…And how it can fail
For every last-mile project, however, there are three problems that must be solved for it to work in the rugged South American market. “You have to have infrastructure, you need security and you need to navigate around traffic,” said Azul Cargo’s Frota. “Last-mile is really the hardest part of the business. There are a lot of countryside cities that are really difficult to reach, so even though we serve 90 airports, you have to go by road for the last mile.”
“Brazil, it’s a really unique country,” said Connect Cargo’s Pacheco. “Its area is larger than the United States if you do not take into account Alaska, but it relies on 80% truck transportation for cargo. Also, Brazil has the Andean Mountains that block the surface transit from the Pacific Ocean, so the western region turns out to be a ‘dead end’ road.”
The enormous rainforests of the Amazon basin not only make paved roads impossible – it also means there is low populational density and isolation in the north and northeast areas, Pacheco said. Isolation causes economic underdevelopment, compared to southeastern states, where the “megacities” of Rio de Janeiro and São Paulo are located. “This creates a large demand imbalance,” he explained. “One-way demand is high and lanes are very long, which causes additional logistics costs to reposition both trucks and planes.”
São Paulo and Rio de Janeiro also have the twin problems of near gridlock on the often hilly surface streets and security problems in high-crime neighborhoods. According to a 2018 article in Insurance Journal, Rio and São Paulo had a combined 22,000 cargo thefts in 2017 – or about 60 cargo thefts per day – a figure that was nearly double the rate from 2012. As a result, many last-mile deliveries in high-crime areas require a signature before packages can be dropped off, which can be difficult for B2C deliveries if people are not home.
Expanding the scope outside of Brazil, Avianca said integrating the systems of all the customers, vendors, customs officials, forwarders and others in the neighboring countries has been challenging. The specific requirements from each country’s customs departments and differing legislation makes it hard to set a standard solution for all Latin American markets, the carr. Infrastructure challenges and procedures also vary significantly, depending on the country, Avianca said.
For many logistics firms, the hope is that technology can overcome these hurdles in South American logistics. To provide a more controlled, safer alternative for their customers, Azul Cargo said it is considering the implementation of locked electronic boxes that may safeguard their last-mile shipments.
“We started the discussion about the boxes last year, and we are actually evaluating the risks and the actual benefits of proceeding with this kind of freight,” Frota said. “It’s still in the initial planning phases.” The idea is to roll this out maybe in the last part of this year or early next year.
With 800 daily flights to 103 airports in the Americas, Azul Cargo began experimenting last year with its “Azul Box” program that allows Brazilians to purchase goods from any e-tailer in the United States and send the goods to a depot in Miami, where Azul completes the necessary customs clearance and ships the goods to more than 3,500 cities in Brazil.
Other types of technology involve communication improvements. “More than 90% of the shipments that we have are monitored by our drivers’ apps,” Frota said. “We’re making sure that information is shared for a long time, and so the drivers can optimize their routes. If there is any problem with a shipment, the customer will want to know.”
At DHL, the express carrier is seeing some success with its “On-Demand Delivery” service rolled out on its platform. “When you ship a shipment to, say, São Paulo, you get an alert in advance that you have a shipment coming,” Parra explained. “But you can also set it up to give customers an option to have that shipment re-directed to another location if you’re not going to be home. You’re able to schedule a delivery day, you can have it delivered to a retail point to pick up when you want.”
While communication is still a spotty in many parts of South America, “they’re closing the gap with the ability to have cell phone towers put up” in some areas, Parra said. As the digital infrastructure slowly improves, DHL is looking to improve route optimization through Google Maps, Google Earth and real-time automation that can better interpret traffic patterns.