As various forms of uncertainty and supply chain congestion continue to disrupt trade flows, the specialized logistics skills and infrastructure required to manage cross-border freight continue to be tested as never before.
These disruptions experienced by many shippers are incredibly challenging — but they also provide some valuable insights into improving the efficiency of freight operations at the border.
This article looks at the unique demands of cross-border freight management and what companies can learn from the upheavals of this time in supply chain.
Takeaways for the Future of Managing Cross-Border Freight
The U.S. Department of Transportation estimates that $1.2 trillion of transborder freight moved by all transportation modes in 2019. The lion's share, $772 billion, was shipped by truck. Of this total, $343 billion and $429 billion crossed the U.S.-Canada and U.S.-Mexico borders, respectively. The top three truck commodities were computers and parts ($156 billion), electrical machinery ($121 billion), and motor vehicles and parts ($117 billion).
Aside from the logistics of moving such massive volumes of goods, shippers must navigate jurisdictional differences between the national legal and freight systems involved. In 2020, these demands were spotlighted by the phasing in of the United States-Mexico-Canada Agreement (USMCA), which replaces the NAFTA agreement. And the biggest disruptor of all — and one that will reverberate for years to come — was the COVID-19 pandemic, which changed freight flows on multiple fronts.
But change also brings opportunity, and shippers can derive some crucial lessons from the above experiences that will help them manage their cross-border freight operation better. Here are five examples.
1. Agility and flexibility are vital attributes
Many of the changes that buffet freight networks are amplified at border crossings. For example, the COVID-19 pandemic upended product demand patterns, and measures to control outbreaks of the virus such as lockdowns hampered — and continue to hamper — manufacturing operations. Companies had to adjust the movement of raw materials, components, and finished goods across borders in response to these disruptions. Inventory levels fluctuated as companies battled to maintain steady supplies to manufacturing facilities without tying up too much cash in safety stock. The ability to make decisions on the fly is at a premium in these situations.
"Penske is well established at the borders, and this presence combined with our inventory management systems enabled us to help shipper clients flex up and down as needed," says LeAnne Coulter, vice president-freight management for Penske Logistics.
2. Flexibility also means mix-and-match logistics choices
Just as cross-border logistics need to be flexible, so does the choice of logistics services required to support freight movements across borders. Some shippers need a complete management package covering every base, including documentation, cross-docking, inland ports, transportation and warehousing. Others may already cover one or more of these components and need expertise in specific areas such as working with customs brokers. Look for third-party logistics providers with the versatility and resources to tailor their services to individual shippers.
3. Keep an eye on visibility
There are so many touchpoints to navigate when transporting freight across borders — from line-haul carriers and drayage operators to brokers and freight forwarders — that shippers cannot afford to fly blind at any stage in the process. Moreover, 20/20 supply chain visibility enables shippers to closely monitor shipments critical to customers and the smooth running of manufacturing plants. Penske achieves this visibility level with its Visibility Platform and Control Tower technology that provides network-wide visibility into cross-border freight.
4. Local presence is non-negotiable
Given the number of parties and jurisdictions involved when shipping goods across national borders, having eyes and ears on the ground is a must, not a luxury. Moreover, these local connections need to be well established and strategically located.
Consider, for example, a management solution Penske has created for a shipper in the auto industry. It includes load tendering, track and trace, and carrier management for all U.S., Canadian and Mexican plants/containers, including Mexico/U.S. and Canada/U.S. cross-border movements. Some 116 associates at Penske locations in the U.S. as well as in Nuevo Laredo and Saltillo, Mexico, support the operation. Penske chose these locations to ensure that staffing is available where and when needed.
Local representation is especially important when dealing with unexpected disruptions.
"If a plant suddenly shuts down, we have to quickly figure out how to hold parts in transit, when to push the pause button and when to restart. It is difficult to do that without having personnel on the ground," says Coulter.
5. Cross-border is forward-looking
Physical borders are static, but the freight traffic that flows through them, as well as the entities that manage this traffic and the rules that regulate it, are dynamic. In this ever-changing environment, planning ahead is essential.
For instance, "We work with many stakeholders including customers, carriers, and suppliers to get advance shipment notifications and prepare the documentation around shipments," says Coulter. Penske uses a unique workflow tool to bring all the components needed to smooth the way for shipments together on a single platform.
Certainties Amid the Uncertainty
Many of the transborder-related changes wrought by the COVID-19 pandemic are permanent, while others will continue to play out over the foreseeable future. Also, freight management is evolving toward a digital transformation and will always be subject to various types of disruptions and regulatory changes.
However, one thing is sure: comprehensive infrastructure and technical capabilities, trusted working relationships, and flexible support services will continue to be integral to efficient cross-border freight operations.