usco case - graded
TRANSCRIPT
usee Logistics Case Team 784
After carefully reviewing the Mexican logistics market opportunity and the pot tial impact NAFTA will have in free
trading between Mexico-USA-Canada we have decided to venture into the Mexican arket as a 3PL (Third party logistics).
We believe our expertise, sophistication, current customer base and success in th USA and Puerto Rico will allow us to
provide an excellent service and bring an added value to our future customers in M il ico.
Based on all the scenarios and analyzing each one of them in detail we decide1 not to partner with Banco Mexicano or ~
any of the other banks for the following reasons: 1. ':Iedo not ljke tbe Qossible cOQQectiolLwith the Governsent, 2. Banks] ,ij lack 10~iS~iC kno~~, <» this area is not th.eir area Of. expertise, 3. Bureaucracy and 4. The fa~ that banks ~anted out of ' .
the 10 stfes"tl'G"Sirless or at least to partner With profeSSional firms who could help them cut their losses on their warehouse
peration. We do not want to partner with someone that does not share our company main focus and objective.
Even though Privately Owned public warehouses appeared to be a good fit for a joint venture, we decided not to
partner with them. One of the reasons is that we do not share the same target market segment as, this company's main ~
business comes from warehousing agricultural products. But it was the high cost of acquisition and the upfront payment ] ",<iJ what mostly does not match our company's culture and strategy, If they receive the revenue payment up front then, what U
incentive do they have on making the joint venture work? USCO wants a partner they could share the risk with.
This is why we have decided to enter the Mexican market via a Greenfield operation. We believe that having a
trucking Company as our strategic partner will be key to our success. The trucking company would compensate our lack of
knowledge of the Mexican territory and culture. They will be subject to high quality standards such as, trailers and trucks
not older than 3-4 years and well-maintained equipment. USCO will be handling the warehousing part of this venture with
the option of partnering with a custom brokerage service if needed.
USCO target segment are the Fortune 500 companies exporting to Mexico, specially the one's that we do business with
in the US. We understand Mexican executives usually make their own decisions on logistics partners in Mexico, however,
we believe they could be willing to change due to our value added and expertise brought to our current customers in the
US. At the same time, we would like to leverage our relationship with Banco Mexicano and the other banks to take over
their customer's base logistics. As we know, the banks do not have a specialization or even a full understanding of the
process and would forfeit the responsibility of a logistics business.
Our services would include multi-client warehouses, which will consolidate some if not all of our accounts to better ~
utilize warehouse space, as well as mono-client warehouse. We would offer X-docking services to those companies that
want it as a way to lower their cost on storage and inventory. We also suggest the use of warehouse management system
(WMS) to provide the customer with accurate information and reports. We would offer vendor management inventory
(VMI) service; re-work service and small assembling duties as well. In house service would be provided to those companies
that have manufactory plants and wanted their product to be handled and shipped out of their own facility. USCO would be
liable for any stolen or damaged product from the time we receive the cargo to the time we deliver the merchandise. High
Tech and pharmaceutical companies would be charged a premium for dealing with "high value products" this service would
include extra security to prevent any stolen product. As part of the mid and long term strategy we recommend renting the
warehouses instead of buying or constructing as this will give us the flexibility to move when our customer's move.
Our distribution strategy begins with the cities of Mexico City, Guadalajara and Monterrey with the possibility to
expand to Ciudad Juarez and Nuevo Laredo depending on our customer's needs.
Our Human Resource strategy consists of three different stages: 1. We will bring a team of Puerto Rican managers to
start training Mexican new hired employees, as they are the ones that dominate the language and the business. 2. At the
same time, USCO will be recruiting potential Managers and supervisors at the top Mexican universities (Spanish-English a
must) and 3. We would look at hiring other people from companies lik~ our competitor: a~ ei~ate war~housing and Banco
Mexicano (logistics department). ~~~ ,ccf c.t..:C. 4:( h::vJt.s 11~~ b, FfAMII~ "" if{,. ~ ? We understand that gOing into this new Venture without a local partner means higher capital investment and though,
higher project risk but we believe that not having a partner is better than having the wrong one. USCo has the expertise
and lead of the logistics in Mexico, the only weakness is the know-how of the Mexican culture but, we believe that with the
implementation of Mexican Managers and employees and having a local trucking company as a partner will compensate
our deficiencies and strengthen our company as a whole.