Transportation in the Americas: A Cross-Country Comparison
Latin American countries have particular challenges related to truck transport. Identifying key strengths in procurement and management in high-impact countries will support a fast improvement that may boost economic growth in the region.
Truck transportation comprises 75% of all freight in Latin America. So for a company to be competitive in the region, it’s imperative that they know how to effectively navigate countries’ transportation markets.
Currently, the state of the logistics market is measured by the Logistics Performance Index (LPI), a benchmarking tool developed by the World Bank. While the LPI does give valuable information on national logistics systems in the Americas, says Guilherme Mendonça, a student in the MIT-SCALE Graduate Certificate in Logistics (GCLOG) Program, it does not focus specifically on transportation data obtained from primary sources. So Mendonça and two other GCLOG students, Andres Villena and Vivian Ruiz, set about developing the Truck Transportation Performance Index (TTPI) as their capstone project.
What the TTPI adds to the picture is a layer of qualitative data, based on interviews with experts and stakeholders in the transportation industry in a number of countries, to yield finer details and a clearer picture of what’s happening on the ground. “Let me give you an example,” says Mendonça. “Driver shortage: Instead of just discussing a number that would come from an official statement or an official government statistic, we got much more detail on what is actually happening.” The driver shortage is such that the group found that U.S. companies were hiring Mexican drivers for six months at a time, since that’s how long their visas would last. “This kind of particularity,” says Villena, “you will only get with semi-structured interviews.”
The objective of this new index is to provide practitioners and researchers an overview of the main practices inside truck transport system and the performance conducted on those countries by multinationals, carrier companies, owner-operators and local transportation agencies that could be taken as benchmark practices for other countries.
The TTPI rates countries based on five main categories: driver labor market and training, procurement practices and market structure, transportation cost structure (variable vs. fixed), innovation in trucking practices, and public policy toward developing national transportation systems. Mendonça, Villena, and Ruiz interviewed professionals from three distinct areas of the freight world: trade associations, multinational companies, and carriers — including owner-operators.
The TTPI gives a country an overall rating on a scale of 1–4. But, say Mendonça, Villena, and Ruiz, each country’s situation is unique. So, the index also breaks down each country’s score in each of the five main categories and displays them on a radar chart. This way, it’s easy to parse out in which areas of trucking countries are leading and in which ones they’re falling behind. For instance, Brazil and Colombia both come in at 2.4 on the index overall, but Colombia has more consistent public policies toward developing and maintaining the transportation sector, while Brazil scores much higher on trucking innovation.
Such a comprehensive and detailed snapshot of transportation in the Americas is in particular use as a guide to companies who might be trying to procure and make inroads in various American countries. “So instead of just beginning from scratch,” says Mendonça, a company might, for instance, say, “‘OK, here it lacks innovation. Maybe I can go here and provide something different in the market.”
For now, Mendonça, Villena, and Ruiz have focused on just five major markets in the Americas: the United States, Mexico, Brazil, Colombia, and Argentina. The size of these markets means they heavily influence transportation in other parts of the region, but there’s room to expand to other countries and regions in future research, which could have an important impact on the way countries’ logistics markets are evaluated going forward.
The authors will be presenting their work in more detail at the 2021 MIT SCALE Latin America Conference, being held virtually from March 21–26, 2021.
