Canada-Mexico Transportation Heats Up – What You Need to Know
By John Kelly, President of Transplace Canadian Division
Canada-Mexico trade continues to heat up thanks in part to the growing number of company’s near-shoring operations to North America, particularly to Mexico, from Asia. The rising cost to produce in Asia, as well as the cost of ocean and air transportation continuously increasing, port congestion and demand on speed to market are all contributing factors. Not only is Mexico becoming a preferred country for manufacturing specific commodities like flat screen TV’s and medical devices, we’re seeing it responsible for a lot of assembly. Even though goods are being made in Asia, those same goods are then assembled in Mexico to then be shipped into the U.S. and Canada.
Issues Impacting Canada-Mexico Transportation
Capacity. A continual issue, capacity challenges aren’t going to go away. The fact that there is more freight than available trucks or drivers to move it is an issue, but we’re also seeing imbalances of goods coming in and out of both Mexico and Canada. Capacity issues will fluctuate depending on the region, so shippers need to plan ahead on where prices might be affected in terms of cost to secure capacity.
Driver shortage. With the aging population and drivers retiring, the driver shortage issue experienced in the U.S. is also an issue in Canada. Employee retention and training remains critical factors in helping thwart driver shortages and subsequently, capacity constraints.
Declining Canadian dollar. Back when the Canadian dollar was at .75-80 cents, Canadian exports were robust. Canadian exports made it attractive for U.S.-based carriers to service Canada knowing there was quality paying loads to get back to the U.S. After the 2008 recession, the Canadian dollar rebounded to above par to the U.S. dollar putting the brakes on Canadian exports to the U.S. The Canadian dollar has fallen back to levels that make Canadian exports more attractive. This is great for Canadian exporters, but now you have one more country looking for capacity from U.S. carriers. Canadian carriers are seeing stronger revenues as there is a slow shift in exporting from Canada as a back haul to a regional head haul.
Regulatory issues. Whether its changes to the Hours of Service (HOS) regulations for U.S. truck drivers or the FMCSA’s CSA Safety Measurement System scores for fleets, U.S. transportation regulation issues have a definite impact on Canadian transportation. These regulations have and will continue to exacerbate and constrict capacity, causing both shippers and carriers to adjust their practices.
Mexico to Canada Transportation (and Vice Versa) = Route of Opportunity
There’s a robust market for transportation from Mexico to Canada. With Mexico sourcing growing, as previously mentioned, there’s a great opportunity to manage and bridge the (U.S.) gap. How do you do this? It comes from how you manage freight. By being in control of freight flows and equipment, you have an opportunity to grow your business. You don’t need to own the asset, you need to be “freight flow data rich”.
To step back, shippers should look at their supply chain and transportation in its entirety not only from a cost standpoint, but also from the viewpoint of value on customer experience around supply chain execution. Mexico to Canada transportation may not be the largest spend in many organizations, but likely is a disproportionate amount of time to manage. So Mexico to Canada (and vice versa) transportation should be a core strategic move to leverage spending and equipment utilization in other markets to fund/support growth in these types of growing markets.
Where Do You Start?
First, open up the lines of communication with your transportation strategy leader. Second, get your 3PL involved with senior level planning to share corporate deliverables and at the same time develop with them a performance measure that puts you on a path to achieve these goals. Third, ensure you’re partnering with the right 3PL. This means you’re gaining access and visibility into capacity as well as opportunities to integrate with other customers and equipment to run leaner and smarter.
Are you exploring Canada to Mexico and/or Mexico to Canada transportation opportunities? What are your biggest challenges? Opportunities?