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Supply Chain Brain: “The Rise of Trade With Canada and Mexico”

October 19, 2015

The Rise of Trade With Canada and Mexico

The return of some manufacturing capacity from China has fueled economic growth in Mexico and Canada. John Kelly, president of the Canadian Division of Transplace, outlines some of the opportunities and challenges that have resulted from that development.

Kelly notes an “uptick” in U.S. trade with Mexico and Canada. The reason, he says, is the increased cost of production in China, along with the expense of moving product by air and ocean, and the risk of disruptions such as port congestion and labor unrest. “There’s been a push toward near-sourcing in Mexico,” he says. “It’s really happening.”

Canada is part of the surge because it, too, is purchasing more manufactured products from Mexico, Kelly says.

Transportation services are responding to handle the new wave of demand. Carriers must engage in detailed capacity planning, examining where product is coming from and who the customers are. “You can’t just pick up the phone,” Kelly says.

There is, however, a significant capacity shortfall in the U.S.-Mexico trade. The U.S. carrier base is struggling to meet domestic demand, let alone that generated by new business in Mexico and Canada. Additional challenges include a series of new regulations, tighter restrictions on driver hours of service, driver shortages and fluctuations in the Mexican and Canadian currencies.

Shippers also need to do a better job of managing their data and understanding freight flows, Kelly says. “You have to be freight-data rich.”

It’s vital to have access to data that looks further upstream in the supply chain. Shippers should be communicating with carriers more in advance. Electronic data interchange (EDI) is a valuable tool for making those connections and better preparing carriers for future capacity requirements, Kelly says.

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