According to the Office of the U.S. Trade Representative, U.S. goods exports to Mexico in 2022, the latest year for which numbers are available, were $324.3 billion, up 17% from 2021 and 50% from 2012. U.S. goods imports from Mexico totaled $454.8 billion in 2022, up 18.9% from 2021 and 64% from 2012.

Nearshoring is on the rise, and a growing number of manufacturers are moving production to Mexico to reduce delivery times, increase agility and take advantage of favorable trade conditions. In addition to new businesses moving into Mexico, companies already doing business there are expanding, increasing demand for cross-border and intra-Mexico transportation solutions and warehousing.

Operating in Mexico

“When people think of Mexico, the first thing they think of is the border. But Mexico is a large country, and there are a lot of kilometers to traverse ,” said Bob Black, vice president of operations at Penske Logistics. “You need to have an understanding of the country, the infrastructure and regulatory requirements. It’s also invaluable to have people who are knowledgeable about operating in Mexico, have lived there and understand the culture.”

Black said it is essential for logistics providers in Mexico to thoroughly understand the labor, government, city and state requirements because they can be unique. “There are new regulatory requirements on the patrol of goods that we’re seeing now, and we anticipate more coming as Mexico matures,” he explained, adding that the existing government has prioritized labor reform.

Knowledge of the country also aids in change management and agility. “Understanding where resources are, quickly determining short-term solutions, such as warehousing or parking, and anticipating what could come next based on historical issues or experience creates an advantage,” Black said.

Mexico recently experienced heat waves that created power challenges, and the power grid is becoming strained due to growth. “We’re seeing manufacturing facilities that have had to shut down for certain periods,” Black said. “Cities in Mexico are moving as fast as they can to upgrade their infrastructure, but these are things that aren’t necessarily top of mind.”

Managing the Border

By moving operations to Mexico, companies can take advantage of Mexico’s shared border with the U.S., which is the world’s largest economy. Mexico also has multiple trade pacts, including the United States–Mexico–Canada Agreement.

Scenario planning and visibility are even more crucial at the border. “The number of U.S.-based companies operating at the border with little to no visibility is shocking. Penske’s mission is to bring visibility to them,” added Black. “It’s very difficult to pivot in the supply chain. We’ve helped partners build solutions and temporary balances for things like strikes, and that’s why it’s important to bridge a gap on the other side.”

Labor Considerations

Lower labor costs in Mexico have also made the country attractive. However, new growth is making the market for talent more competitive. “When considering labor, it is important to be an employer of choice in Mexico through publications and surveys. That also means that you’re properly compensating monetarily, providing benefits and supporting employees emotionally with things like paid holidays,” Black said, adding that as the market grows, wages will have to increase, which has the potential to change the ROI.

In some areas of Mexico, pulling employees from nearby areas may be necessary. “We first try to staff with locals, but we have experienced situations where we provided transportation and brought employees in from outside the city,” Black said.

Optimizing Operations

Growth is also increasing demand for warehousing and industrial space. “Size and market dictate availability. Our customers are asking us to analyze the market and identify suitable facilities,” Black said.

Businesses are also seeking guidance on their existing operations and locations in Mexico. “A lot of companies have experienced natural growth over the past 10 years, so you can see a patchwork of facilities. We can look at it to see if it makes sense to consolidate into larger facilities,” Black added.

Penske’s engineers can create models and run what-if scenarios that analyze transportation network design, warehouse sizes and facility locations. Engineers can also look at the ripple effect network changes can have throughout the supply chain. For example, companies doing business in Mexico are often Tier 1 suppliers. “If they introduce a new model into a Mexico plant, other tiers in the supply chain are impacted as well,” Black said. A large part of Mexico’s industry is automotive manufacturing. New vehicles and model changes can require Tier 1 suppliers to ensure their supply chain is prepared to support the production needs of these manufacturing operations.

Most companies doing business in Mexico are multinational, which means decision-makers are often located abroad, adding to the complexity of their operations. “You have to know where the final decision-maker is and know and understand the local operations so you can meet their needs,” explained Don Klug, vice president of sales for Penske Logistics.

Serving Customers

Penske has provided freight management, warehousing and brokerage solutions in Mexico for over 20 years and is a registered service provider. With thousands of team members located throughout the country, Penske can provide engineered solutions, execution and day-to-day management of any company’s supply chain requirements in different verticals.

“We have built a solid team that understands the requirements, intricacies and challenges of operating in Mexico,” Black said. “We are excited about the anticipated growth in Mexico in the coming years and the growth of our footprint in the market.”

Visibility is critical at the border, and being proactive rather than reactive can keep products moving. Penske has added a border workflow technology tool as part of its ClearChain® technology suite that facilitates collaboration between the many stakeholders involved in a border crossing to mitigate the risk of a delay.

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Two new regulations in Mexico — the Suplemento de Carta Porte and Proyecto de IntegraciónTecnológica Aduanera (PITA) — are expected to create more documentation and record-keeping which may further complicate an already elaborate process.

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Bob Black is the new managing director for Penske Logistics in Mexico. His duties include operations oversight and leading business growth and development in Mexico.

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Penske Logistics will once again have a strong presence at the upcoming Automotive Logistics Mexico Conference. It will take place at Mexico City's Marquis Reforma, February 25-27.

In addition to serving as the event's Premier Sponsor, Penske will co-present a session with its customer Toyota.

On Day 1, Penske Logistics vice president of enterprise accounts, Stacy Schlachter, and Eliel Cole, production control general manager, Toyota Motor Manufacturing de Guanajuato, will host a case study.

Entitled The Importance of Developing Adaptive Logistics Partnerships, these experts will discuss real-life collaboration success stories between a third-party logistics company and an automotive manufacturer.

Organized by Automotive Logistics magazine, this event includes presentations by a wide range of automotive supply chain professionals. The conference will be attended by industry thought-leaders and senior executives from OEMs, tier suppliers, logistics providers and infrastructure operators.

By "Move Ahead" Staff

Penske Logistics patrocinará y hará una presentación en la conferencia Automotive Logistics México de 2020

Penske Logistics tendrá nuevamente una presencia importante en la próxima conferencia Automotive Logistics México. Tendrá lugar en el Marquis Reforma de la Ciudad de México, del 25 al 27 de febrero.

Además de servir como patrocinador principal del evento, Penske presentará una sesión junto con su cliente Toyota.

El 1.º día, la vicepresidenta de Cuentas Empresariales de Penske Logistics, Stacy Schlachter, y Eliel Cole, director general de Control de Producción de Toyota Motor Manufacturing de Guanajuato, organizarán un estudio de caso.

Bajo el título The Importance of Developing Adaptive Logistics Partnerships (La importancia de desarrollar asociaciones de logística de adaptación), estos expertos conversarán sobre historias de éxito de colaboración en la vida real entre una empresa de logística de terceros y un fabricante de automóviles.

Este evento, organizado por la revista Automotive Logistics, incluye presentaciones de una amplia gama de profesionales de la cadena de suministro automotriz. A la conferencia asistirán líderes de pensamiento de la industria y ejecutivos de alto nivel de los principales fabricantes, proveedores de nivel, proveedores de logística y operadores de infraestructura.

Por el personal de "Move Ahead"

Editor's note: This story is part of our “50 Stories of People Helping People" series. As we celebrate Penske's 50th anniversary in 2019, we are spotlighting associates every Friday who are making a difference in their communities.

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Penske Logistics is the Premier Sponsor of this month’s Automotive Logistics Mexico Conference. It will be held January 29-31 at the Marquis Reforma in Mexico City.

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Successful border crossings require expertise, visibility and seamless communication. Due to government regulations, they also require additional, specific documentation and careful planning for carriers and shippers alike.

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