Five Ways to Drive a High-Performance, Cross-Border Automotive Supply Chain.Connect
Where are you likely to encounter the worst bottlenecks when shipping product between the U.S. and Mexico? The obvious answer is the busy border, but our experience in the automotive vertical suggests otherwise.
Inadequate visibility into cross-border shipments and a lack of synchronization between trading partners can be more disruptive than border controls. In fact, there are instances where too much time is allocated to navigating the border between the two countries.
Pinpointing and fixing the real causes of delays by analyzing cross-border supply chains is more important than ever. According to the U.S. Department of Commerce, in 2015 Mexico produced 3.4 million vehicles, and was ranked seventh-largest vehicle producer in the world and number one in Latin America. Since 2009, U.S. auto part exports to Mexico have more than doubled and were valued at more than $30 billion in 2015.
Given the huge volume of automotive exports and imports flowing between the U.S. and Mexico, we need to be cautious when generalizing about related logistics issues. Every supply chain is unique and vulnerable to a particular set of risks. Also, the mix of products is complex, and includes finished goods, components, and work in progress.
However, we have identified some issues and solutions that appear to be relatively common in the automotive trades.
Level cargo flows. Mismatches between supply and demand is a significant cause of delays. For example, a U.S. supplier ships more product than a buyer in Mexico can handle. These problems can be avoided by anticipating demand and planning accordingly. One method we use is to collect information from U.S. Customs and Mexican plants to plan ahead and synchronize incoming loads with production line needs. Another useful practice is to work with shippers and destination receiving points to forecast labor requirements in distribution centers ahead of time. Measures like these iron out demand spikes, and eliminate both delays and cost.
Smooth the way for carriers. Giving carriers as much lead time as possible for picking up loads lowers the likelihood of disruptions. Going the extra mile in this way also reduces the need to expedite cargo and affords more flexibility for changing shipment schedules.
Flag potential problems. You can avoid snafus by identifying high-risk shipments and monitoring their progress. Work with operations and supply chain risk management professionals as well as customs authorities to pick out these loads. In addition, collaborate with border warehouses to manage red-flagged units by, for example, sequencing them to depart first.
Go beyond compliance. Track the number of days that loads are in transit and work with shippers to ensure that transit times are within destination service level agreements. Having achieved compliance, look for opportunities to take more days out of the supply chain.
Build relationships. Bridging cultural and language disparities helps to establish strong, cross-border relationships between trading partners. Bilingualism is key. Our global Control Tower® network plays a critical role in aligning supply chains with local nuances such as differences in languages and logistics practices.
Room for improvement
The U.S. Department of Commerce estimates that Mexico may surpass Korea by 2020 to become the sixth largest worldwide vehicle producer with more than 5 million vehicles.
Supported by the North America Free Trade Agreement, Mexico and the U.S. already are major trading partners. Even so, there is still much to learn about improving the efficiency of cross-border cargo flows – especially in the automotive sector.
For more information about the challenges and solutions for automotive supply chains, read our case study.