The nearshoring boom has added complexity to US-Mexico cross-border shipments. US carriers need a 3:1 trailer-to-tractor ratio, with border crossings taking 1-3 days, sometimes up to 15 days. Infrastructure issues, ranked 54th globally, and 8,000 cargo thefts in 2022 further complicate logistics. A driver shortage with 56,000 unfilled positions adds pressure. The rising peso, up from 20 to 18 pesos per dollar, increases costs, impacting budgeting and pricing strategies.
Moving a cross-border shipment into Mexico is a complex process that requires understanding the intricacies of partner carriers, how the logistics chain operates, who is responsible for each step, and the ability to communicate effectively in two languages. Currently, this communication is predominantly conducted via WhatsApp.
It is uncommon at this time for U.S. carriers to send trucks into Mexico, they send trailers. The reluctance comes from the fact that carriers servicing Mexico have a unique operational setup, which is defined by several key elements described in the following subheadings.
Companies like US Xpress and Covenant withdrew from Mexico just before the nearshoring trend took off. In light of the increased nearshoring activity at the Mexican border, more U.S. carriers with a fleet of 50 or more trucks might soon consider expanding into Mexico.
A blogger named Matt Silver is a logistics expert based in Texas and one of his posts is a must-read for those interested in this subject. Key parts of his analysis informed much of this article.
Tractor-to-Trailer Ratio
Typically, U.S.- and Canada-based carriers servicing Mexico maintain a ratio of three trailers for every tractor. The average time for freight to cross the border is 1-3 days, but it can extend to 12-15 days in extreme cases. A 1:1 tractor-to-trailer ratio would result in drivers waiting at the border for extended periods.
For example, a southbound load destined for Guadalajara, JAL, approximately 635 miles southwest of Laredo, TX, involves a series of steps. The driver drops the trailer in Laredo, where a customs broker initiates the clearance process. Once the paperwork is ready, a transfer carrier takes the trailer across the border. The freight is cleared for crossing on Wednesday afternoon, and after it crosses and clears Mexican customs, a Mexican driver takes the trailer to the delivery location in Guadalajara. The delivery might occur on Friday, but the trailer may need to be stored in a carrier's yard in Guadalajara before making the delivery on Monday morning.
Carriers need a 3:1 trailer-to-tractor ratio to keep trucks moving and not be dependent on trailers crossing. This surplus of trailers also allows carriers to offer drop-trailer programs to potential cross-border shippers.
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Physical Footprint
Most carriers servicing Mexico have a terminal at the border, or their headquarters there. These carriers employ cross-border experts for customer success, operations, customs management, and general customer service, including shipment tracking.
Carriers with terminals elsewhere in the United States can run more efficient drop-trailer programs. The same strategy applies in Mexico in key markets such as Monterrey, El Bajio, Guadalajara, Queretaro, and Mexico City. Terminals or shared terminals with partner carriers allow for secure storage of trailers, positioning these carriers as premier providers with trailers always ready nearby.
Carrier Partnerships
Most carriers sending their trailers into Mexico partner with Mexican carriers, sometimes up to twenty. These Mexican carriers run consistent lanes between major Mexican markets and border cities, using the US carrier's trailer for pickups and deliveries. The US carrier handles customer service and requirements, ensuring a seamless door-to-door service.
These partnerships, often built over social engagements before discussing business, are crucial for capacity expansion based on customer demand. Mexican carriers also seek growth opportunities by partnering with US-based carriers.
Even with inland moves from Mexico to the border, transfer carriers handle the actual border crossings, using their permits and patience. One Mexican carrier might work with multiple US carriers, forming a critical part of North American logistics.
Cross-border carriers invest significant time and resources in establishing the right carrier partnerships in Mexico. Relying on the wrong carrier can lead to shipments disappearing and damaged customer relationships, breaking trust with just one stolen load.
Additional Factors Impacting Carrier Capacity
In addition to the unique operational setup in Mexico, other issues negatively cross-border logistics between the U.S. and Mexico.
Driver shortages and cargo theft remain an issue too often ignored. Mexico's trucking industry has as many as 56,000 unfilled driver positions, a 9% year-over-year increase compared to the same period in 2023. This driver shortage is compounded by ongoing issues with cargo theft, which is a significant concern for cross-border shipments.
Infrastructure and security issues in Mexico continue to negatively impact carrier deliveries from the US. The World Economic Forum ranked Mexico 54th out of 141 countries in terms of infrastructure quality, highlighting deficiencies in road conditions and maintenance. Cartel-related violence, including drug and human trafficking, continues unabated increasing security concerns.
The peso has strengthened against the dollar, increasing the cost of hiring Mexican drivers for US-based carriers to carry out the Mexican leg of the parcel journey. For example, if the exchange rate shifts from 20 pesos to the dollar to 18 pesos to the dollar, a carrier paying 10,000 pesos for a delivery leg would see their cost in dollars rise from $500 to approximately $555. Fluctuating exchange rates add an element of financial uncertainty, complicating budget forecasting and pricing strategies for cross-border shipments.
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