feed for respective ERP systems is another huge benefit reaped by users of global TMS solutions.
Other sources of uncertainty in South America include poor infrastructure and varying transportation practices. In some parts of the region, such as areas that straddle rainforests, the only mode of transportation available is domestic air. A TMS is needed to help optimize the mix of modes, particularly on long routes that cross wildly varying terrains. In this environment, switching between modes and managing carrier relationships, as well as relatively routine tasks like invoicing, is much easier with the automated functionality of a TMS.
Routing guides—such as the ones that are familiar to logistics managers in the United States—are used in South America, but the tool might also have to be adapted to local practices, or not be an effective option. In Argentina, for example, shippers negotiate with carriers and drivers that belong to a trade union. Rates are negotiated collectively, based on the cost per ton for moving cargoes, effectively removing price as a bargaining chip. A TMS can be programmed to allow for different transportation systems across the region.
Variations in tax codes and financial reporting requirements can also be built into a TMS. The differences are not only national; there can be important variations when moving product from one state or province to another. Interestingly, since carriers in countries like Brazil are well used to reporting financials to the government electronically, we have found that they are generally quite advanced in terms of data communications.
As is the case in developed economies, there are early adopters of sophisticated TMS solutions in South America. But the number of applications is still relatively small, particularly when it comes to the use of systems with an international reach. The technology is evolving in the region, however, and adoption rates will surely increase as more shippers use TMS solutions to help manage the complexity that is inherent in the region’s supply chains.