Conference speakers focus on Latin American logistics

By Patrick Burnson -- Logistics Management, 8/1/1999

The INTERLOG '99 conference staged by Worldwide Business Research in San Francisco in June may have sought to take a broad view of international sourcing issues, but the conference had a decidedly Latin flavor. A number of speakers focused their attention on Latin America and its development as a service-support and after-market battleground.

Increased investment in the region by multinational corporations and strong sales for North American products have made it necessary to provide better after-sale service in the region, a situation that is opening up new opportunities for carriers and logistics-service providers. "We are going to see a real scramble among carriers to serve high-tech manufacturing and customer support," predicted Ian Nevin, a former Compaq Computer Corp. executive and now a Latin American logistics consultant.

At least one carrier seconded that observation. "Increasingly open markets are establishing service as a key competitive advantage there," reported Jeffrey Glade, director of Latin America logistics for DHL International Ltd. "Achieving critical mass, therefore, is essential for companies like ours." The air-express company is moving quickly in that direction: Just one week after the session, DHL announced that it had acquired DHL Internacional, S.A., its agency in Argentina. The company also said it would invest $10 million in the Argentine market over the next 18 months.

Several speakers mentioned their belief that shippers would benefit from United Parcel Service's plan to acquire Miami-based Challenge Air Cargo, one of the region's biggest airfreight carriers. (See related story on Page 123.) "Compaq and other major vendors are going to be given a great many more options as a consequence of this move," Nevin said. Kraft Schumann, executive logistics director of electronics manufacturer Siemens Nixdorf, agreed. "With more transport alternatives, we will be able to support ... fast response [for product replenishment] in new markets," he said. "The more [carriers], the better."

Nevin, meanwhile, injected a note of realism when he pointed out that after the acquisition, UPS would have to make some changes in order to satisfy shippers' needs. "[The acquisition] is not going to make our jobs easier until [UPS's] internal operations are adjusted for distribution and backhaul," he said.

Although carrier support in Latin America is greatly improving, managing after-sale service in the region remains a difficult task. There's more to it than simply choosing the right carrier, he noted. For example, he found that metrics necessary for tracking cycle time in Guatemala were quite different from those used in the United States--a concept that was difficult to explain to corporate management. "Due to cultural distinctions and differing measurement techniques," he recalled, "we would have to apply new standards that demonstrated our incremental improvement in this area."

In another session, Dell Computer Corp.'s senior logistics manager, Dennis Dienno, discussed the importance of tapping local knowledge to achieve maximum performance in foreign markets. For example, because local managers understand local consumer buying patterns, it makes sense to rely on them for accurate forecasting. "You have to balance your priorities between having optimal stocking levels and establishing maximum inventory turns. We do this by concentrating on local expertise," he said.

Regional control of customer service, in fact, is important to Dell's international success, Dienno explained. "Our customers want one number to call if they have a problem," he said. "If you visit us in Austin (Texas), you will hear 10 different languages being spoken by our support staff. That's our foundation for doing business in the United States, Mexico, and Canada, and we feel it will work anywhere else in the world for us."

The need to focus on local expertise applies not just in Latin America, but in other parts of the world as well. Schumann of Siemens Nixdorf said he found that out when searching for a single, worldwide transportation provider. "None of the so-called 'international' partners has been able to meet our very precise standards on a global basis," he said. "Therefore, we have been selecting those carriers that most closely match our requirements in each area."

Although the ability to compete internationally depends in good measure on wise use of local expertise, Dienno said, that local expertise must work hand-in-hand with excellent logistics management at home. "If you are going to expect to compete in Japan," he said, "you had better know how to compete in Texas."