Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
What if they threw open the U.S.-Mexican border to all qualified trucking companies, but no Mexican truckers showed up?
It would indeed be an ironic outcome of a battle that has dragged on for more than 11 years, culminating in March 2009 in a mini-trade war that has cost U.S. exporters billions of dollars in lost revenue and, according to U.S. Chamber of Commerce estimates, led to the loss of more than 25,000 American jobs.
Yet it is entirely plausible, according to various experts. For all the publicity surrounding the March 3 announcement by President Barack Obama and Mexican President Felipe Calderón of a tentative resolution to the cross-border dispute, few expect the status quo to change for years to come. The agreement would allow carriers on both sides of the border to operate beyond a 25-mile "commercial zone," but that doesn't necessarily mean they'll take advantage of that freedom. In fact, Mexican truckers will have little, if any, desire to operate deeper into U.S. commerce than they already do, these experts say.
"The majority of Mexican truckers don't want any part of it," says Herb Schmidt, president and CEO of Con-way Truckload, the truckload unit of Con-way Inc. Schmidt estimates that only 5 percent of the 80 Mexican truckers that have cross-border interline relationships with Con-way Truckload have even considered serving the U.S. market beyond the commercial zone.
"There's less interest on the part of Mexican truckers than many people think," adds Derek J. Leathers, chief operating officer of truckload giant Werner Enterprises, which generates about 10 percent of its annual revenue from Mexican operations. Before joining Werner, Leathers spent four years running the Mexican division of truckload and logistics giant Schneider National Inc.
As for how much volume we're talking about, an estimated 2.7 million loaded trailers crossed into the United States from Mexico in 2009, according to the U.S. Bureau of Transportation Statistics. About 1.2 million loaded trailers entered Mexico from the United States that year, according to data from private research firm Transearch.
Winners and losers
The agreement has yet to be finalized, and the details remain sketchy. The pact must still pass industry and congressional muster, which promises to be a significant challenge. At the very least, there will be U.S. lawmakers concerned about the safety of Mexican drivers and the environmental worthiness of Mexican vehicles—not to mention the cost to taxpayers of a proposal by the Federal Motor Carrier Safety Administration to partially foot the bill to equip Mexican rigs with electronic on-board recorders to monitor a vehicle's movement and location.
If and when an agreement is signed, one clear winner would be U.S. producers whose exports have been curtailed by tariffs imposed by Mexico in retaliation for its carriers being denied access to U.S. markets. As part of the accord announced in March, the Mexican government will reduce the tariffs by 50 percent when a final agreement is signed, and suspend the remaining 50 percent when the first Mexican carrier is granted operating authority. The tariffs have been levied on 89 U.S. import products valued at about $2.4 billion a year.
Among the losers could be Mexican customs brokers, about half of whom own drayage companies that move freight between Mexican and U.S. trucks for line-haul service into either country. Because the agreement allows Mexican truckers to operate beyond the commercial zone and haul freight directly to U.S. destinations, the need for those drayage services would diminish, if not disappear, experts say.
For the most part, however, it's likely to be business as usual along the border. U.S. carriers operating southbound to Mexico will continue to drive to the commercial zone and tender their trailers to their Mexican interline partners for the line-haul, largely out of concern for their drivers' safety within Mexico. The same business model is likely to prevail on the northbound routes, with Mexican truckers turning over trailers to their U.S. counterparts for movement into the U.S. interior, the experts say.
There are a host of reasons why Mexican truckers would be loath to enter the U.S. market. For one, the liability exposure in the United States would be too great for many Mexican truckers to tolerate. "They are scared to death of our tort system," says Schmidt, noting that the costs of obtaining insurance coverage—if Mexican carriers can obtain coverage at all—combined with the risk of being hit with a massive jury award in the event of an incident would be enough to keep many Mexican truckers out of U.S. commerce.
Then there's the expense. Mexican carriers looking to expand into the United States would face significant upfront costs for labor, maintenance, facilities, and equipment. The typical Mexican trucker has a fleet of six trucks, hardly enough to justify the kind of capital investment needed to play in the world's biggest economy, experts say.
In addition, the agreement bars Mexican carriers from accepting loads moving between U.S. points, thus keeping the intra-U.S. market off-limits to competition with U.S. carriers.
The debate goes on
In the meantime, the debate over easing restrictions on Mexican truckers continues. The agreement's opponents—chief among them the Teamsters union and Owner-Operator Independent Drivers Association, the trade group representing the nation's independent drivers—have warned that cheaper Mexican labor will undercut U.S. driver wages and siphon off jobs. Leathers of Werner says the argument is a red herring, contending that any labor cost advantage enjoyed by Mexican drivers will be more than offset by their companies' higher costs of capital and equipment, as well as the increased liability exposure.
Schmidt of Con-way Truckload adds that should Mexican drivers enter the United States with more frequency, they will, over time, demand wages that are comparable to U.S. drivers'. Schmidt compares that possible scenario to what has occurred over the years at Mexican "maquiladoras," plants in Mexico where raw materials imported on a duty-free basis are assembled into goods, which are re-exported back to the United States or another destination market. At Mexican "maquilas," Schmidt says, rising labor costs have forced businesses to relocate deeper into Mexico to procure inexpensive labor.
Lana R. Batts, a partner in transport advisory firm Transport Capital Partners and vice president of government affairs for the American Trucking Associations in the 1980s and early 1990s, says the Teamsters have little to fear from Mexican drivers jeopardizing their livelihood. Batts adds that union concerns that the agreement will give Mexican drug lords and other unsavory characters an open supply chain into the United States are unfounded, noting that border security is not disappearing and that the situation will be no worse than if there were no agreement.
"I have no idea why the Teamsters would waste their political capital on this issue," says Batts. Teamster officials did not return a phone call requesting comment.
Jim Giermanski, president of transport security firm Powers Global Holdings and a veteran observer of the Southern border trade scene, says the agreement could actually stimulate the U.S. economy and increase jobs by creating new demand for maintenance services, truck yards, and equipment.
Despite that, Giermanski says the agreement will have little competitive impact on the marketplace. The one exception, he says, could be the creation of regional hub-and-spoke operations linking Mexico with U.S. border cities, notably in Texas.
Kyle Alexander, director of strategic carrier development for Transplace, a Frisco, Texas-based third-party logistics service provider with significant Mexican exposure, agrees that open access for Mexican truckers could, in the near term, trigger new opportunities for shippers building a distribution presence on the southern border.
"It will open up this unique economic zone between Texas and Mexico to a level that has never existed before," Alexander says. Opportunities for long-haul service, he adds, will take at least three to five years to develop, if they come to fruition at all.
Thanks, but no thanks
The issue of open access for Mexican truckers into U.S. markets has been on the table since the North American Free Trade Agreement (NAFTA) took effect back in 1994. In fact, NAFTA stipulated that qualified Mexican carriers should be allowed full freedom in U.S. commerce no later than January 2000. However, legal and administrative roadblocks—mostly driven by safety and environmental concerns—have kept them out.
The reality, though, is it has never been a freedom that Mexican carriers crave. One trucking industry source noted the Bush administration "literally had to beg" Mexican truckers to participate in a 2007 pilot program that gave a limited number of Mexican truckers entry into U.S. markets. Mexican carrier participation fell way short of the 100 trucking concerns the U.S. government hoped for, the source said.
"This notion that this agreement opens the floodgates is absurd," said the executive, who requested anonymity. "However this develops, it will be evolutionary, not revolutionary."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.