The North American Free trade Agreement has contributed a lot to support the commerce among the Mexico, Canada and United States. The value of surface transportation between United States and its other two partners increased by 14 percent to a new record, which was 904 billion in 2011. Siemens is one of those companies, which switches from air freight to over the road transportation for shipments within NAFTA area to save cost. However, efficient and security ate two major problem challenging many shippers for moving goods across the borders because border crossing is complex, subject to laws, treaties and security requirements.
Siemens’s Mexico-based division Siemens S.A de CV, locate about three hours south of the U.S-Mexico border. The facility manufactures 2.2 million molded case circuit breakers (MCCBs) for both residential and industrial use. The factory shipped three to eight pallets of MCCBS via air daily until fall 2009. 90% where heading to three Siemens DCs Ontario and Quebec. The other 10% were bound for Southaven and La Mirada. This made the manufacturer have to meet tight daily air cargo windows at nearby Mariano Escobedo International Airport in Monterrey. There are two cons for this operation. Production delays lead to Siemens to miss the shipping Cutoff. And there is huge transportation cost for its air fright. The logistics director for Siemens, Alejandro Reyna, says “ we were using the most expensive shipping mode based on production delays, client demands, and limited logistics knowledge.”
A BETTER WAY
By collaborating with Con-Way and its Mexico-based division CFI Logistics, Siemens want to improve the efficiency and cut off the cost. CFI, which was acquired by Con-way Truckload in 2007, contracts for both LTL and TL shipments domestically within Mexico, providing the Mexico service formerly handled by Con-way freight. Siemens’s requirements were quite simple: daily, reliable LTL pickups and only three day transit time form Mexico to Canada. Besides, the carrier also need to be bonded, which means licensed against a guaranty by customs to carry duty-unpaid goods in bond across U.S, Canada, and Mexico borders.
For better collaboration, Siemens have to make some production adjustment to accommodate the 3-day transit time, while CFI promised some special service to make the adjustment even palatable. For example, CFI assigned a dedicated customer service representative to Siemens to provide information and status updates on demands. CFI also offered access to a Siemens-specific web portal, which enable the manufacturer to view the shipment information. Besides, because CFI is a sub-division of Con-way, it can work seamlessly with Con-Way to manage LTL, TL and cross-border freight. This allows Siemens to management all transaction through one contact, which improves the efficiency.
SECURING TRANSPORT IN MEXICO
Mexico is among the three counties most at risk for cargo theft along with Brazil and South Africa according to logistics security agency FreightWatch International. Thus, cargo security was a large concern for Siemens as it transitioned from air to over-road-transport. In 2011, total cargo thefts increased 13 percent, with more than 10,000 hijacking occurring on road and highways.
To ensure Siemens’ goods travel safety, CFI logistics uses both process and technology. The trucks that carry shipments from plant to CFI’s cross docking facility are equipped with GPS technology, the location is always known. Besides, the driver’s name, unit number, and license plate number are provided to Siemens in advance, so it can verify it is tendering the load to an authorized driver. Once the truck is loaded, Siemens takes a photo of loaded shipment as part of its compliance with Business Anti-Smuggling Coalition (BASC) requirements. BASC is a business-customs partnership created in cooperation with governments and international organization to promote safe international trade. At CFI logistics’ cross docking facility, there will be security guard watch over the entire shipment handling and match paperwork to ensure the consistency. Also, security cameras provide surveillance, and long haul trucks use GPS tracking. There are even emergency buttons in truck cabs, which provide another method for communicating with CFI security personnel.
By collaborating with Con-way and its sub-vision CFI Logistics, transition from air to cross border over-the-road transport has enable Siemens to cut transportation cost by 35 percent.