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“AUTOmation” Has Positive Impact on New Trade Agreement between U.S. and Mexico

Posted by Mark Vickers, Client Executive on 09.13.18

After President Trump’s recent announcement of a preliminary trade agreement between the United States and Mexico, North American manufacturing companies and third-party logistics companies (3PLs) are aggressively looking for long-term ways to reduce costs.

According to the preliminary agreement, vehicles will only qualify for duty-free treatment if 75% of each vehicle is manufactured in the U.S. or Mexico. This is a 12.5% increase from the previous requirement of 62.5% and is intended to bring more manufacturing onshore. This agreement “would require a significant portion of each vehicle to be made by workers making at least $16 per hour – a significant increase for Mexico,” reports The Washington Post

Based on these changes, companies that own distribution centers (DCs), cross docks, and warehouses in Northern/Central Mexico and along the U.S.–Mexico border might finally be ready for something that the rest of North America has already adopted: automation, or, as I like to call it, “AUTOmation.”

In recent years, the top automotive manufacturing and distribution giants in North America have capitalized on the ROI behind the automated processes in their DCs. However, the facilities they use to manufacture, store and transload product at the U.S.–Mexico border and in Northern/Central Mexico have been significantly underinvested in and often act as the “shock absorbers” of the supply chain. This is especially true in Mexican cities such as San Luis Potosí, Saltillo, Guanajuato, Monterrey, Ramos Arizpe, Nuevo Laredo, Mexicali, Tijuana, Ciudad Juárez, and others. Similar results are seen in U.S. border cities including Laredo, El Paso, Hidalgo, Otay Mesa, Calexico, Brownsville, and Eagle Pass.

This presents a dilemma because all players associated with cross-border commerce are suddenly being forced to look creatively at the labor costs associated with transloading, distribution, and warehousing. These companies are now investing a significant amount of time in learning about “best fit” when it comes to AUTOmation and the ROI around it. Over time, investments in AUTOmation will lead to reduced friction and costs in trade between NAFTA countries.

I’m looking forward to learning more about the increasing importance of AUTOmation in North America at this year’s Pathways Trade Symposium in Laredo, TX on September 19–20. I’ll have a chance to discuss AUTOmation with some of the top public and private figures in North America, plus I’ll meet a diverse range of companies affected by the proposed trade agreement. If you plan to attend the Symposium, please contact me at mvickers@jasedlak.com so we can set up a meeting.

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