World commerce is under continuous disruptions, the growing urgency in the arrival of a product or service expected by the consumer is not a trend anymore, supply chains are being transformed into digital supply chains or fulfillment networks as some experts like to refer to it these days. This new reality brings new challenges for every supply chain team worldwide.
How companies and their supply chain teams react to this market-consumer disruption will be the key to success or their path to failure. As Eric Pearson CIO, IHG Group said, ¨it´s no longer the big beating the small, but the fast beating the slow¨ these days it applies in almost all business and this is why: who puts the product first on the hands of the customer in an efficient and safe way will be the winner in this race.
In Latin America the ¨Amazon effect¨ is probably less felt than in other markets due the distribution challenges in the region but the consumers are getting the same information everywhere. Realtime information about new products, fashion, trends, events and services are as close as their smartphone regardless the time and place. This is when supply chain challenges begin, the need to fulfill a customer’s whim because of what she saw on an Instagram post or any other social network are creating headaches to many of us.
Latin America and the Caribbean represent over 30 countries that span the extremes of Brazil with 210 millions of population to small rocks in the Windward Islands like St Vincent with 110,000 population additionally you have to deal with the complexity of deal domestic government rules and regulations, languages and cultures. Is common to hear ¨We are not interested in serving X, Y, or Z market because is so complex and the volumes are low we will only focus on the bigger and easiest markets¨ let´s give that market to a distributor who take care of it, however, in today’s competitive business environment the correct statement should be ¨How we can reach the customers in that range of countries so we can satisfy their demand as well as increase our market share and brand recognition with all our assortment of products? ¨ the answer to that question is with no doubt: Panama.
Panama is the by any measure the best location for a multimodal logistics operation. The country boasts a first-class infrastructure as well as outstanding logistics assets that make it the center for the distribution, order fulfillment, light assembly, storage, manufacturing, heavy or light assembly distribution, spare parts logistics, e commerce, reverse logistics, cold chain management as well as any manner value added requirements of any product required for distribution on the entire region.
Connectivity, Connectivity, Connectivity
The old saying real state is ¨Location, Location, Location¨ but in the supply chain world, location without connectivity, reliability and a broad portfolio of services and interoperability is a little value.
Panama is strategically located in the center of the Americas and from the early years of the sixteen century the Spanish conquistadores used Panama for bringing finished goods to the city of Portobello in the Caribbean side of Panama and returning with the new world treasures after being trade in the Portobello fairs.
Having the newly expanded Panama Canal as the transportation backbone that moves the 8% of the world’s commerce that reaches a market of 1.3 billion consumers, it’s an extremely valuable asset. Panama is number one in Latin America and the Caribbean in the Liner Shipping Connectivity Index (LSCI) On average, 55 regular line services dock in Panama´s 6 ports every week, connecting directly with 148 ports in more than 50 countries in the world. While the Atlantic port conglomerate is also number one ranking of container port throughput and the Pacific ports number two effectively having ports on both oceans makes the country ranks 6th in the world in regard to port infrastructure. Dr. Don Rattlif Regents’ Professor Emeritus in Stewart School of Industrial and Systems Engineering at Georgia Tech and Co-Executive Director of the Georgia Tech Panama Logistics Innovation & Research Center. said, ¨Panama is unique: it is a port with terminals in two oceans¨, the distance from ocean to ocean is less than 50 miles. The country has also the best-connected airport in Latin America and offers unsurpassed advantages, more than 132,000 annual direct flights departing from Tocumen International Airport to 90 destinations in 35 countries, including 16 cities in Canada and the United States and connecting key European destinations such as China, Germany, Spain, France, Italy and the Netherlands. A new end of the runway logistics complex is now under construction at the Tocumen cargo terminal that will add a new platform to expand the range of services offered in Panama, this project is mainly focused on e commerce, spare parts logistics and pharma companies.
With the objective of increasing foreign investment and consolidating the logistics and services platform of Panama created the “SEM” regime and over 145 multinational companies are taking advantage of the law that encourages a wide range of activities and benefits to drive the growth of multinational companies in Latin America, enabling them to reduce operational costs and maximize their efficiency companies such as Pfizer, Adidas, Samsung, Dell, Sony, Under Armour, Bayer, 3M, Diageo, Phillips, HP, Payless Shoes, Huawei among others are enjoying the benefits on this special regime.
The international companies that develop logistics operations in Panama, also take advantage of the tax, labor and migratory benefits that the country offers as incentive for foreign investment. These companies are exempt from income tax on their foreign and domestic operations, as well as from other taxes and import duties. Panama is also a strategic point for global logistics companies, such as DHL, Ceva, Expeditors, Damco, DB Schenker, K&N, Panalpina and recently DSV and Nippon Express opened branches.
During my experience working with global companies helping them to develop their Latam business strategies through efficient logistics operations, obtaining a differentiator factor on the market by service innovation, liberating cash flow, offering a shortest time to customer, reducing inventory carrying costs and risk, we have developed logistics operations and platforms for a very wide range of services and industries from: Emergency small spare parts solutions to underground mining drilling equipment and everything in between. (Engineering, fashion apparel, Pharma, Wine and spirits, Telecom, Automotive, consumer electronics, heavy equipment, e commerce, Hi Tech, CPG companies among others)
In 2017 Panama started a procs to established diplomatic relations with The People’s Republic of China, these days both countries are working on a Free Trade Agreement, that also led to the historic visit to Panama of President Xi Jinping. We learn about the Panama’s key role in China’s silk roads. Eddie Tapiero Competitive Intelligence Specialist at Panama Canal Authority during his book (The silk road and Panama) presentation said: this initiatives not only has a direct impact on the commercial and investment field of the Isthmus but also incorporate Panama into the Chinese initiative ‘One Belt, One Road’ (OBOR), also known as the new ‘Silk Road’, “Once the construction of the infrastructure planned for these routes (new ports, railways and free zones) is completed, Europe will not only be consumers of the products coming from China but will become a center for the collection and distribution of commodities. Because of its access to the Atlantic, Panama could take advantage of that trade, but, Panama can also take advantage of the Pacific side, to materialize its entry to the Pacific Alliance,” The Silk Road and its impact on trade in Asia and Europe should not be left aside, instead should review long-term state strategies, so that economies, both China and Panama, continue to strengthen. The reality is that commercial and cultural exchange started approximately by1854 when the first important group of Chinese citizens arrived in Panama to work on the construction of the first transcontinental railroad so the history between both countries has over 150 years.
The uncertainty created by the US-China trade war is leading American retailers to make changes in their import strategies for goods from Asia’s largest economy to avoid new tariffs and ensure they have adequate supplies to keep their business going on but what about those companies that are importing to the US from China and after will be shipping goods to Latin America? Their goods will be more expensive and will automatically lose customers and market share by their competitors that are reaching this market in a more agile way, the obvious solution for companies who want to reach the Latin American market in a faster, safer and reliable way the only competitive option is: Panama, the Latin American logistics capital.
The author is a Supply Chain business strategist at LSP Group, former President of the Panama Logistics Council and President of CSCMP Panama Roundtable.