Transloading on the rise at US-Mexico border

Transloading on the rise at US-Mexico border

The dynamics of cross-border trucking between the U.S. and Mexico are changing. More U.S.-bound shipments are being sent to transloading facilities at the border before heading north, logistics operators say. That opens new opportunities for U.S. companies importing goods from Mexico and may actually reduce cross-border transportation costs and speed shipments.

Deconsolidating and reloading shipments at a cross-dock is a departure from the standard practice of simply swapping tractors at the border and hauling the shipment direct to its destination. Several factors are driving the trend, especially the growing imbalance in truck capacity along the U.S.-Mexican border, where more loads move north than go south.

Transloading is alleviating some of the peak-season capacity issues shippers and carriers face along the U.S.-Mexican border, said Troy Ryley, managing director of Transplace Mexico.

“Remember the doom and gloom stories about peak season?” he asked, referring to the spring produce season. “I’m not saying it was easy for us, but it was much better than in prior years.”

Ryley claims a shortage of U.S. trailers in Mexico is part of the problem. “From Transplace’s perspective, fewer U.S carriers are allowing equipment in Mexico,” he said. “As a result of having less U.S. equipment in Mexico, Mexican carriers are making up the difference and shifting to a cross-dock model. That’s part of the reason why peak season wasn’t so bad this year.”

Transloaded shipments at Transplace’s Laredo, Texas, facility are at an all-time high, having more than doubled over the past year, Ryley said. He expects even more transloading next year.

“We’ve gone from 10 percent of our volume managed cross-dock to roughly 30 percent, and I assume we’ll hit 50 percent this coming year,” he said. “The dynamic has changed.”

One factor driving that change is the strength of the U.S. dollar compared with the Mexican peso. The Mexican peso has been swiftly losing ground against the U.S. dollar since the start of the year, with the value of the dollar in Mexico rising from about 14.7 pesos per dollar Jan. 1 to nearly 17 pesos per dollar by early November. That’s a roughly 26 percent year-over-year increase.

That makes U.S. goods —  from consumer products to heavy trucks — more expensive in Mexico. U.S. goods shipped to Mexico dropped 3.6 percent in value year-over-year in August, the latest month for which data is available, according to the U.S. Bureau of Transportation Statistics.

In the same month, the value of goods destined for the U.S. increased 4.2 percent, according to the BTS.

The number of trucks crossing the border is also rising. At Laredo alone, truck crossings were up 4.4 percent in the first half of 2015, topping 1 million for the first time, according to BTS data. The agency’s data doesn’t differentiate between northbound and southbound crossings.

At Yusen Logistics (America), Laredo Branch Manager Ben Escarcega also sees an increase in shippers opting for transloading, prioritizing tractor capacity over keeping freight in the same trailer. “I believe the need for capacity is driving the transloading trend.” he said. “Much of the urgent northbound freight crosses the border in the evenings, after most of the U.S. truck capacity has already been dispatched. With the increasing amount of automotive freight coming out of Mexico — especially auto parts going to U.S. production lines — customers are not willing to wait in Laredo for an available U.S. truck with their usual ‘door-to-door’ carrier,” Escarcega said.

During peak season, which sees the largest U.S-Mexico border crossing for trucks, many truckload carriers hauling direct from the border are overbooked, sometimes by more than 200 percent, he said. “It can take them several days to dispatch a northbound shipment. Transloading allows us to contract any one of thousands of independent owner-operators to haul the most urgent shipments. Their costs may be higher, but at least we can buy the capacity when it’s most needed.”

“The majority of what we do (cross-border) is cross-dock,” said Art Nourot, vice president of carrier procurement for Unyson, the logistics subsidiary of intermodal company Hub Group. “Our cross-border business is growing tremendously because the capacity is just not there.”

Like Ryley, Nourot sees more Mexican carriers hauling goods in their own trailers rather than picking up a U.S. trailer at a customer site. “If you can get the Mexican leg with a Mexican carrier, you’ll have more consistent capacity and a more consistent price as well,” he said.

Transloading and cross-dock operations will expand as Mexico becomes an even bigger gateway to the U.S. market, especially if truck capacity in the U.S. tightens, Ryley said. Shippers need to consider building transloading into their cross-border supply chains to avoid higher costs. “Companies shouldn’t wait for peak season to build this into their models,” he said. “There’s a lack of warehousing and yard space in Laredo already. “They need to make sure they’ve got capacity secured for cross-dock before peak season next year. It will be another large boom.”  

Transloading is becoming more common as more international companies set up plants in Mexico, Escarcega said. “The more experienced supply chain managers who work for the foreign companies that have recently established themselves in Mexico are realizing that it is ‘OK’ to transload at the border,” he said. “In the past, more managers thought that transloading would increase the likelihood of freight damage and border crossing times, when in fact damage is very low and transit times can be reduced due to the greater accessibility to capacity.”  

For most shippers, “a truck and trailer is a commodity,” he said. “They just want their shipments picked up and delivered on time. I think that is becoming more evident with the transloading trend.” Shippers may pay some additional fees to transload freight, but the overall cost of transportation is often lower, and at least comparable to direct loads, Ryley and Escarcega said.

“When you compare transload versus direct, in almost every case you’ll save money on the cross-dock solution,” Ryley said. “And your transit times should be almost equivalent.”

“Most warehouses will charge $100 to $150 for a typical transload of palletized freight,” Escarcega said. “That may be waived if the transload is being performed by a 3PL that is also providing the transportation on both sides of the border. The operational cost of late deliveries, especially to production lines, far outweighs this. It’s been a long time since a customer has told me that they are concerned with the additional costs added with transloading.”

Contact William B. Cassidy at bill.cassidy@ihs.com and follow him on Twitter: @wbcassidy_joc.