Transplace readies expansion of intermodal offering in U.S.-Mexico trade

The third-party logistics provider (3PL) Transplace plans to expand its rail intermodal offerings in the U.S.-Mexico market to give customers an alternative to road transportation services that are increasingly plagued by border congestion and equipment imbalances, according to the executive heading its Mexican operation.

Troy Ryley, Transplace's managing director-Transplace Mexico, said this week that the company is "seriously considering a more aggressive approach" to growing its intermodal business between the two countries. Ryley would not offer details, but said an announcement should be made in the coming weeks.

Transplace's transborder traffic moves almost exclusively by truck, with only about 1 percent of its mix shipped via rail, according to Ryley. However, increased road volumes in the booming trade, combined with inadequate capacity on busy northbound routes have intermediaries like Transplace seeking other options for at least part of their customers' transportation needs.

Normally, two tractor-trailers move northbound for every one that heads south. However, this year the imbalance has been aggravated by bad winter weather that has curtailed supply, and by an ongoing drought in California that has increased U.S. demand for Mexican products, Ryley said.

Both forces have created a "peak season" effect several months early and made the search for supply a major headache in key origin markets like Monterrey and Guadalajara, Mexico, Ryley said. At times, the capacity ratio has been as pronounced as 5-to-1, he said. In one instance, 300 fully loaded trailers sat at Laredo, Texas, for an extended period waiting for rigs to haul them, he added.

Ryley said he expects the imbalance to persist as long as the U.S. economy continues its recovery.

The U.S.-Mexican rail market is controlled by two companies: Ferromex, which is about one-quarter controlled by U.S. rail Union Pacific Corp., and Kansas City Southern de México, owned by U.S. rail Kansas City Southern Railway. Until the mid-1990s, the Mexican rail system was a ward of the state, and over the years, its infrastructure had fallen into disrepair. Starting in 1995, however, the Mexican government began privatizing the industry and awarding concessions to incentivize companies to invest in modernization projects. The nation's network is today in far better shape and is capable of efficiently handling much more traffic than currently moves over it, Ryley said.

The groundwork for Transplace's intermodal expansion was laid in October 2011, when it acquired Celtic International, a Chicago-based intermodal marketing and truck brokerage company that serves the United States, Mexico, and Canada, for an undisclosed sum. The transaction was financed in part by CI Capital, a New York private equity firm that owns Transplace.

About 10 percent of Transplace's total revenue, estimated at more than $1 billion a year, is generated by business that touches Mexico. Of that, 80 percent is cross-border with the remainder being intra-Mexican traffic, according to Ryley. Transplace entered the Mexican market about six years ago.

NEW TMS ROLLOUT
In a related development, Transplace has rolled out a Mexican version of its U.S. transportation management system (TMS) to companies doing business in Mexico and Unite States and Mexican firms operating across the border. The product was actually launched about a year ago but wasn't being actively marketed until recently.

Transplace began ramping up a Mexican TMS model after discovering that virtually every Mexican business it deals with still uses archaic spreadsheets or databases to manage their transportation networks, according to Ryley. Few Mexican businesses have the financial wherewithal to buy high-end, complex software sold by giants like Oracle Corp. and SAP. Ryley said there is an enormous untapped market of small to mid-size businesses that are "price-sensitive" and that would benefit greatly from the efficiencies a scalable TMS would offer.

Ryley said the Mexican TMS is being sold as both an off-the-shelf product and as a premium-priced, customized solution. Businesses do not have to use Transplace as their shipping provider in order to use the software, he added.