Despite uncertainties about the treaty's future, Mexico's place in the global supply chain is secure, says the head of the country's Trade and NAFTA Office.
Contributing Editor Toby Gooley is a writer and editor specializing in supply chain, logistics, and material handling, and a lecturer at MIT's Center for Transportation & Logistics. She previously was Senior Editor at DC VELOCITY and Editor of DCV's sister publication, CSCMP's Supply Chain Quarterly. Prior to joining AGiLE Business Media in 2007, she spent 20 years at Logistics Management magazine as Managing Editor and Senior Editor covering international trade and transportation. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.
Kenneth Smith Ramos, head of Mexico's Trade and NAFTA office, has his work cut out for him in light of U.S. plans to renegotiate the treaty.
Editor's Note: In light of the Trump administration's formal notification yesterday to Congress that it intends to re-negotiate the North American Free Trade Agreement (NAFTA), DC Velocity is posting an interview conducted last month with Kenneth Smith Ramos, head of Mexico's Trade and NAFTA office. Based in Washington, Smith is in charge of promoting the trade relationship between Mexico and the United States and for ensuring proper implementation of NAFTA.
The interview was conducted by Toby Gooley, editor of CSCMP's Supply Chain Quarterly, DC Velocity's sister publication. The full version of the interview appears on CSCMP Supply Chain Quarterly's website.)
Q: There is a lot of talk about manufacturing returning from Asia to North America. Are you seeing evidence of that in Mexico?
A: Yes, we are. Since China entered the World Trade Organization [in 2001] China has been strongly competing with Mexico for U.S. business and also for business within Mexico. In fact, some Mexican manufacturing moved to Asia. So we tried to incentivize advanced, higher value-added manufacturing to locate in Mexico through a network of free trade agreements and, for the domestic sector, a program of duty-free inputs for industries such as electronics, steel, and automotive.
This was quite successful. Let's take the example of televisions. We made modifications to the NAFTA rules of origin to allow certain components from abroad to be included, and the finished product could still qualify as a NAFTA product. This created an incentive for new-generation TVs to be made in Mexico for U.S. consumption.
Mexico receives more than US$30 billion of foreign direct investment annually. In the last few years, less than half of it has come from the U.S. The number one sector for foreign direct investment is the automotive industry—and not just from the big U.S. automakers. Companies like BMW, Hyundai, Audi, and Volkswagen are expanding manufacturing and assembly capacity in Mexico.
Q: Manufacturing is becoming highly automated. Is Mexico prepared for this change?
A: As I mentioned, we are promoting Mexico as a location for advanced, higher value-added manufacturing. That means our workforce needs more technical skills. For that reason, the Ministry of Economy and state governments are working with the private sector and foreign investors to provide more technical training and education. A good example is the aerospace industry, which has a strong presence in Mexico. In Querétaro we established an "aeronautics university," a special graduate school for engineers who want to work in that sector. The university works with the private sector to identify the engineering skills they will need for the future. We have something similar for the medical equipment industry in Chihuahua, and we hope to replicate it in other industrial segments.
Our workforce is a key "selling point" for bringing more manufacturing back to North America. Mexico has the right demographics—our average age is 26—and we already have a very robust base of skilled labor increasingly shifting from traditional maquiladora assembly plants to more technologically advanced industries.
Q: What industries does Mexico excel in, and where will its future strengths lie?
A: In addition to agriculture, our current strengths are in aerospace, medical equipment, biotech and health sciences, electronics, and automotive. In addition to manufacturing plants, we're seeing more companies investing in product-design centers in Mexico, including companies like Intel and Honeywell.
I think those industries will continue to be successful and grow. Mexico is also pushing forward with structural, constitutional reforms that have opened the way for private investment in oil, gas, electric power generation, and renewable energy. The energy potential in North America is huge, and it could greatly boost the NAFTA region's competitiveness.
Q: How does Mexico see its position within the global supply chain?
A: I think that through NAFTA, Mexico has demonstrated that we can be a hub for production and a platform for cross-border supply chain integration. So we have great potential to expand that capability and to be a key player in global supply chains. In addition, Mexico is the world's 15th largest economy, the 10th largest exporter, and the 9th largest importer, and we have free trade agreements with 46 nations. These agreements make Mexico an attractive center for investment and production for the rest of the world.
Q: What is the Mexican government's position on NAFTA modernization and renegotiation?
A: The Mexican government's position is that NAFTA would benefit from modernization that is based on a fact-based assessment that reflects reality and avoids political rhetoric. The outcome of any renegotiation must be a win for all three countries involved, and it must maintain the integrity of the integrated supply chains that NAFTA created.
We are at a very important crossroads in regard to NAFTA. We can go down the road of building on what we've achieved in the past 23 years and strengthen our cooperation on regulations and infrastructure. Or we can fall prey to the pressures of protectionism, which would raise the cost of doing business within our region and severely hamper our economic growth.
Q: Work has begun on developing a North American version of the "Single Window," where shipment data would be shared by the three NAFTA governments' relevant agencies. Are cooperative initiatives like this at risk if the treaty is renegotiated?
A: Mexico is very committed to a "21st century border" and to partnerships that support prosperity for all three NAFTA countries. Mexican Customs has a very strong partnership with its U.S. and Canadian counterparts. For example, Mexico changed its laws to allow U.S. Customs and Border Protection (CBP) officers to conduct cargo pre-inspections in Mexican territory. We want these types of pilot programs to become permanent and expand beyond the border.
So far [customs cooperation] has not been brought up directly in conversations about NAFTA modernization. I think the three countries should work to ensure that trade enforcement and facilitation are strengthened. Cooperation among the customs agencies will be essential as we go forward with NAFTA modernization.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
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.
Krish Nathan is the Americas CEO for SDI Element Logic, a provider of turnkey automation solutions and sortation systems. Nathan joined SDI Industries in 2000 and honed his project management and engineering expertise in developing and delivering complex material handling solutions. In 2014, he was appointed CEO, and in 2022, he led the search for a strategic partner that could expand SDI’s capabilities. This culminated in the acquisition of SDI by Element Logic, with SDI becoming the Americas branch of the company.
A native of the U.K., Nathan received his bachelor’s degree in manufacturing engineering from Coventry University and has studied executive leadership at Cranfield University.
Q: How would you describe the current state of the supply chain industry?
A: We see the supply chain industry as very dynamic and exciting, both from a growth perspective and from an innovation perspective. The pandemic hangover is still impacting decisions to nearshore, and that has resulted in a spike in business for us in both the USA and Mexico. Adding new technology to our portfolio has been a significant contributor to our continued expansion.
Q: Distributors were making huge tech investments during the pandemic simply to keep up with soaring consumer demand. How have things changed since then?
A: The consumer demand for e-commerce certainly appears to have cooled since the pandemic high, but our clients continue to see steady growth. Growth, combined with low unemployment and high labor costs, continues to make automation a good investment for many companies.
Q: Robotics are still in high demand for material handling applications. What are some of the benefits of these systems?
A: As an organization, we are investing heavily in software that will allow Element Logic to offer solutions for robotic picking that are hardware-agnostic. We have had success deploying unit picking for order fulfillment solutions and unit placing of items onto tray-based sorters.
From a benefit point of view, we’ve seen the consistency of a given operation improve. For example, the placement accuracy of a product onto a tray is far higher from a robotic arm than from a person. In order fulfillment applications, two of the biggest benefits are reliability and hours of operation. The robots don't call in sick, and they are happy to work 22 hours a day!
Q: SDI Element Logic offers a wide range of automated solutions, including automated storage and sortation equipment. What criteria should distributors use to determine what type of system is right for them?
A: There are a significant number of factors to consider when thinking about automation. In my experience, automation pays for itself in three key ways: It saves space, it increases the efficiency of labor, and it improves accuracy. So evaluating which of these will be [most] beneficial and quantifying the associated savings will lead to a “right sized” investment in technology.
Another important factor to consider is product mix. With a small SKU (stock-keeping unit) base, often automation doesn’t make sense. And with a huge SKU base, there will be products that don’t lend themselves to automation.
With any significant investment, you need to partner with an organization that has deep experience with the technologies that are being considered and … in-depth knowledge of the process that is being automated.
Q: How can a goods-to-person system reduce the amount of labor needed to fill orders?
A: In most order picking operations, there is a considerable amount of walking between pick faces to find the SKUs associated with a given order or set of orders. Goods-to-person eliminates the walking and allows the operator to just pick. I have seen studies that [show] that 75% of the time [required] to assemble an order in a manual picking environment is walking or “non-picking” time. So eliminating walking will reduce the amount of labor needed.
The goods-to-person approach also fits perfectly with robotic picking, so even the actual picking aspect of order assembly can be automated in some instances. For these reasons, [automation offers] a significant opportunity to reduce the labor needed to fulfill a customer order.
Q: If you could pick one thing a company should do to improve its distribution center operations, what would it be?
A: Evaluate. Evaluate the opportunities for improving by considering automation. In my experience, the challenge most companies have is recognizing that automation is an alternative. The barrier to entry is far lower than most people think!
Toyota Material Handling and its nationwide network of dealers showcased their commitment to improving their local communities during the company’s annual “Lift the Community Day.” Since 2021, Toyota associates have participated in an annual day-long philanthropic event held near Toyota’s Columbus, Indiana, headquarters. This year, the initiative expanded to include participation from Toyota’s dealers, increasing the impact on communities throughout the U.S. A total of 324 Toyota associates completed 2,300 hours of community service during this year’s event.
The PMMI Foundation, the charitable arm of PMMI, The Association for Packaging and Processing Technologies, awarded nearly $200,000 in scholarships to students pursuing careers in the packaging and processing industry. Each year, the PMMI Foundation provides academic scholarships to students studying packaging, food processing, and engineering to underscore its commitment to the future of the packaging and processing industry.
Truck leasing and fleet management services provider Fleet Advantage hosted its “Kids Around the Corner Foundation” back-to-school backpack drive in July. During the event, company associates assembled 200 backpacks filled with essential school supplies for high school-age students. The backpacks were then delivered to Henderson Behavioral Health’s Youth & Family Services location in Tamarac, Florida.
For the past seven years, third-party logistics service specialist ODW Logistics has provided logistics support for the Pelotonia Ride Weekend, a campaign to raise funds for cancer research at The Ohio State University’s Comprehensive Cancer Center–Arthur G. James Cancer Hospital and Richard J. Solove Research Institute. As in the past, ODW provided inventory management services and transportation for the riders’ bicycles at this year’s event. In all, some 7,000 riders and 3,000 volunteers participated in the ride weekend.
After years in the military, service members and their spouses can find the transition to civilian life difficult. For many, a valuable support on that journey is the U.S. Department of Defense (DOD) SkillBridge program. During their final 180 days of service, participants in the program are connected with companies that provide them with civilian work experience and training. There is no cost to those companies while the service member continues receiving military compensation and benefits.
Both sides benefit from the program. “We’re proud to work with SkillBridge to give back to our military veterans for the bravery and sacrifices they’ve made for all of us,” Troy Pederson, director of training and development at LiftOne, a Hyster-Yale dealer and established SkillBridge employer, said in a release. “In the last year, we’ve helped 10 SkillBridge interns transition from military to civilian life, and the value and positive impact of the program can’t be overstated. At LiftOne, we’ve gained so much from the experience and diverse mix of technical and leadership skills of our SkillBridge candidates.”