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David Henry of Globaltranz
David Maloney, Editorial Director, DC Velocity :
USMCA is here with us. How does it affect your shipments? The growing interest in sustainable packaging solutions. And what does it take to be a Rainmaker?
Pull up a chair and join us as the editors of DC Velocity discuss these stories, as well as news and supply chain trends, on this week's Logistics Matters podcast. Hi, I'm Dave Maloney. I'm the editorial director at DC Velocity. Welcome.
Logistics Matters is sponsored by Fortna. Fortna partners with the world's leading brands to transform their distribution operations to keep pace with digital disruption and growth objectives. Known worldwide as the distribution experts, Fortna designs and delivers intelligent solutions powered by their proprietary software to optimize fast, accurate, and cost-effective order fulfillment. For more information, visit Fortna.com.
As usual, our DC Velocity senior editors Ben Ames and Victoria Kickham will be along to provide their insight into the top stories of the week. But to begin, it's Independence Day weekend, so we have national interest in mind, including the USMCA agreement that just began its official life this week. I will turn things over to Victoria now to introduce our guest and we'll talk about USMCA. Victoria.
Victoria Kickham, Senior Editor, DC Velocity :
Thanks, Dave. Yes, our guest today is David Henry, head of operations in Mexico for freight broker and third-party logistics provider GlobalTranz. David is responsible for managing all cross-border transportation and logistics services on behalf of GlobalTranz's customers. He and his team, based in Monterrey, Mexico, provide strategic guidance to GlobalTranz's customers to help them navigate the ever-changing complexities of the cross-border supply chain. So, as you said, David is here to talk about USMCA. David, thank you for being here.
David Henry, Regional Manager - Mexico, GlobalTranz, :
Thank you, Victoria.
Victoria Kickham, Senior Editor, DC Velocity :
Great. Well, I'm just going to start off by asking you, what are the most important changes shippers can expect as a result of USMCA implementation, now that it's here?
David Henry, Regional Manager - Mexico, GlobalTranz, :
Certainly. So, overall, a few key changes that have stood out to many shippers and are closely watching: First and foremost, a significant portion of auto content being made with high-wage labor; stricter rules for regional value content; as well as steel and aluminum sourcing. Additionally, at least 40 to 45% of automotive vehicles have to originate in places where workers earn at least $16 an hour. That would benefit, obviously, the U.S. and Canada to keep manufacturing domestically, and would also lead to better wages, overall, in Mexico. The independent U.S. International Trade Commission last year calculated that the U.S.-Mexico deal would add .35%, or 68 billion [dollars], to economic growth and generate almost 200,000 jobs over six years. Ultimately, it doesn't have a huge impact, you know, if you consider a $20 trillion economy. However, I think it drives a lot of certainty with respect to investment and moving forward in manufacturing over the coming years.
Victoria Kickham, Senior Editor, DC Velocity :
Thank you. I also wanted to ask, sort of long term. how the deal benefits this industry and U.S. business in general, and why was it necessary to replace NAFTA, which preceded USMCA?
David Henry, Regional Manager - Mexico, GlobalTranz, :
Again, going back to long-term certainty, looking at nearshoring, having more control over the overall supply chains in North America, that's been key there, right? So the plan to not only preserve a North American Free Trade Agreement, but to enhance it to ensure that it continues to drive all of the different industries that produce, in each of these countries, and make for a good agreement and for job-creation long term, right? That would be number one.
In addition to that, obviously, you have many different aspects of the agreement that have looked to enhance or improve on things such as duty-free access to Mexican and Canadian markets for U.S. consumers.
In addition to that, specific to the automotive industry, it will increase U.S. jobs within the sector, and it will also incentivize production in the U.S. and throughout North America, right? So, looking at possibly bringing back, especially, higher-tech jobs or other jobs within these industries.
Another key advantage that we see as well is USMCA requires transparency on currency policies. It addresses unfair currency practices, and that's obviously a very good thing for everyone.
Victoria Kickham, Senior Editor, DC Velocity :
Great. Thank you. Conversely, I wanted to ask you about some of the downsides. Should shippers expect disruptions or delays at the border as this process unfolds? How is that going?
David Henry, Regional Manager - Mexico, GlobalTranz, :
Currently, I would say, you know, one of the key downsides at this moment isn't as much related to the actual agreement. I would say it's more in relation to the fact that we're in the middle of a pandemic and looking to implement, right? So, obviously, as everyone knows, it just makes things a little bit more difficult. Considering different market outlooks and how the pandemic has disrupted different industries, and for these to come back significantly in that timeline is unlikely to happen. Therefore, a lot of these changes are having to take place during Covid, right? So that would be the key downside, which is really not related to the actual agreement.
In addition to that, I would say, USMCA, it does make it evident that trade continues to be a top priority, right, for all three countries. It serves as a primary source of income, and, you know, it's important to consider, for industries such as trucking, transportation, logistics, this is a very good thing. We continue to see shippers looking to Mexico for sourcing products that they were otherwise sourcing in Asia, as well as other parts of the United States and Canada. So, overall, we see a lot of positive things come from the agreement.
Victoria Kickham, Senior Editor, DC Velocity :
Yes, I'm glad you mentioned that this implementation comes at a tough time given the Covid-19 pandemic. Does it make it just sort of, this is just one more thing that shippers have to deal with? How has it affected their ability to really prepare for this?
David Henry, Regional Manager - Mexico, GlobalTranz, :
First and foremost, I would say, from a transportation, logistics perspective, supply chain perspective, the pandemic has created a lot of disruption in cross-border, in the flow of cross-border freight, right? So I think that's one piece, that now, as we see exports coming back into Mexico, which has been a very good thing and has really spiked up in the past several weeks, a lot of challenges have come with that as well, right? Different carrier networks have shifted. Imports are still pretty low compared to what we were seeing before, so the market is kind of balanced, right? So, that's one piece that drives issues and disruptions.
Now, looking at the agreement and different industries and corporations, companies, manufacturers looking to implement the necessary changes for that agreement, drives another set of issues, right? And that is, looking to shift these supply chains, making the changes, making the investment, planning, now that we actually have government guidance—you know, it's been out there for only a few weeks now. So it's been good to see. But at the same time, there's been a very short timeline, right? We have seen, in particular to the automotive industry, a deferred duty period, to where duties have been deferred out to the end of the year, and that will allow for some breathing room for the automotive industry to make some of these much-needed changes. So, again, as we move through 2020, towards the end of the year, I expect we will see continued disruption caused by this patchwork process of getting everyone back online, and the actual agreement, and the deadlines.
Victoria Kickham, Senior Editor, DC Velocity :
Thank you. One last thing I wanted to ask you about was—you touched on it a little bit—it's how does the, how will this trade deal affect companies' sourcing strategies? What what are you seeing, as someone who works on the southern border? What issues or concerns are you helping customers with in this regard?
David Henry, Regional Manager - Mexico, GlobalTranz, :
Right. So we see heavy activity on the cost-analysis side, and so obviously, for us as a transportation, logistics, and supply chain partner, on a daily basis, we're seeing, we're seeing shippers all over the world and within the U.S. coming to us to understand different scenarios, right? Obviously, if they're looking to bring investment back from other continents to North America, they want to understand how that impacts their bottom dollar. They want to understand how that impacts their supply chain costs. And we're there to support them, and understanding and analyzing and updating those different modes and and cost scenarios. So that's it one thing that we've been seeing lately. And a lot of collaboration with, between us and our shippers in understanding how this is affecting their overall supply chains.
Victoria Kickham, Senior Editor, DC Velocity :
Well, David, thank you again for being here. We really appreciate it.
David Henry, Regional Manager - Mexico, GlobalTranz, :
Thank you, Victoria. Appreciate your time.
Victoria Kickham, Senior Editor, DC Velocity :
And Dave, I'll turn it back over to you.
David Maloney, Editorial Director, DC Velocity :
Thank you, Victoria and David. To read more on the USMCA, be sure to check out Victoria's articles online at DCVelocity.com. Just type "USMCA" in the search bar to find them.
Our July issue of DC Velocity is ready for readers, and we're posting those articles even as we speak. So let's take a look at some of the highlights, which includes stories on retail trends and a report on the current state of logistics. But our cover story this month, for July, features our annual class of Rainmakers. And, Ben, you've been involved in this process for quite a few years now, and can you explain who are the Rainmakers? And how are they chosen?
Ben Ames, Senior News Editor, DC Velocity :
Hi, Dave Yes, this is, I think, one of our favorite issues every year. Every year in the July issue, we feature interviews and profiles of between 10 and 12 professionals from around the supply chain and logistics field. To select those Rainmakers, we begin by asking our editorial advisory board, along with past Thought Leaders and past Rainmakers, to suggest individuals that they've come across who've made a lasting difference to the field. That's people who've demonstrated innovation and leadership all around the business. That could include logistics, transportation, material handling, technology. And the editorial advisory board then votes on those nominees to determine each year's Rainmaker class. That process, in the past, has included logistics practitioners, consultants, academics, vendors, of course, professional-association directors, and even military commanders.
David Maloney, Editorial Director, DC Velocity :
And we're posting the Rainmakers that were selected this year, one day at a time. We started that on July 1, and so let's—well, no, let's not spoil all the fun. Let's let people actually go to the website and figure out who they are. But can you give us a little bit of a clue as to who might be part of this year's class?
Ben Ames, Senior News Editor, DC Velocity :
That's right. So two of them have already published, and there'll be another one every day. But this year's class includes leaders and experienced executives from a really wide range. There's a supply chain systems integrator. There's a nonprofit trade group. Somebody from a third-party logistics provider. Logistics technology startups—there a whole lot of those around. Researcher and advisory firm. There's a professor from a business school. And of course, on the shipper side as well. There's a food wholesaler, an executive from a food and beverage retailer, and also somebody from the fashion retail sector. So it's really, it's an incredibly wide array, and it speaks to the real mix of skills and areas that all contribute to the, to make the supply chain what we love to cover.
David Maloney, Editorial Director, DC Velocity :
Yeah, the editorial advisory board did a great job this year of selecting our Rainmaker class, so we appreciate all those people who were involved in that process, as well as folks who nominated them. We do this process every year. So we encourage you next year, as 2021 rolls around, we'll start the nomination process in around February or so to whittle it down to the eventual class. So, be looking out for those emails. And again, we encourage you to go to DCVelocity.com to see those postings, a new person each day throughout the next week or so.
Thank you, Ben.
Victoria, you wrote in the July issue about how sustainability is making its way more and more into the packing areas. Can you share what your research for the story showed?
Victoria Kickham, Senior Editor, DC Velocity :
Sure, absolutely. So we're looking at, taking a look at how environmental sustainability is playing out in warehouses and DCs—particularly, as you say, related to packaging. And in talking to some packaging suppliers and others, it's pretty clear that companies of all sizes are really interested in eliminating excessive packaging—you know, that's when you order some small little product, it comes in a huge bag with all that extra filler—while also increasing the use of recycled and reusable materials in their packaging, and really reducing the use of plastics overall, especially single-use plastics. So those are some of the things companies, as I said, are looking to do.
And in looking at that, there are some trends that are really emerging, especially the use of right-sized, on-demand packaging. That's one way a lot of the experts say you can reduce the amount of packaging that you're using. And just to explain a little bit about how that works: Typically companies will store a limited range of box or envelope sizes and they'll use them to fit whatever they're shipping, and that process, you know, results in the use of filler, as I mentioned. You know, all that paper, packing peanuts, plastic pillows. But with right-size packaging, what companies can do is, they install software and equipment that allows them to produce the right size package for the job—a box or an envelope. And they do that on demand. This is especially useful, they say, in e-commerce environments, where you're dealing with different-size orders. So that's, that's really the biggest trend that my research shows, and it's really interesting
David Maloney, Editorial Director, DC Velocity :
Victoria, what's driving the change towards more sustainability in the distribution center?
Victoria Kickham, Senior Editor, DC Velocity :
One easy answer: It's consumers, is what everyone's telling me, and sort of the growing concerns over climate change, and really just an overall desire by just about everyone, you know, to be kinder to the environment. And an interesting point that pretty much everyone I talked to made was that, you know, being a good steward of the environment is important to your brand, and your brand is carried on your packaging. So that's why companies are really focused on the message they send when their package is delivered.
David Maloney, Editorial Director, DC Velocity :
Very important in this day and age. You also created an infographic that appears in the July issue that talks about innovations to create more sustainable warehouses and DCs Can you tell us what you found there?
Victoria Kickham, Senior Editor, DC Velocity :
Yes. And that was also very interesting. The idea of sprung out of a trip I took back in the fall, back when we were all traveling, and I visited—I had an opportunity to visit—a sustainable warehouse in, outside of Amsterdam, in the Netherlands, for Rhenus Logistics. And it was considered one of the most sustainable facilities in the world, and they say the most sustainable warehouse in Europe. And it's really interesting, it's a very futuristic design and just, it embraces all aspects of sustainability. It has an airtight outer shell, solar-powered energy, it's built mostly from sustainable materials. It has automatically dimming lights when you walk into the building. And a couple of interesting facts: It has more than 13,000 rooftop solar panels, and those produce enough energy to power the facility and also feed energy back into the grid. That's just one really interesting aspect of it. And it also collects rainwater on the roof that flushes the toilets throughout the building.
So that really spurred my interest in, you know, what other facilities around the world are doing to become more sustainable. And what I did was gathered just a few examples from—mostly from, I think the U.S., and a couple of others in Europe. And we have some pictures and just little descriptions of what they're doing. That's really—it's pretty cool.
David Maloney, Editorial Director, DC Velocity :
That's great. And we encourage listeners to go to DCVelocity.com for more on these and other stories, to take a look at that infographic and read about sustainability, and the Rainmakers, as well as, also online, you'll find our continuing Covid-19 coverage and list of resources. That's all available on DCVelocity.com. So go there to check it out. Thank you, Ben and Victoria, for sharing the highlights of our July issue.
Ben Ames, Senior News Editor, DC Velocity :
Thank you, Dave.
Victoria Kickham, Senior Editor, DC Velocity :
Yeah, thank you.
David Maloney, Editorial Director, DC Velocity :
And again, our thanks to David Henry of GlobalTranz for sharing his expertise on USMCA today. We encourage your feedback on this topic and our other stories. You can email us at podcast@dcvelocity.com.
And a reminder that Logistics Matters is sponsored by Fortna. Fortna partners with the world's top brands to transform distribution operations into competitive advantage. Expertise includes distribution strategy, DC operations, micro-fulfillment, automation, and intelligent software. Distribution solutions designed today for tomorrow's challenges. Learn more about the distribution experts at Fortna.com.
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