April 2012 | Case Studies | Casebook

Cross-Border Shipping: The Road Now Taken

Tags: Trucking, Cross-border Trade, Transportation Management

Collaborating with Con-way Truckload and its Mexico-based division CFI Logística, Siemens cut transportation costs by 35 percent.

Electronics manufacturer Siemens switches from air freight to over-the-road transport for shipments from Mexico to the United States and Canada and lights up savings.

More to the Story:

The North American Free Trade Agreement (NAFTA) has done much to support commerce among the United States, Canada, and Mexico. The value of surface transportation trade between the United States and its NAFTA partners increased by 14 percent to a record $904 billion in 2011, according to the U.S. Department of Transportation.

Despite the transportation sector growth NAFTA has triggered since going into effect in 1994, moving goods across the borders securely and efficiently still challenges many shippers. Border crossing is complex, subject to hundreds of laws, treaties, and security requirements.

Cross-border shipping represented a pain point for Siemens S.A. de CV, a global electronics and electrical engineering manufacturer whose factory in Santa Catarina, Nuevo León, Monterrey, Mexico, lies about three hours south of the U.S.-Mexico border. The facility manufactures 2.2 million molded case circuit breakers (MCCBs) annually for both industrial and residential use.

Until fall 2009, the factory shipped three to eight pallets of MCCBs via air daily. Ninety percent were bound for three Siemens distribution centers (DCs) in Ontario and Quebec, Canada; the remaining 10 percent went to DCs in Southaven, Miss., and La Mirada, Calif. The manufacturer had to meet tight daily air cargo windows at nearby Mariano Escobedo International Airport in Monterrey.

Sometimes, production delays caused Siemens to miss the shipping cutoffs. And relying on air freight for all its Canada and U.S. MCCB shipments generated high transportation costs.

"We were using the most expensive shipping mode," says Alejandro Reyna, logistics director for Siemens. "The decision was based on production delays, client demands, and limited logistics knowledge."

A Better Way

Siemens executives in Mexico discussed their challenges with colleagues in Canada, and decided to approach CFI Logística/Con-way Truckload de Mexico about alternate mode options.

Con-way Truckload was already doing business in Mexico when it acquired CFI in 2007. A non-asset-based entity, CFI Logística contracts for both less-than-truckload (LTL) and truckload (TL) shipments domestically within Mexico, providing the Mexico service formerly handled by Con-way Freight.

Another arm of Con-way Truckload, CFI de Mexico, performs Mexico sales and customer service operations from five cities in the country's interior: Mexico City, Guadalajara, Monterrey, Querétaro, and Mexicali.

Siemens' requirements were simple, but critical: daily, reliable LTL pickups and three-day transit times to Canada. The carrier also needed to be bonded—licensed against a guaranty or surety by Customs to carry duty-unpaid goods in-bond across the U.S.-Mexico border, through the United States, and across the U.S.-Canada border.

Siemens would have to make some production adjustments to accommodate the three-day transit time, but CFI Logística promised a range of services to make the adjustment more palatable.

"We assigned a dedicated customer service representative to Siemens to provide information and status updates on demand," says Salvador Moreno, general director, CFI Logística. CFI also provided access to a Siemens-specific Web portal so the manufacturer could view shipment information.

In addition, because CFI Logística is a Con-way company, it can work seamlessly with Con-way Truckload and Con-way Freight to manage LTL, TL, and cross-border freight. The arrangement simplifies the entire operation for Siemens because it can manage all transactions through one contact.

The service includes daily LTL shipment pickups in straight trucks during Siemens' pickup window. Once a shipment is ready, Siemens creates bills of lading and tracking numbers, and prepares Customs paperwork— including the in-bond shipment—for the broker, then contacts CFI, which generates the shipment's PRO number identification code and bar codes.

The trucks transport the cargo to a CFI Logística crossdocking facility in Monterrey, where shipments are consolidated with those of other shippers into 53-foot trailers. CFI drivers transport the shipments that night to Nuevo Laredo, just across the border from Laredo, Texas.

CFI offloads the goods for Customs clearance into the United States and notifies the customs broker. After clearance, a transfer company moves the shipment across the border and turns it over to Con-way Freight in Laredo.

The carrier receives the LTL shipment and schedules transportation across the United States and through Canada's Customs process; then closes the in-bond, and finally delivers the shipment to Siemens' distribution facilities.

Securing Transport in Mexico

Cargo security was a concern for Siemens as it transitioned from air freight to over-the-road transport. Mexico is among the three countries most at risk for cargo theft—along with Brazil and South Africa—according to logistics security agency FreightWatch International. In 2011, total cargo thefts in Mexico increased 13 percent, with more than 10,000 hijackings occurring on roads and highways, reaching an estimated loss value of $9 billion.

CFI Logística leverages both process and technology to ensure Siemens' goods travel safely. The trucks that carry shipments from the Siemens MCCB production plant to CFI's crossdocking facility are equipped with global positioning system (GPS) technology, so their location is always known. The driver's name, unit number, and license plate number are provided to Siemens in advance, so it can verify it is tendering the load to an authorized driver.

Once the truck is loaded, Siemens takes a photo of the loaded shipment as part of its compliance with Business Anti-Smuggling Coalition (BASC) requirements. BASC is a business-Customs partnership created in cooperation with governments and international organizations to promote safe international trade.

At the CFI Logística crossdocking facility, security guards watch over shipment handling and match paperwork to ensure consistency. Security cameras provide surveillance, and long-haul trucks use GPS tracking. Emergency buttons in truck cabs provide another method for communicating with CFI security personnel.

A Helping Hand

For Siemens, a big ­benefit of working with CFI Logística is receiving personalized, local help with logistics issues.

For example, in spring 2011, Siemens approached CFI seeking to reduce time spent producing the two required bills of lading—one for shipment movement across Mexico, and an international bill of lading from Laredo to the shipment's final destination.

"We called our team in Mexico, and it took 15 minutes to fix the issue," says Reyna. CFI Logística used the first bill of lading to automatically populate fields in the second. "It's a simple matter, but it had been taking us 20 minutes to fill out the second bill of lading for every shipment."

These efficiencies will be particularly helpful as Siemens moves to close a production facility in Juárez and consolidate MCCB production in Monterrey, increasing its shipment volumes.

The most dramatic result of the shift from air to ground shipment has been the one that resonates with Siemens' finance department: a 35-percent drop in shipping costs.

Siemens learned that even the most vexing problem may have a simple solution—if you look.

"Don't think you've done everything your carrier or supplier can do," Reyna advises. "Don't be afraid to let carriers know what your problems are. They may be able to provide another solution."

For Siemens, the simple act of asking for help made a game-changing difference.