With the onset of technological advancements and globalization, the boundaries that once inhibited the progress and capabilities of trade across the state and international borders have minimized, thus creating a massive impact and scope for trade at a larger scale. With more and more relaxations and easy transit routes that governments across the globe have agreed to, the trend in the business and trade sector has seen massive growth over the years.
Importance of Logistics in Global trade
Global trade undoubtedly has a rich heritage, embedded within a rich history. When we track the roots of worldwide trade, it takes us to the golden times of merchant era of the 16th century. This was a time period when the global trade really took off. With trade routes clearly defined and with the country producing their finest resource and opening them up to the other parts of the world, international trade grew by a great margin.
Global Trade and Logistics: Where it all began!
As the trade routes opened up, so did the need for logistics. And in the 16th century, there were no radio signals or satellites to help the people navigate. So they begin making very detailed maps. The Dutch was at the forefront of cartography and was pioneers in Logistics as they built ships that can carry more goods which can be operated by fewer crew members. They also made guides that helped the crew understand different languages.
With each decade, new innovations came into existence, and now, in 2019, Global trade is an expansive network connect counties all over the globe. The World Trade Organization reports that in 2017, the European Union exported $4.67 trillion worth of goods while China followed with $2.13 trillion.
When reviewing these numbers, it is clear that no entity can create such numbers without having a solid logistics department working within it.
Logistics facilitate trade by providing transport and warehousing solutions to get the product from A to B, in the most efficient way possible.
Logistics: The modern proposition
Trade and business opportunities across the world have now evolved from being just limited to their immediate surrounding or zone into a global scale. This is all possible because of the logistics operations that these businesses and manufacturers are making use of in the present era. The ability to deliver a product to the right place at the right time to the right person safely and care has been the distinctive factors that make a good logistics enterprise to stand out.
More outreach has created more business opportunities and assigning a good logistics handling company the task of delivering their products to their destinations have in fact increased the customer base for the manufacturers and businesses. This, in turn, reduces the pressure and stress of these businesses and they can concentrate more on the quality and other aspects of the products.
Providing safer and timely delivering of commodities to the customers across the borders are carried out by air, water or land based on the safest and cheapest option available for the country.
The logistics service providers take care of the storage and safe movement of the goods and take the utmost care in delivering the products to the right person based on the service they have asked for. Making the customers happy about product delivery has been a topic of concern for the manufacturers as it is one of the many things that the present day customer satisfaction reports consist of. Executing this task will, in turn, lead to an increase in sales and helps in winning over the competition on a global scale.
Having a good plan and execution of the logistics operation gives the manufacturers the required confidence and push to expand into other areas of expertise in their products and helps them to capture a larger market globally by taking out smaller competitions out of the way.
Logistics vs. Supply Chain: What is the difference?
People often get confused about logistics and supply chain management and think they both are the same. But there is some considerable difference between them and logistics is just a small part of the supply chain management. Let us first differentiate each of them by explaining what each term means in the sector of trade and commerce.
Explaining Supply Chain: The chain of processes that make a product
Supply chain refers to the network of components which includes the procurement of raw materials to its conversion into the finished good and until it reaches the customer’s hand. Every operation and process that takes place from the start to the end necessarily falls under the tag of Supply Chain. A supply chain network includes suppliers, manufacturers, transporters, wholesalers and retailers. All of these are executed by various teams to look after each process which includes the procurement, resource planning, manufacturing process, supply and demand planning, inventory management, logistics and transportation, and the optimization.
The main objectives of a supply chain within an enterprise are to look after each aspect of production and supply within the organization to maximize the efficiency and at the same time minimize the cost that comes with all these processes. They need to evaluate whether the said divisions under the supply chain are working smoothly as it reflects on the collective growth of the company and necessary rectifications must be entertained to carry out it’s smooth working.
Explaining Logistics: Movement of Goods through each process of Supply Chain
While on the other hand Logistics revolves mainly around moving goods and other required commodities from one place to another within the supply chain. Logistics mainly deal with inbound and outbound transportation of goods, warehousing and storage, and fulfilling of the orders to deliver it to the right customers on time safely. Their main aim will always be to satisfy the customers as they are once that reflect on the performance of a good logistics division.
In a broader sense logistics is actually a subset of the supply chain as it mainly involves the movement of goods within the supply chain. But the work carried out by the logistics has a prominent and outlasting effect on the enterprise and cannot be just tethered to a mere subdivision of the supply chain.
How does logistics affect US Mexico Trade?
Now that we have known the importance of the cross border logistics in the global trade, let us delve into one of the most important cross border logistics across the globe, the US Mexico border. There are a lot of factors that lead to the booming increase in trade across the United States – Mexico border over the years.
The rising increase in wages, the increase in difficulty over transporting goods over the Pacific Ocean, the delay in time due to the even-growing formalities between the customs have been a hindering factor for exports from China into the United States. This has in fact led to more and more investments in Mexico and has transferred them from being just an assembler of goods into one of the most sought after goods manufacturer for the markets in the United States.
Mexico has, in fact, the added advantage of having free trade policy for 90% of their goods which has indeed led to more increase in the logistics across this border. Having easier customs clearance from Mexico into the US has led to an increase in brokers that deal with cross border logistics across these two countries. With the increase in brokers and thus the competition, the logistics companies have become more careful in providing both their clients and customers with quality and outstanding service and that too at reasonable rates.
Shipping time from Mexico to the US is also one of the favorable factors for the transportation of freights from Mexico into the US and vice versa. Since these two countries share a considerable border, they have numerous places of entrance and exit by means of road and also the air freight carrier would take only lesser time than by road.
Since it is easier to transfer the goods into Mexico due to much less hectic paperwork and customs clearances, exporting to Mexico from the US has seen an increase over the years and has led to more licensed logistics companies and Mexican house brokers are making use of this opportunity all the same.
US Mexico cross border trucking program: What you need to know?
The North America Free Trade Program (NAFTA) controlled the cross order logistics between Mexico and the United States and there were several relaxations they enjoyed over the years that eventually lead to the boom of trade between them making Mexico the third largest trade partner of United States across the world. Most of the goods transported across the borders were carried out either by rail or road.
Transporting goods and other commodities by road was three step processes due to security and other reasons. As per the three-step program, a freight moving from the United States into Mexico would require transportation that moved the good from the warehouse to the border, another transportation facility to carry the goods and commodities across the border and up to a certain distance and then the final carrier that takes it to the desired destination. The carrier that carries the goods across the border had a movement right within each country that extended up to 30 miles from the border. This was the same in case of freight movement from Mexico into the United States.
The US Mexico cross-border long haul trucking program was brought by the Federal Motor Carrier Safety Administration (FMCSA) in order to ease up the trade and logistics segment between the United States and Mexico. Earlier the carriers that crossed the orders were only given a certain zone limited by distance from the borders to operate and transport the goods to.
In December 2018 alone, 45,618 truck containers passed through US-Mexico border carrying a full load.
With the help of US Mexico cross border trucking program, the governments analyzed the possibility of granting Mexico domiciled trucks and other carriers to operate and transport throughout the US soil and not just be limited to the commercial zones along the border. The carriers that enrolled for this program were given licenses that extended up to 3 years and this was given after they went through a safety audit called the Pre-Authorization Safety Audit (PASA) and reviews frequently. This has in fact eased up the logistics hurdles that the cross order trade faced over the years.
Any logistics division that intends to transport commodities across the border must carry the bill of lading which contains the details of the contents and their value and is an important legally binding document in both countries. A commercial invoice and an import/export form in either English or Spanish are required to be presented at the customs clearance for the transit to take place. NAFTA certificate of origin is another document along with other safety certificates that must be produced for the transfer of goods.
Challenges in the US – Mexico logistics
One of the big challenges that the logistics across the US Mexico border faces is the issue of security of the goods and commodities. Certain spots on the border are famous for active drug cartels and illegal traffickers of various prohibited items.
More often the goods and other items transported through these routes get hijacked by the miscreants creating losses for the logistics operators. Many measures and security features have thus been incorporated into this trade route in order to benefit from such an opportunity for the businesses across the borders.
The other main challenge that has affected the efficiency of such transits and increased the costs is the unavailability of drivers that can work across the borders. This is due to a number of reasons including security and not being qualified enough to get into the country or are limited by the rules of the trade. This can be overcome by utilizing more and more carriers and drivers from Mexico by granting them the B1 visas which allow them to stay in the US for 10-12 days.
Optimizing both the northbound and southbound transits in such a way that they can work along with other logistics companies and thus maximizing efficiency can tackle a lot of hurdles they face.
How Technology drives the future of logistics
Technology has been one of the major and most supportive allies of the logistics sector. They have brought new features and have made it easier to communicate and organize various aspects of the transportation and storage requirements that come as part of the logistics operations.
The Transport Management System (TMS) has enabled the logistics operations to work smoothly and organize the load details and timings of the operations and its working effectively which in fact led to the maximization of efficiency.
The carrier tracking system of all the goods within the logistics gives a real-time data to the operations wing to smoothly chart out plans and also allows the customers to keep track of their goods and plan accordingly which in fact positively affects the customer satisfaction.
With real-time monitoring being the new standard, the use of IoT (Internet of Things) in various logistical areas are also seeing a major jump.
The Warehouse Management System (WMS) is the platform that enables these enterprises to plan and execute the best methods to handle the goods that come into warehouses for storage between its movements from one point to another.
All these factors highlight the role logistics play in the trading sector and has the paramount importance in the global trade sector. Anyone who is inexperienced has an alarming chance of losing their way when are met with the different laws and requirements set by various governments or nations.
Hence, the best way to grow your business through global trade is to find a reliable trade facilitator. At Pedraza Customhouse brokers, we possess more than 15 years of experience in helping businesses trade their goods across the borders. With a robust logistics wing, our tracking methods are at par with the highest of industry standards.
We use in-house software specially engineered to carry out logistics missions quicker and create reports in real time, something that our competitors fail to achieve. By combining automation and the human element, we make Global Trade simple. Contact us at (915) 791-5500 or send us an email to help you in matters of international trade and logistics.