With an estimated 63 percent share of the market for new motorcycles in Mexico, the Italika brand is king of the hill in that country, and it is zooming into prominence in several other Latin American countries as well. But its partners have aided Italika quite a bit in its climb to the top, not least of which is Damco.

Today, Italika's stable of products includes at least five motorcycle models, ranging from 90cc to 200c, rated from 5hp to 15hp. It also offers scooters and off-road ATVs. In it earliest days, the vehicles were jointly designed by South Korea's Hyosung, and they were assembled from parts manufactured in South Korea and China. Today's product line is designed entirely in Mexico, and assembly, also in Mexico, is from parts sourced from China alone.

Final assembly takes place at Italika's factory outside Mexico City. With the capacity to produce 350,000 units a year, the factory in Toluca reportedly is the largest motorcycle plant in Latin America. In March 2011, the company sold its millionth motorcycle.

The brand is now sold in Guatemala, Honduras, Panama, Peru and Brazil as well. There are more than 500 authorized dealers in those countries, according to Eduardo Bringold, director of international logistics for Elektra, an international chain of stores owned by Grupo Salinas, a Mexican conglomerate with interests in the television industry, the telecommunications sector, and the banking and financial markets. Grupo Salinas, which is active in much of Central and South America, also owns Italika Motorcycles.

Whereas the Italika brand had been sold exclusively through Elektra stores, Bringold says the company has now begun to also market through Walmart and through another Mexican nationwide retailer, Monterrey-based Soriana.

Complete reorganization of parts importation was one of the major factors in Italika's rise to the top in Mexico, Bringold says. Before Damco got involved, parts sourced from China transited to California's Port of Long Beach. From there they were transported to Laredo, Tex., before making the trek to the Toluca plant.

When Bringold studied the transportation model in 2008, he saw that the built-in inefficiency simply wasted time. Port to port, surface time from Shanghai to Long Beach averaged between 20 and 22 days. However, it was the ground operation, that was problematic, he says. It took two to three days to get from California to Laredo, where consolidation ate more time before the merchandise could move to the assembly plant. The final leg was another two or three days in length.

"It was more expensive because we had to pay for three transportation segments: from port to port, then from Long Beach to Laredo and then from Laredo to Toluca. Ridiculous!"

It was decided that a Mexican port could save both time and money, and the Port of Lazaro Cardenas, on Mexico's Pacific coast some 225 miles southwest of Mexico City, fit the bill perfectly.

"I wanted to change this from the very beginning," Bringold says. "Why not use a Mexican port and get a reduction in lead time, in transit time? After all, the plant in Toluca is a just-in-time plant."

Damco was brought in to put the plan into effect, Bringold says. "They have complete control of the maritime operation."

One of the problems with the previous method of transportation, says Javier Garcia, Damco cluster manager, is that there was insufficient time management. "Late shipments were quite high, so they had to have large safety or buffer stocks on hand. That has changed completely. They have reduced their safety inventory significantly."

Both Garcia and Bringold estimate that today on-time delivery is around 98 to 99 percent.

The weather is one aspect of inbound transportation that can be quite challenging. Some parts are sourced in Chinese regions where the rainy season can severely impact movement from plants to dockside in Shanghai. "That is one important supply chain constraint," Garcia says. "It can really complicate truck shipments to the coast. There has to be a lot of coordination with parts makers on the transportation. It isn't simply a matter of bringing the stuff into Mexico. The complexity comes from the challenges faced during the year. But we have ensured that the flow is smooth."

For his part, Bringold says: "It helps to have supply chain visibility to the whole process. That helps us to penetrate other markets and to do other things because we can let these parts be handled by people specialized in transportation."

What eventually arrives at Lazaro Cardenas is a complete knockdown (CKD) kit. Common in the automotive industry, CKD kits generally contain all parts necessary for final assembly of a vehicle. Rather than shipping all parts for a single vehicle in one "kit", as a rule all similar parts are bundled together and shipped.

Utilizing Maersk Line, which like Damco is part of the A.P. Moeller-Maersk Group, Italika imports approximately 3,000 forty-foot equivalent units a year, says Garcia.

Damco is not involved in the trucking of the CKD kits from the Mexican port to the Toluca facility nor in distribution to Elektra outlets after completion. It does handle the maritime portion of Italika imports to Elektra stores in other parts of Latin America. Moreover, says Bringold, Damco imports computers and other such gear for Elektra, which got its start as an electronics retailer.

The high on-time delivery level can't be stressed too much, says Bringold. "It's important because of the just-in-time nature of the plant in Toluca. It's really been a win-win relationship with them, not only here in Mexico but in all of Latin America."

Resource Links:
Damco
Italika
Elektra
Grupo Salinas


Keywords: transportation management, international trade, logistics management, logistics services, logistics & supply chain, supply chain management, 3PL, third party logistics, global logistics