LOGISTICS
Latin America Snapshot |
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Harvey Donaldson, director of the Georgia Tech Logistics Institute, told attendees of the 2006 Sumaq Summit that one of the chief logistics trends involving Latin America is the expansion of sea lanes between Asia and the U.S. east coast, by means of both an expansion of the Panama Canal and new Pacific ports in Mexico.
As for the port congestion issues that so many global ports face, he said, "The Chinese are doing a much better job at solving their port problems than we are." He also sees a return of manufacturing to Latin America from Asia, driven by such factors as lower transport costs to end markets and U.S. port and surface transportation delays. In his remarks, Donaldson said one logistics executive had told him his biggest concern was that "just as we get port capacity" to handle the Asian influx, "we're going to move it all to Brazil." Sergio Biggemann, director of research for the Latin America Logistics Center, has compiled an Index of Logistics Complexity that assesses how countries with more barriers will naturally lead to a longer order cycle for companies trying to do business in them. Among the 289 companies participating in the LALC's 2005 benchmarking survey, 16 percent were in the manufacturing sector, 19 percent in the logistics sector and 21 percent in the "fast- moving goods" sector. Forty- five percent of them had only one distribution center, with 16 percent having two and 10 percent each having either 4- 5 or 5- 10 DCs. Making the case for more DC development in the region is the fact that the single- DC owners are serving more customers per day with more turnover and more SKUs than in 2004, all coming from that one facility. "This explains why the key performance indicators [KPIs] haven't improved as much as you might expect," said Biggemann. Among the KPIs is a distribution cost- to- sales ratio of just over 18 percent for all of Latin America, led by 11.8 percent in the Andean region, which jumps to more than 18 percent for Mercosur and Chile. Biggemann said the chief reason was 25 percent more SKUs, though perfect order numbers were up slightly and forecast errors were down. All parties agree that there is a need for highway development in Central America, and east- west highway development in particular in South America. Biggemann says the Colombian government is asking what type of infrastructure should be developed. He says El Salvador is committed to a new logistics infrastructure. But the primary commitment needs to be driven more by the private sector, even as populist governments make headway in Bolivia and Venezuela. Paul Esqueda, a professor of engineering from Penn State University, said, "I get the impression that Latin American leadership has been from the economic development or political sides, but we don't have business assuming that role. It is there for some raw materials or resources, but there is a lack of overall strategy to develop infrastructure." — Adam Bruns
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