A Fresh Look at Latin America The Greatest Supply Chain Challenges and Opportunities for Companies Operating in Latin America May Surprise You
By Antonio Boccalandro, JDA Software's group vice president, Latin America.
There is no doubt that Latin America holds enormous promise for manufacturers across a wide variety
of industries that are looking to expand their supply chain depth and breadth. As they look beyond their previous offshore sourcing models, which focused heavily on the Asia-Pacific region, they are finding
fertile and profitable ground in Mexico, Central America and South America.
Perhaps nowhere is this trend more visible than in the automotive industry, with Toyota, Honda,
Volkswagen and Nissan among the companies recently investing in large Mexican production facilities. In fact, industry experts anticipate Mexico's auto output to hit a record 2.86 million vehicles when the
2012 figures are tallied, making Mexico the eighth-largest automotive producer worldwide. Further, this trend is expected to continue, with analysts predicting 34 percent growth in Mexican auto production by
The growing popularity of Latin America as a supply chain partner makes sense, given the region's close
proximity to large North American markets, its rich natural resources, attractive labor costs, liberal trade policies, and companies' reputations for delivering high-quality products quickly and reliably.
While this growth is creating excitement among the region's executives, it is also presenting them with new challenges. Today, there is special pressure on Latin American businesses to adopt leading-edge
supply chain practices and tools in order to collaborate with their new global partners, compete successfully in international markets and increase profitability.
While the needs of every company are different, in general Latin American businesses are seeking supply chain improvements in the areas of demand, inventory replenishment, transportation, and sales
and operations planning (S&OP). Retailers add category and space management to this list of top concerns.
The adoption of advanced supply chain
solutions has been slower in Latin
America than in the U.S. and Europe, with many companies struggling to
leverage outdated and overloaded enterprise resource planning systems to
tackle complex new challenges. When
comparing supply chain metrics of Latin American manufacturers to those of
their U.S. counterparts, the effects of being a late technology adopter are
significant. For instance, leading U.S. beverage manufacturers average 18.7
days of inventory, whereas the average
in Latin America is 43.5 days. And while the average return on equity in the U.S.
is 16.8 percent, it is only 8.4 percent for Latin America's manufacturers (See
Figures 1 and 2).
With so many Latin American
businesses experiencing dramatic growth as the international business
landscape has changed, it may be difficult for executives to pause and
think beyond their...