Shipping to and from Mexico is never easy, but this year a perfect storm of market conditions is putting a crimp in rates and capacity.
“An imbalance of trade means there’s much more northbound capacity coming out of Mexico than inbound entering the country”, said Troy Ryley, president of Redwood Mexico, a division of Redwood Logistics, a third-party logistics (3PL) provider based in Chicago.
The electronic logging device (ELD) mandate has also made U.S. carriers more conscious of lost productivity when their trailers are stuck offloading at the border. As a result, many of those carriers are pulling their trailer equipment out of Mexico “because they get a higher return in the U.S.,” Ryley said. (In January, U.S. Xpress sold its cross-border operation.)
Redwood Logistics has operated in the Mexico market for years and last summer launched Redwood Mexico as an expansion of its existing cross-border supply chain solutions services. The company offers expert freight constancy, not just transactional truck brokerage solutions. “We’re attacking the market as an integrated logistics provider with some asset capability,” Ryley said.
That perspective allows Redwood Mexico to take a more strategic approach to solving client issues, saving them headaches and money in the long-term.
And in 2019, headaches abound.
In addition to the previously mentioned macroeconomic and technology factors, several “never before seen” challenges are popping up south of the border, said Redwood Logistics president Todd Berger. A teachers’ strike in January shut down the Puerta Mexico rail ramp in Toluca for several weeks, wreaking havoc on inbound and outbound intermodal traffic and putting more pressure on truck capacity. A gasoline shortage is causing lines of several hours at the pumps.
Add to that the ramp-up to peak produce season – which starts in May – and shippers in 2019 should expect a challenging year. To weather the storm, Redwood executives said, shippers should be open to multiple logistics modes, useage of alternative border crossing points and avoid trying to lock in spot rates.
“We’ve told [clients] there is a time to be on the spot market and a time not to be,” said Ryley. During the first and second quarters of this year, shippers will be making a big mistake if they focus on price alone, he warned, as those who do will see capacity evaporate. “They will be the first ones to lose.”
The good news is that later in the year, things should cool down. “We are positioning clients for the fourth quarter to take advantage of spot opportunities for additional savings,” Ryley said.
Transloading – the process of transferring a shipment from one kind of transportation to another – is a good option this year. Many clients are hesitant to go with the intermodal model because they don’t want people’s hands on their freight, Ryley said. “But if you have a fairly standard load, it’s an extremely effective way to mitigate cost increases, and ensure capacity.”
Redwood, which operates its own transload border facility in Laredo, recently put together a competitive transload program for a large baking ingredients client that provided reliable capacity at its plants in Mexico and dedicated capacity for its U.S. deliveries.
The 3PL has helped other companies navigate the Mexican logistics maze that has been made all the more sticky this year. During the teachers’ strike that shut down the Toluca ramp, Redwood helped one client switch to alternative ramps in Mexico to ensure were no interruptions with its supply chain.
Agile solutions like this and an open-minded approach to logistics will continue to be keys moving forward if shippers hope to continue running their cross-border operations without a hitch.