How has the Mexican market developed for DB Schenker over its time here?
DB Schenker has undergone several different stages in Mexico. We have been in Mexico for almost 40 years, which makes us the third oldest country for DB Schenker in Latin America, only behind Argentina and Brazil. Next year, we are anticipating that we will have around 500 employees in Mexico and a revenue stream of over €100 million. The importance of Mexico for the organization is obvious when you consider that other major markets in Latin American are struggling. Our strategy has always been to maintain offices all over the country; we will be in close physical proximity to our customers, which will facilitate building strong relationships.
You are among the top three players in your sector. What distinguishes DB Schenker from its competition?
Almost 50% of our costs are related to human resources. Our biggest differentiator in this market is our staff. We take care of them, we train them, and we put them in management programs, which I believe translates to a low turnover rate among our customers. Our customers usually work with us for a long time, for example LÓreal has worked with us for over 15 years.
How has your sectorial focus changed over the past few decades, and what does that say about the Mexican economy?
We are involved in almost every vertical market in Mexico, whether it is automotive, consumer goods, aerospace, fashion, or retail. In the past, one of our core businesses was perishable exports, exporting handicrafts, and relocation services. When it comes to industry, Mexico is on the edge of becoming a developed country, because we do business here like they do in the US or Germany.
What effect will the energy reforms have on growth for your business?
It does not help that the oil prices are low now, but in the mid term it will be a booming market for us. In the past, the market was dominated by Pemex, but now investments are pouring in from other companies.
How important is the aerospace sector for you?
On a worldwide basis, we have a business unit designed specifically for aerospace. In Mexico, we have what we call an AOG desk. AOG stands for aircraft on ground, which implies that you have to move spares and parts from one point of the world to the other in order to avoid a plane standing still. At our offices, we have a system through which you can see which part numbers are flying where, arrival times, who is picking up what, and who is going to deliver the goods to the airport in order to install it in the aircraft. It is rather unique in Mexico.
What have been the challenges in expanding the land transport segment?
The first challenge is to get the transport management system (TMS), which can interface with different subcontracting carriers. My customers receive a platform via which they can see their shipment moving from A to B, even though the carrier can change. That is one of the challenges, and we are working with our colleagues in the US to make a uniform platform for all of our customers. The second challenge is to get the right carriers on board. It is a segmented market, as there are hundreds of carriers that are international, local, and small. Getting a matrix of quality carriers that comply with health and safety, social security, and other laws is not easy. The third challenge is that the margins are rather low in land transport. NAFTA trucking for us represents less than 10% of our revenue, and land transport is mostly focused on trade with the US. What is interesting for us is that 80% of the trade of Mexico is with the US; if only 10% of my business represents the US, then there is a large gap to be covered.
How big is trade with South America and Central America for you?
Today, our biggest markets are Europe and Asia. Asia is heavily involved in ocean freight, while Europe dominates consumer goods. On the import side, we could have good business with Argentina and Chile for commodities. For instance, from Argentina we bring in lemon peel, which is manufactured and used later on to make aromas and salts. With Brazil, we work with more industrial goods. On the import side, Latin America is our third largest market, even stronger than the US.
How do you integrate sustainable practices into your operations?
Our holding company, DB, has announced a strategy called "DB 2020." The project focuses on three pillars: social responsibility, financial responsibility, and ecological responsibility. The company started different programs under ecological responsibility. If you work with more corporate customers, they value sustainability; if you go to the importers of toys from China, however, it is not a high priority. But there are other companies, such as SC Johnson, who value that, and they even ask us what the CO2 footprint of their transport is. We are working toward developing our practices further.
Looking ahead, what are your goals for the next few years?
We have laid solid groundwork in order to further develop in Mexico. Additionally, even though the traditional air and ocean business is a commodity business, it is very transparent as everyone is aware that the rates for a container can change every two weeks. We also provide services and customs clearance via third parties and land transport, and we intend to invest heavily in land transport, with new offices and cross-border offices to manage cargo at the border. We are also starting a project now to gain market share in the perishable business for our exports. We grew over 30% last year, and we expect to stay on track. Our goals include investing in our larger sales organization and bringing specialists on board for both oil and gas and for perishables, which will help us cover additional areas of the Mexican market.