Big in Brazil
Already the industry leader and the core warehousing provider in one of the largest markets in the region, DHL Supply Chain (DSC) is on a roll. Jose Nava, President DSC Latin America, on progress to date and plans for the future.
Brazil is host of the Soccer World Cup 2014. In 2016 the Olympic Games will take place in Rio.
When Jose Nava thinks Brazil, he thinks big. Really big. And he is justified in doing so, having recently reeled in the biggest ever deal in divisional history. The ten-year contract with Makro, Brazil's leading cash and carry wholesaler, sees DSC operating from a new 40,000 square meter warehousing facility near Campinas in the Brazilian state of São Paulo. As a consolidated inbound/outbound contract, it includes not just receipt and storage, but picking, packing, and delivery to Makro stores across Brazil. Most impressive of all, it secures a long-term relationship with a new customer.
Nava says Brazilian business thrives on consistent economic policies and the many ways that high commodity prices boost the economy - not least in attracting foreign investment. The strong Real fosters high imports of consumer and other goods. While this has its upsides, it also stunts domestic production. Cheaper goods from countries like China outcompete Brazil's home-grown items. Add heavy subsidies for the Brazilian Development Bank, a complex tax system and efforts to curb inflation, and the government has a job keeping the economy in check. "But there are signs that the President and her cabinet have an eye on it all. They're trying hard to balance the spend and increase revenue," he explains.
Jose Nava, President DHL Supply Chain Latin America
Biggest not big enough
Although the industry leader in Brazil, DSC can still find opportunities to grow. "Outsourcing is only about 10% of today's logistics spend. With the trend towards large conglomerates in Brazil, these new players are looking to outsource in the same way that the multinationals do," says Nava. But it is not just new customers that are driving growth. Partnerships with large global consumer customers are anchoring DSC Brazil as a key warehousing provider.
"These customers see Brazil as a core emerging market," says Nava. "If they get per capita consumption of their products here to the same level as in Mexico, they will see business multiplying several fold." In anticipation of such growth, one such customer has redesigned its logistics network and warehousing infrastructure. DSC operates its Main Distribution Center for finished goods and the main warehouse of the co-packing operations in Rio. The task now is to build efficiency and capacity: almost every month, a new product line or a new brand is launched, adding to inventory and generating volume.
Whatever the deals, whatever the sector, expansion is clear. "Short-term measures help us cope with demand, but mid and long-term planning is vital," says Nava. A new campus is planned near DSC's facility at Louveira, São Paulo. With one section for large accounts and another for medium-sized customers, it will retain the combined campus and resource-sharing concept. "It has huge potential," enthuses Nava. "We can serve multiple combinations, can modularize the phases so there is no financial burden on the business - and we can start working on the balance we want to achieve with different sized accounts under one roof."
- Total employees: 8,000+
- DHL Global Forwarding: 700
- DHL Supply Chain: 6,500
- DHL Express: 850
- Distribution centers: 40
- Global Forwarding is in Brazil since 1976, Express since 1978, Supply Chain since 1999
Ceci - a big box of shared services
As the customer base grows, so does the service portfolio. DSC Life Sciences at Ceci, in Barueri near São Paulo, serves 18 accounts - from a multi-national diagnostics company to an international pharmaceutical services firm. "The Ceci solution is really a big box of shared services," explains Nava. "We meet regulatory standards for temperature controlled and ambient temperature goods. And customers like not having to pay for dedicated space." Serving all customers and all products, the 'box' offers shared facilities, labor and security.
A recent case study by consultants Armstrong & Associates called Ceci 'the jewel of DSC's life sciences operations.' Even so, Nava envisions expansion. "We're close to capacity, so we need new real estate. And the system is partly automated, so we have to update our technology."
Business never better in Brazil
Balancing the short and the long is one challenge. Another is weighing small against big. "It takes as much to win a small business as it does a big one. When big deals come up, we should focus on them," Nava says. That said, medium-sized deals allow multi-customer sites to be managed profitably, giving flexibility to move sites and fine-tune the network.