Ryder expands in Mexico as cross-border automotive business grows

Ryder expands in Mexico as cross-border automotive business grows

A busy warehousing operation in Mexico

A surge in manufacturing is leading to more logistics outsourcing in Mexico, Ryder System says.

For insight into Mexico’s economic future, consider a trip to the Bajío. The region of north-central Mexico is one of the fastest growing parts of the country, and the recipient of significant direct foreign investment, particularly from automotive manufacturers. El Bajío is on its way to becoming one of the largest automotive “clusters” in Latin America, with manufacturers such as Mazda, BMW, Honda and Nissan already established there and component suppliers such as Germany’s W. Voit Automotive planning to set up operations.

In El Bajío, “You have access to labor, to good highways, to telecommunications, all that is required to have a pretty solid manufacturing base,” Gene Sevilla, vice president of Ryder International Supply Chain Solutions, said. “Together with that there’s been significant investment in highways, and the area is served very well by the two major rail companies that operate in Mexico.” As manufacturing arrives, “there’s been tremendous development.”

For Ryder System, that development spells opportunity to both expand its business both in Mexico itself and across the Mexican-U.S. border. “The logistics market is growing faster than the rest of the economy” as outsourcing grows in Mexico, Sevilla said in an interview from Ryder headquarters in Miami. Ryder Mexico currently manages more than 3.1 million square feet of warehouse space and more than 3.7 million square feet of yard space in Mexico, handling more than 4,000 border-crossings between Mexico and the U.S. a week.

A growing Mexican manufacturing base means more inbound products to feed plants moving through the ports of Manzanillo and Lazaro Cardenas on the West Coast and Veracruz and Altimira on the Gulf Coast. Import volumes at major Mexican ports increased on average 36.8 percent from 2010 to 2013. “Ryder’s plan is to have a presence in those four ports” to help manage the inbound flow and inland transportation of products, Sevilla said.

“At this point, we only have a presence in Altamira,” he said, where Ryder manages a transloading facility at the port for Chrysler de Mexico. The automaker this week announced Ryder will handle inland transportation of components from the port to its plant in Saltillo, west of Monterrey. Ryder Mexico receives 40-foot containers shipped from two Italian consolidation centers, handle the customs process and transload the shipments into trailers at its cross-docking center. Electronic data interchange allows Ryder, Chrysler and suppliers to share information with customs brokers, transportation partners and the assembly plant.

“We receive the containers from the vessel and then we transload them into 53-foot trailers and deliver them to the plant,” said Sevilla. Shipments that filled four FEUs now fill three tractor-trailers, “so if you were paying for four trips from Altamira to the plant, now you’re only going to pay for 3 trips,” Sevilla said. “Your freight bill goes down close to 25 percent.”

The concept may be simple, but execution can be “tricky,” he said, and requires clear visibility into shipments and careful loading and scheduling of trailers. “You can’t do this without thinking about how you unload the containers and load the trailers. The right material has to go to the right dock door at the plant, otherwise you could stop a production line.”

As a 3PL, Ryder also handles outbound transportation for many automotive manufacturers in Mexico. “We serve a number of major original equipment manufacturers in the U.S. with parts that come from Mexico,” Sevilla said. “We also manage finished products. We get the finished cars off the assembly line, do the quality checks and ship them to the appropriate dealer, whether it is in Mexico, or the U.S., or elsewhere in the world, such as South America.”

Much of that automotive traffic moves by truck, though intermodal is playing a bigger role in Mexico, Sevilla said. “The automotive industry is using intermodal very effectively in Mexico,” he said, “though it tends to increase the time it takes to move a load to the U.S.”

U.S.-Mexico trade by rail and truck hit record highs for the month of July this year, with the value of rail freight in cross-border traffic increasing 12 percent and truck freight 8.8 percent year-over-year, the U.S. Bureau of Transportation Statistics said Sept. 24. As the U.S. economy picks up speed, the odds are in favor of greater growth, Sevilla said. “We are definitely seeing a trend of near-shoring (manufacturing) into Mexico,” he said. “We’re seeing a number of companies moving plants” as Chinese labor costs rise, as well as “a large number of companies that are at least considering moving plants to Mexico.”

Mexico’s growth isn’t just in bilateral trade with the U.S. “Mexico now has free trade agreements with 44 nations,” Sevilla said. “They are using those agreements to grow their economy. As Mexicans get more work, they can buy more. The prospects are very solid.”

Contact William B. Cassidy at wcassidy@joc.com and follow him on Twitter: @wbcassidy_joc