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Tremendous possibilities in the borderlands

Three new US offices along the Mexican border signal the beginning of increased business for all of DSV. New processes and keener focus widen the possibilities for the entire network.

US MX border

The trucks are queuing up on both sides of the border, patiently waiting their turn. Although NAFTA (North American Free Trade Agreement, linking Canada, the US and Mexico) ought to ensure smoothly flowing customs clearance and cross-border traffic, southbound goods from the north are unloaded and carefully inspected by the forwarder at terminals set up for this purpose. The transport companies on the border between the US and Mexico have their own staff to inspect loads, because the brokers are responsible if the truck’s cargo does not correspond with the specifications in the freight documents.

In many instances, the cargo is reloaded onto Mexican vehicles, unless the trailer is registered for operation in both the US and Mexico. In that case, only the driver changes, because very few US drivers continue driving into Mexico.

Northbound goods into the US cross the border more smoothly, but in return, very few Mexican carriers have permission to drive any further into the US, which is why most cargo has to be reloaded onto US vehicles as soon as they cross the border.

Maquiladoras

We are in the borderlands between the US and Mexico crossed by more than five million trucks a year, about three million of which – or 8,000 trucks a day – cross at Laredo, Texas, the main thoroughfare between the US and Mexico. A little further to the south-east are the crossings at McAllen (Hidalgo) and Brownsville, primarily used for shipments of raw materials to the so-called maquiladoras on the other side of the border: manufacturing companies in industrial tax-free zones which process raw materials, and then re-export the finished products back into the US without ever paying duty or tariff. The scheme was introduced by the Mexican government back in 1965 to provide jobs to people living along the border, and today these tariff-free and duty-free factories comprise Mexico’s second-largest industry (after the oil industry). The products manufactured by this sector account for more than half of all trade with the US.

Got the offices from UTi

Up until January 2016, DSV was not involved in Mexican–US cross-border traffic. A Road office in Laredo for customs and cross-docking/stocking was on the DSV wish list and the business plan had in fact been described in detail when, in one fell swoop, the acquisition of UTi made DSV the owner of offices in precisely Laredo, McAllen (Hidalgo) and Brownsville, with 38, 11 and 9 employees respectively. In addition, there are terminals in these three cities totalling 15,000 m2 (in addition to the other Solutions contract logistics warehouses along the border).

Enormous potential

Besides the obvious purpose of getting a share of the cross-border trade with the US’ third-biggest trading partner (after Canada and China), David Peng, Vice President, DSV Road North America, sees huge opportunities in “injecting the business with DSV DNA” and seizing the opportunities available in the network.

 “We can greatly intensify our focus on the opportunities created by the border offices for the Road and Air & Sea divisions,” David says, while at the same time drawing attention to the possibility of additional contract logistics and just-in-time stock management for a wide range of industries, including the sizeable automotive industry in the area.

“As Mexican companies improve their quality and as the infrastructure continues to be developed, more and more US companies will look south rather than to China. Labour costs in China continue to rise, which creates new joint-venture opportunities with DSV’s contract logistics along the border,” he says.

DSV US trucks 2016 

Bigger market share

Whereas David Peng, as Vice President, is delegated with overarching responsibility for the offices along the US-Mexican border, Amaro Medina remains district manager for the region:

 “We will grow our market share through cross-selling and by creating high-level solutions through achieved synergies at the DSV network already operating at the southern border. We will continue to strengthen the border presence with added focus, leadership, and tools/solutions of the different business units,” Amaro says, optimistically adding:  “DSV’s success has been heavily dependent on its ability to streamline processes, having efficient operating tools and achieving profitability in all business units. Transparency and ability to manage daily operations allow for improved management controls which were lacking before,” he says.

New opportunities in the south

Niels Larsen, President, DSV Air & Sea, is ”very enthusiastic” about the prospect of having new team-mates along the Mexican border. Because even if the offices are Road-oriented to a great extent, he is convinced that the US Air & Sea division will indeed benefit from having these offices in the portfolio due to the clients they will attract:

 “I see tremendous possibilities in having these offices in terms of our automotive clients such as GM and Ford, both of whom recently raised the prospect of increasing their production of small cars at Mexican assembly plants in the border area. In this regard our increased border presence could give us a crucial advantage,” he says, adding that the same is true of “various T1 and T2 suppliers we are already doing business with.”  DSV has a higher market profile, which will benefit the entire organisation.

Joint ventures

“Having our own facilities at the border is tremendously important for DSV Air & Sea Mexico, as much of the southbound traffic is controlled by Mexican companies,” says David Peng.”

Read about DSV USA

Read about DSV Mexico

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