LATIN AMERICAN TRADE 2008 - Penske Logistics’ Bill Scroggie: Challenges, opportunities in the South American marketEditor’s note: Bill Scroggie is Managing Director of Penske Logistics South America and is based in Sao Paulo, Brazil. Scroggie has been in logistics management for 17 years and spent over a decade with Penske. By George Lauriat, AJOT AJOT: Penske Logistics has a significant presence in Latin America (16 location and $78 million in revenues). How long has Penske Logistics been in the Latin America market, where did it start and why? Was the move based on the needs of specific customers? Did it develop out of the 2007 deal with ABX Logistics or was it already in place? Could you talk a little about the deal and how it came into being? Scroggie: “Currently, Penske Logistics South America only operates in Brazil. Penske Logistics began in South America in 1998, operating via a joint venture with Cotia Trading, known as Cotia Penske Logistics, primarily importing Ford vehicles. In 2005, we assumed sole ownership and full operational control of the JV with Cotia. We first became involved with ABX LOGISTICS in 2006, announcing a strategic global alliance. Then in 2007, we formed a joint venture with ABX, known as ABX-Penske Air & Sea. The JV with ABX enabled Penske Logistics to provide international freight management services to customers in Brazil.” AJOT: Over the last five years, the Latin American market has grown rapidly, particularly in countries like Brazil, Argentina and Chile. In terms of the import & exports what changes in the Latin American market have you [Penske Logistics] seen and what trends are underway? For example, there has been a big growth in electronics and the automotive/truck sectors. Scroggie: “We have seen import and export volumes for Brazil double in the last five years. Penske’s focus during this time has centered on the auto and electronics markets. Our Q1 volume for Ford has exceeded our entire 1999 Ford volume. Penske Logistics’ growth has mirrored that of the country: we have recently seen the need to expand a multi-client warehouse to handle increased import and domestic products from 35,000 meters to 70,000 meters.” AJOT: Managing a supply chain has different challenges in every area and with different commodities. What are the most challenging aspects of running a supply-chain network in the Latin American market? How does this fit in with the “best teams” approach? Scroggie: “A lack of different transportation modes is perhaps the biggest challenge of operating in Brazil. We have seen data stating that only 11% of roads in Brazil are paved, as compared to about 85% in the US. The rail and air infrastructure are not as strong. There also exists a very large seasonality in the marketplace, bringing with it time sensitive challenges. Across all industries, 50% of all activity occurs in the last week of each month. There are also quite a few security issues to contend with, which aren’t nearly as prevalent in the US.” AJOT: Traditionally, Latin American nations have engaged in classic north-south trades with Europe and North America, however recently China has become a big player both as an importer/exporter and investor in the region. What is the impact on business in Latin America as the north-south trades move east and west? Scroggie: “We have seen some east-west activity. However, with the lack of infrastructure to receive ships from Asia, there are limitations on east-west activity. China is hungry for raw materials, such as iron, cement and other commodities. Brazil is a huge producer of commodities like timber, soy and steel. We are seeing increased importation of electronics from the Asian market – approximately three domestic items for each import. There is an emerging middle class in Brazil that is purchasing more consumer goods. I liken it to the US of the 1950s. At Penske Logistics South America, we only work in the