The Mexican 3PL market is expected to register a CAGR of over 7% during the forecast period (2020-2025). The growth in the market is driven by the increasing trade flows, which are not only from one region to another but more decentralized and fragmented. This factor is expected to intensify the complexity of logistics activities in the coming years. The evolution of supply chains is also subject to changes in consumer habits, driven further by the emergence and increasing acceptance of e-commerce leading the supply chains, which are more flexible and adapt to the demands of the new consumers.
The approval of the United States-Mexico-Canada Agreement (USMCA) may bring about changes in Mexico, in terms of globalization and logistics integration, as well as in the role of logistics operators, in the near future.
Key Market Trends Effects of USMCA
According to industry experts, the provisions of this agreement go further than any other free trade agreement, allowing the use of only one data set to ship goods across all three countries. The agreement focuses on increasing efficiency in cross-border freight, removing all restrictions from the Mexican custom brokers and creating a streamlined process. The US-Mexico-Canada Agreement (USMCA) involves several updates for the automobile industry, in terms of the production of cars and its parts. USMCA mandates the automobile industry to source 70% of the steel and aluminum used in vehicle manufacturing from North American suppliers. Along with the composition, the Agreement states that 40-45% of these vehicles should be produced by workers earning more than USD 16 per hour. After the agreement, the minimum wages in the country are expected to increase exponentially, thus, increasing the overall cost of production of cars in the country.
Along with these challenges, the Agreement requires the 3PL service providers to collaborate and increase their connectivity within the country, as well as in North America, for the ease of trade. In response to this, DB Schenker and AirBridge Cargo teamed up to improve digital connectivity for air cargo. Ryder, the leading provider of 3PL solutions in Mexico, announced an expansion of four centres that may fucntion as the operating premises located in key points of the national territory of Mexico, as part of its growth plans and in response to the demand for logistics services from different sectors.
Developments in the Logistics Sector
The escalating digital accessibility and growing start-up business support mechanisms advocate Mexico’s expanding culture of innovation in the logistics sector. Increase in technology investment by the Mexican government, combined with pro-private investment schemes, is encouraging the multinationals to view Mexico as a viable setting for centers focused on emerging technologies, such as blockchain, artificial intelligence (AI), Internet of Things (IoT), automated warehousing, investments in WMS, and digital transformation (warehouse digital twin). Due to emerging technologies, traditional industries are reinventing themselves. The Y-o-Y growth rate of e-commerce and increasing consumer demand are leading the logistics companies to adapt the technological improvements to provide a seamless service, thus, helping them gain a competitive advantage over other companies. Mercado Libre, in competition with Amazon, is aggressively focusing on expanding its integrated warehousing capacity, along with its 3PL partners DHL, FedEx Express, Estafeta, and 99 minutes, which may not only increase its storage space but also be helpful in last-mile logistics and one-day deliveries.
Along with the development of the helicopter freight service, DB Schenker Mexico is now focusing on its end-to-end logistics solution and going beyond offering shipments only from Point A to Point B. With an increase in the volume of automotive exports and imports, the company is also developing programs to address the automotive industry’s reverse logistics and contract logistics needs.
Competitive Landscape The market is fragmented with the presence of a large number of players, including DHL Supply Chain, Traxion, Schneider, Solistica, and Accel. The strategic alliances of 3PL service providers in the market are expected to set the tone for the exchange of innovations in supply chains, in order to improve the services provided and adopt and integrate the latest technological solutions. The total visibility of goods in transit, a trend that plans production and distribution according to real demand, is likely to make operations more efficient and profitable.
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