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Mexico Logistics: Fedex, DHL Favorites

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Fedex and DHL lead customer surveys for transportation and warehousing in Mexico, followed by K+N.

BY JASMINE SABAGH
InfoAmericas

A recent market study conducted by InfoAmericas included telephone interviews with 50 manufacturing company executives in Mexico City, Monterrey, Guadalajara and San Luís Potosí (22 percent of them decision makers for logistic providers contracting) revealed that, in Mexico, the “top-of-mind” leaders for transportation and warehousing companies are FedEx, followed by DHL and K+N tied for second, and UPS in third place. Respondents mentioned DHL most frequently as a second alternative, followed by FedEx and the duo K+N & UPS.

Branding managers measure top-of-mind awareness as an indicator of positioning within specific target market.  Being the first brand mentioned by potential consumers surveyed is a good indication of an intention to purchase goods or services from the mentioned company. 

TRANSPORT: DHL

Regarding transport services, DHL was mentioned most frequently, followed by FedEx and K+N in second place, and UPS third. Local transport firms mentioned included Castores, Potosinos and Tres Guerras.

The survey indicates a degree of brand awareness domination by four companies (FedEx, DHL, K+N and UPS). It is remarkable that, not withstanding the best media marketing campaign in Mexico among logistics providers, DHL does not rank first in unprompted brand awareness.

The survey also confirms that only a dozen or less 3PLs effectively compete with any semblance of national coverage and one-stop-shop variety of services.    Due to entry barriers, particularly regulations and the high capital investments required for technology, the logistics services market functions as a quasi-oligopoly.

Interviewees evaluated the service obtained from outsourced transport on a scale of one (“very unsatisfied”) to 10 (“very satisfied”), and final scores ranged very little from 8.3 and 8.6.  Low dispersion indicates an intra-brand standardization of service, making it increasingly difficult to differentiate service.  

WAREHOUSING: DHL

In the case of warehousing, the companies best positioned in terms of unprompted brand recognition were DHL, K+N and Accel.

Altamira Terminal Multimodal (ATM), a port in the state of Tamaulipas, was also mentioned as an option, as well as Almacenadota de Depósito Moderno (Ademsa) and Megafrío. The port infrastructure of ATM was considered by many interviewees as the best option on the Gulf of Mexico. 

Respondents scored warehousing services between 7.0 and 8.5. The wider dispersion reveals a less mature market with stark differences in service quality between providers.  This makes warehousing a riper market for a new entrée to carve out market share for himself.  Indeed, no interviewee felt confident of the quality of outsourced warehousing services available today in Mexico. In most cases, third parties are used only temporarily, and almost all respondents indicated they preferred in-source, rather than outsource their warehousing and inventory management, for reasons of trust and security.

A low propensity to outsource warehousing today is similar to where transportation stood in Mexico 15 years ago.  The still fragmented warehousing supply market needs to come together to build a common message to the market to promote the benefits of outsourced warehousing and inventory management services.

MEXICAN INFRASTRUCTURE

Inadequate infrastructure limits Mexico’s competitiveness and impedes the functional integration of productive chains, from raw materials to finished and delivered products. Interviewees ranked standard government built (free) roads as the worst Mexican transportation infrastructure mode (6.2) followed by and railroads (6.5), well behind the better-scoring toll highways (8.0) and air and sea ports (7.9), both of which are privately built and managed.

According to an OECD study, close to 10 percent of national GDP is spent on transportation and logistics, a higher number than most OECD members demonstrating that Mexican logistics, though much improved over the last ten years, remains reliant on old and inefficient infrastructure.  The 10 percent figure for Mexico along with the 15 percent figure for Turkey likely underestimate the true total cost of transportation given the strong presence of an informal (cash only) trucking industry.

Mexico’s steady march toward integration with the US economy has been glued together by fairly sophisticated cross-border logistics which manage to move goods at about 4-5 percent COGS.  The large scale manufacturers on the Mexican side of the U.S. border utilize state-of-art logistics processes and technology to connect their factories with global suppliers and U.S. customers. 

LESS EFFICIENT

Mexico’s domestic logistics industry, however, is far less efficient and the full cost of transportation and logistics probably reaches closer to 15-18 percent of the purely domestic market GDP.  Here is where Mexican regulators and planners need to focus their attention on improvements.  The $40 billion infrastructure plan underway in Mexico will help tackle some of the infrastructure issues. 

Equally compelling and much less costly is the call to open up Mexican domestic trucking to international ownership, presently barred under the auspicies of the NAFTA.   Cross border logistics in Mexico have achieved their efficiency levels thanks to the investments by players like UPS, FedEx and DHL as well as YRC, K&N, Panalpina, and others. Their technology and global best practices are essential to raising competitiveness.  They have been a shot in the arm to Mexico’s cross-border sector – now they are needed in Mexico’s domestic trucking market. 

This article originally appeared in Tendencias newsletter, published by InfoAmericas. Republished with permission.

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