Morai-Logistics-Blog-Mexico-Rail

Last Friday, a new international rail bridge between the United States and Mexico was finally operational. The project took 15 years to complete, and had a price tag that ran over $120 million according to an article in the San Antonio Express news.

This new international bridge, of a sort not built in over one hundred years, is impressive but it is only a small part of Mexico’s rapidly developing rail ways and intermodal capabilities.

The combination of recent labor disputes at the U.S. West Coast, and rising costs on goods shipped to the U.S. from China (due to high oil prices and rising wages) has made Mexico very popular for international trade and companies seeking to convert to nearshoring as their logistics strategy.

It should be no surprise then that the aforementioned article quoting census data, writes that in the first six months of 2015, Mexico topped $262 billion in trade.

An excellent InboundLogistics.com article on the topic covers Ferrocarril Mexicano’s success, the country’s largest railroad, as a case study for the growing demand for rail transportation both domestically and between Mexico and the United States. This railroad had its carload volume increase by 6.6 percent in 2011 compared with 2010, and revenues increase by 13.9 percent.

Mexico’s central location, and the country’s commitment to improving security across its entire rail system are the other reasons InboundLogisitcs attributes to the railroad renaissance.

A similar article on LogisticsViewpoints.com emphasizes that Mexico has received a lot of investment from private companies to improve the Mexican rail system (over 5 billion U.S in fact).

This, according to the article, has created a system that is compatible with those of both its northern neighbours: “rail transportation, including bulk, general cargo and intermodal, has been a key factor in the expansion of trade between the U.S. and Mexico”.

Bringing it all back home

Stronger, more secure, and better supported rail ways are not the only things Mexico has to offer. Along the Mexico-Texan border, an area traditionally filled with warehouses, a home for “reshoring” is being created. U.S manufacturing companies are moving back home.

CoStar.com gives the example of the $8.1 billion purchase by IndCor Properties of 18 buildings with a combined 2.13 million square feet in El Paso, TX, as evidence of this. The article also discusses why goods shipped to West Coast ports have declined by 30% thanks in large part to the ongoing labor disputes there (which is because of ongoing labor disputes there).

The best way to conclude this blog post, is to again quote from the InboundLogistics article:

Investments in better processes, connectivity and operations will continue to increase capacity, expand intermodal ramp operations, improve service and increase train speed within the growing Mexican railroad network. This, combined with the improvements made over the past 20 years, are making rail and intermodal a sustainable, viable and long-term transportation solution for both cross border and intra-Mexico supply chains

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In recent years, the growing trend with many U.S. companies has been to relocate some or even all of their off-shore production back to North America. China no longer holds the sway that it used to, but countries such as Mexico are quickly becoming the much more attractive option. Here are 12 reasons why you should consider near shoring in Mexico.

The Right Time to Consider Nearshoring Strategies to Mexico

morai-logistics-12-reasons-to-invest-in-mexican-nearshoring

As foreign investment in China stalls, Mexico’s foreign investment continues to grow. As a result, demand for facilities and land is beginning to drive up. Thus, the best time to invest in Mexico for your manufacturing or sourcing potential for your organization is now.

That’s it for us this week! If you liked this blog post, why not subscribe to our blog? If you’re interested in what we do as a 3rd party logistics provider, don’t hesitate to check out our services (as expressed above, we are very pro finding you the lowest total cost!). We’re also in the twittersphere, so give us a follow to get the latest logistics and supply chain news!

Morai-Logistics-Blog-Canada-Rail

On the 20th of February, Federal Transport Minister Lisa Raitt revealed The Safe and Accountable Rail Act which proposes amendments to the Canada Transportation Act and Railway Safety Act. The Act, which is a response to the Lac-Mégantic disaster in 2013, will make railways and crude oil shippers responsible for the cost of accidents said Raitt.

Along with other previously introduced rail safety requirements, this new act will introduce the following:

  • Railways moving large volumes of crude oil will now be required to carry insurance of up to $1 billion to cover the costs of a potential accident.
  • Oil companies shipping their product in railway cars, meanwhile, will now face a levy of $1.65 for every tonne of crude shipped roughly 23¢ per barrel.
  • The Act will bring in minimum insurance requirements for railway crude oil shippers using federally regulated railways, from $25 million for carriers of minimally dangerous goods to $1 billion for substantial quantities of them.
  • Two new liability insurance levels — $100 million and $250 million — will be phased in during the two years after the bill receives royal assent. Companies will be required to come up with half that amount in the first year and the full amount the year after that.
  • Companies that ship crude oil will also have to pay a fee per tonne shipped that will go into a $250-million backup fund to cover costs above what their insurance covers if they’re involved in an accident involving crude oil.

Too Much or Too Little?

Although the reaction to the announcement of the Act has been mostly positive by the Canadian press, it hasn’t been without some controversy.

An article in the Financial Post quoted Greg Stringham, of the Canadian Association of Petroleum Producers’
vice-president of oilsands and markets, who expressed some concerns.

In today’s price environment, every little bit affects the economics. Crude oil prices have plunged more than 50% since June, causing many producers to cut spending.

Mr. Stringham said about 200,000 barrels of oil were moving by rail in Canada every day at the end of 2014. He continued by saying that oil and gas producers don’t know whether additional costs from the new insurance burden will cause oil-by-rail movements to become more expensive for producers.

Looking at the comments section of the articles covering this story, it’s easy to see that there is also the other side who feel that the newly proposed Act can isn’t being taken far enough. It seems that this sentiment stems from the recent Canadian Pacific Railway strike which ended just before employees would’ve been legislated back to work.

In a Maclean’s article, NDP Labour critic Alexandre Boulerice condemned the government for taking quick action against the workers when it was revealed that that there was a legislation being poised in end the strike. “It will put public safety at risk, since the problem of long hours and fatigue among those conductors will not be resolved,” he said at the time

A Problem With No Clear Solution

The growing number of train derailments has to do with the growing volumes of oil being shipped. This is a trend and problem for both Canada and the U.S. There’ve been different long-term solutions that have been recommended, but for now, let’s hope that the new Safe and Accountable Rail Act shows some promise in curbing this deadly trend.

That’s it for us this week! If you liked this blog post, why not subscribe to our blog? If you’re interested in what we do as a 3rd party logistics provider, don’t hesitate to check out our services (as expressed above, we are very pro finding you the lowest total cost!). We’re also in the twittersphere, so give us a follow to get the latest logistics and supply chain news!

Morai-Logistics-Blog-Intermodal-ThreatsLast week, the Intermodal Association of North America (IANA) reported in its most recent edition of the Intermodal Market Trends & Statistics report, a strong full-year and fourth quarter 2014 performance for intermodal volumes despite harsh weather conditions, and continuing intermodal congestion.

An article from Logistics Management by Jeff Berman on the report noted that:

Total 2014 intermodal volume—at 16,276,892 containers and trailers––saw a 4.8 percent annual increase compared to 2013. Domestic containers—at 6,444,532—were up 5.7 percent, and international containers—at 8,166,010—were up 4.4 percent. All domestic equipment at 8,110,882—was up 5.1 percent, and trailers rose 2.9 percent to 1,666,350.

For the fourth quarter, total volume—at 4,111,401—was up 3.0 percent compared to the fourth quarter of 2013. Domestic containers were up 5.1 percent at 1,672,332, and international containers—at 2,011,754—were up 2.1 percent en route to leading all intermodal segments for the fourth year in a row and seven of the last eight years. Trailers eked out a 0.1 percent gain at 427,315, and all domestic equipment was up 4.0 percent at 2,099,647.

Based on IANA data, the report observed that 2014 marked the first time in three years that international, domestic containers, and trailers each saw annual gains, while showing the strongest overall intermodal growth since 2011. What’s more, international volume posted its largest annual increase since the economy was emerging from the depths of the recession in 2010, with the 4.4 percent annual growth rate almost double the previous three years, while total international volume was only 4 percent below 2006’s pre-recession peak. And 2014 trailer volume saw its first annual gain in three years, while seeing a 35 percent total decline in the past decade.

IANA President and CEO Joni Casey commented on the findings: “For the first time in four years, international, domestic container, and trailer market segments all posted year-over-year growth. And volume gains were widespread geographically, with eight out of nine regions recording increases during 2014.” IANA officials also suggested that the reason international growth exceeded expectations in the fourth quarter, was because of “stronger than expected container imports.”

Casey added that considering that the overall volume growth rate of 4.8 percent was above 2013, as well as higher than in 2012, 2014 intermodal industry performance modestly exceeded expectations.

The Skies Aren’t All Clear Yet

Although the findings in the report are very encouraging, an article written by Mark Szakonvi on JOC argues that caution is required going forward.

In particular, he noted that a number of threats from the reappearance of brutal weather conditions seen last year, to a West Coast port lockout could quickly derail the rail industry’s gains.

“The railroads aren’t out of the woods yet. Although the waterfront employers said on Jan. 26 that it had reached a tentative agreement on chassis maintenance and repair with the International Longshore and Warehouse Union— a major roadblock to a labor contract — there is still concern of a terminal lockout by employers. If that were to happen, BNSF Railway and Union Pacific Railroad, the two major U.S. Western railroads, would no longer accept marine container terminals. Analysts differ on the severity an embargo of international intermodal traffic would have on rail service, but they agree it would be negative.”

That’s it for us this week! If you liked this blog post, why not subscribe to our blog? If you’re interested in what we do as a 3rd party logistics provider, don’t hesitate to check out our services (as expressed above, we are very pro finding you the lowest total cost!). We’re also in the twittersphere, so give us a follow to get the latest logistics and supply chain news!

We hope everyone has had a great holiday and we would like to wish all of our readers a Happy New Year! To kick off the year, we have finished compiling our infographic on the top logistics and supply chain facts from the news that we’ve collected throughout last year. As there is a large number of news items spanning the many large topics in the logistics industry, we decided to create our Top 10 by focusing on categories:

  1. Drones
  2. Same-Day Deliver
  3. Supplier Diversity and Women
  4. Sustainability
  5. RFID
  6. World Bank Institute’s Private Sector Platform
  7. Automation
  8. Online Retail
  9. Truck Driver Shortage
  10. Logistics Slow Growth

Each of these topics have some pretty interesting facts and statistics that may have been missed in the hustle and bustle of fellow logistics professionals and enthusiasts. And while we haven’t covered all of the interesting facts from 2014; we felt that these topics helped changes the face of the logistics and supply chain industry in 2014 and serves a good snippet to review the year.

Top 10 Logistics and Supply Chain Facts of 2014

Morai-Logistcs-Top-10-Logistics-and-Supply-Chain-Facts-of-2014

That’s it for us this week! If you liked this blog post, why not subscribe to our blog? If you’re interested in what we do as a 3rd party logistics provider, don’t hesitate to check out our services (as expressed above, we are very pro finding you the lowest total cost!). We’re also in the twittersphere, so give us a follow to get the latest logistics and supply chain news!

Source: Wikimedia Commons
Source: Wikimedia Commons
Last week, the Association of American Railroads reported that Mexican intermodal volume reached a high that has not been seen in the last two years. More and more, Mexican shippers have been turning to rail in order to move their goods. In fact, Journal of Commerce claims that Mexico’s intermodal industry is seen as the industry’s quickest-growing sector. Volume of shipments using intermodal transportation has soared about 31% year-over-year to 14,238 units leading up to last week. Carloads for Mexico also increased by approximately 38%, reaching a total carload of 19,745 units.

We’ve mentioned in a previous white paper that nearshoring to Mexico for North American manufacturing has many advantages, one of them being that cross-border logistics to Mexico, through the efforts of governmental intervention and NAFTA, has been improving heavily especially in intermodal transportation requirements. Combine that with rising ocean transport costs, peak season surcharges, and the rising wages in China and you get a prime contender for a tangible, competitive consideration for nearshoring.

One of Mexico’s largest container port, Lazaro Cardenas, has been showing a steady increase in intermodal demand. Efforts to meet the growing demand is shown in the influx of inextments and developments such as the APM Terminal’s deep water terminal which is expected to become operational by 2016.

By the beginning of this month, Mexico contributed to the overall increase in growth for North American intermodal volume. Of the 13 North American railroads, a total of 347,857 units in intermodal volume was reported (a 5.4% increase in volume compared to the same week last year).

Factors that Affect Mexican Intermodal Business

Intermodal rail in Mexico has some great advantages with regards to cross-border logistics, adding more incentive to nearshore as a strategy for North American manufacturing. Below are some facts that show how both incentives from Mexico and the US governments are leveraging their neighbouring border towards a better solution.

  • With the right documents, clearance can take as little as 30 minutes for a 250-foot container, compared to the two hours it takes for a single-container truck.
  • BNSF Railway launched its first all-rail US-Mexico service in May to help facilitate faster movement between borders by partnering with Ferromex (a Mexican railroad).
  • AMP Terminal is currently developing a new deep-water terminal to launch by 2016.

That’s it for us this week! If you liked this blog post, why not subscribe to our blog? If you’re interested in what we do as a 3rd party logistics provider, don’t hesitate to check out our services (as expressed above, we are very pro finding you the lowest total cost!). We’re also in the twittersphere, so give us a follow to get the latest logistics and supply chain news!

This week we’re continuing our infographic series on The Benefits of Nearshoring. We’re focusing more on Mexico and how efforts in both infrastructure have affected how it has developed in recent times. We’ve also taken a look at how the auto industry is ripe for a nearshoring move for American companies.

Mexico and Nearshoring

Mexico has set itself up to being in a good position for the main nearshoring or reshoring target for companies in North and South America, but especially the United States. Companies in the US are in a perfect position, depending on the industry and logistics needs, as Mexico offers an attractive location and cost (due to China’s rising wages) but also more control over manufacturing & delivery schedules when compared to supply chain and logistics operations overseas.

Mexico and the Automotive Industry

Major automotive manufacturers, such as Ford, Chrysler, and General Motors (GM) have already been operating in Mexico since the 1930s. These companies have spearheaded the nearshoring move in the auto industry and other companies like Toyota, Nissan, Honda, BMW, Volkswagen, and Mercedes Benz have followed suit.

Check out our infographic below to see how Mexico is continuing its trend towards being a very real consideration for American manufacturers looking to optimize their supply chain while cutting costs.

Morai-Logistics-Infographic-Nearshoring-Pt-2

 

That’s it for us this week! If you liked this blog post, why not subscribe to our blog? If you’re interested in what we do as a 3rd party logistics provider, don’t hesitate to check out our services (as expressed above, we are very pro finding you the lowest total cost!). We’re also in the twittersphere, so give us a follow to get the latest logistics and supply chain news!

Source: Wikimedia Commons
Source: Wikimedia Commons
In the recent years, China and Mexico have been battling to be the prime hub spot for logistics operations in North America. While there are still advantages of offshoring to China, for example their already established work force and prime manufacturing facilities, when it comes down to it cost and time are the prime factors for the change. We will be discussing the expected advantages for nearshoring as well as present some statistics that support the trend that suggest that nearshoring, especially for companies that are looking to build manufacturing plants, is the better option.

Top 5 Expected advantages of Nearshoring

Inbound Logistics Magazine released and analysis of the status of the logistics and supply chain industry in Latin America. Below is an excerpt of survey respondents based on research by AlixPartners of the top five expected advantages of nearshoring:

  • Lower Freight Costs
  • Improved Speed-to-Market
  • Lower Inventory Costs
  • Time-Zone Advantages
  • Improved Cultural Alignment with North American Managers

Nearshoring is becoming more and more attractive as geopolitical changes, and factors such as rising fuel costs, have been affecting the main attraction for China: lower total cost for logistics operations. By 2015, China’s wages are expected to rise to $6 USD, and by this point it will no longer be cheaper than Mexico’s flat wages.

3 Statistics on Mexico as an Advantageous Nearshoring Move

Statistics since our initial post on our case study exploring Mexico as a prime logistics hub has shown that the trend to nearshore is not just very real, but also becoming more and more attractive. Logistics Management’s report exploring how US manufacturing costs are now equal to Mexico and how costs will be equal to China by 2015 seem to be confirmed as we near 2015. The following are statistics that we found that further solidify this trend:

1 – The full landed cost of Chinese production rose from 2005-2010 to 87% of US costs, while Mexican costs fell to 75% of US costs.
Source: Lilly and Associates

2 – Ocean freight from Altamira, Mexico to the port of Miami takes 6 days while a similar shipment from China can take up to a month to arrive.
Source: Lilly and Associates

3 – China’s fuel costs grew at approximately 20 percent per year in the past few years.
Source: Supply Chain Brain

China has some challenges to compete with the attraction of nearshoring to Mexico, and indeed efforts are being taken in order to control the rising fuel costs and the new minimum wage standards in order to remain a strong competitor as an offshoring option for North America. But the concept of nearshoring is now not just a real avenue of exploration, it simply cannot be ignored for those in the North American logistics and supply chain industry.

If you’re interested in finding out more Mexico as a solution for your logistics and supply chain needs, check out our white paper on Mexico and Third Party Logistics!

That’s it for us this week! If you liked this blog post, why not subscribe to our blog? If you’re interested in what we do as a 3rd party logistics provider, don’t hesitate to check out our services (as expressed above, we are very pro finding you the lowest total cost!). We’re also in the twittersphere, so give us a follow to get the latest logistics and supply chain news!

DictionaryFor this week’s Logistics Glossary Week post, we’re going to focus on hubs! What exactly is a hub? Well, it actually has many definitions. In the computing sense, a hub can refer to a common connection point for devices in a network. For example, a web hub was one of the initial names to what we now refer to as a portal. But what about the logistics sense? We see articles today that are discussing possible new logistics hubs for manufacturing or where the best logistics hubs are per region. So we thought that for this month’s blog post, we’d give you the breakdown on the logistics ‘hub.’

Logistics Hub

Definition: In logistics terminology, a ‘hub’ is a reference for a transportation network as a “hub and spoke.” The term is commonly used in the airline and trucking industry. A hub in the logistics sense serves as the focal point; its purpose is to handle the flow of good and other resources between the points of origin to destination in order to meet transportation requirements.

Logistics hubs can be mainly one form of transportation such as trucking terminals, rail hubs, or even a hub airport. All refer to the same idea. For example, a hub airport serves as the focal point for the origin and termination of long distance flights (flights from outlying areas meet connecting flights at the hub airport). But, it can also be a…

Multimodal Logistics Hub

Definition: A logistics hub that has more than one mode of transportation (truck, rail, sea, air, etc.) that handles the flow of goods and resources between the point of origin to destination in order to meet transportation demands and requirements.

Value Proposition

Definition: value proposition is particularly important to the definition of logistics hubs because in order for a logistics hub to be truly effective, there has to be value in using a particular location as a hub. Ideally the proposition is two-sided; meaning that the hub is a benefit to both buyers and sellers.

Hubs can be created organically due to pragmatic solutions stemming from a particular location. For example, logistics hubs can be near or around many manufacturing plants and companies that offer warehousing solutions. Furthermore, it could also be easy access between different modes of transportation such as truck and rail. This provides easy intermodal exchanges, like transporting goods from truck to rail. Because of this, routes are created and these hubs offer the benefit of convenience and potential cost savings for both suppliers and consumers.

And that’s all for us this week! Hope you have a happy Halloween and a great weekend! If you liked this blog post, why not subscribe to our blog? If you’re interested in what we do as a 3rd party logistics provider, don’t hesitate to check out our services (as expressed above, we are very pro finding you the lowest total cost!). We’re also in the twittersphere, so give us a follow to get the latest logistics and supply chain news! See you in November!

DictionaryWelcome to our last Logistics Glossary Week post of the summer! This week we’re focusing on the different modes of transportation for logistics and we’re finishing with a look into the potential future of logistics with the introduction of a new, interesting mode of transportation!

Intermodal

Definition: In logistics terminology, intermodal simply means using two or more modes of transportation, usually this refers to truck and rail, but it can refer to any combination of different mdes of transportation. For example truck and oceangoing vessel.

Intermodal transportation is one of the most common ways goods are transported, especially when crossing borders or when transporting good for significantly long distances. Indeed, our biggest offer as a third party logistics provider is intermodal logistics services. News earlier this year suggested that the logistics industry is to experience slow growth over the next 5 years, but it seems that certain aspects of logistics are less affected. Chief Supply Chain officers look to 3rd party logistics providers and intermodal seems to be on the rise in certain parts of the world, for example Eastern Canada.

Truckload & LTL

Definition: We’re grouping these two because they are essentially the same, but differ mainly in the size of shipment. When you think logistics, you normally think truckload transportation; moving full truckloads of freight from the point of origin to its destination. Less-than-truckload (LTL) transportation services consolidate and transfer smaller shipments of freight, usually through a network of terminals and rally points.

Trucking is what makes good move across the world. It is the standard for logistics, hence why you might think trucks when you hear the word logistics! Because this is one of the most in-demand mode of transportation for getting good from origin to destination, there is a huge demand for truck drivers. This is no truer that today, when the addition of e-commerce has created even more demand for trucking services. This increase in demand, combined with the aging trucking population (the average age is about 40, with 20% of the total population over 55), there is a real need to increase the tuck driver workforce in order to keep up with tomorrow’s logistics demands.

Ocean and Air Carriers

Definition: Useful for global logistics, ocean and air carriers are what you would assume they are. They are cargo ships or airplanes that carry freight. Usually these types of transportation fit under intermodal logistics services because they tend to be combined with some form of ground transportation.

Drones

Definition: Also known as ‘unmanned aerial vehicles’ or ‘unmanned aerial systems,’ drones are best known for their military applications. They are aircrafts that can fly autonomously; they usually follow a set path from origin to destination using a form of GPS guide.

The development of technology has brought down the prices of drones to as little as $500-1000 USD. We found an article that takes a look at people in the logistics industry who have introduced the concept of drones as a means to transport goods. This could create a potentially hassle-free way that can transport goods speedily!

And that’s all for us this week! Hope you have a great Labour Day Weekend! If you liked this blog post, why not subscribe to our blog? If you’re interested in what we do as a 3rd party logistics provider, don’t hesitate to check out our services. We’re also in the twittersphere, so give us a follow to get the latest logistics and supply chain news! We’ll catch you next week!