PERSPECTIVES FOR BRAZILIAN LOGISTICS

Logistics in Brazil is going through a period of extraordinary changes. It can even be said that we are on the threshold of a revolution, both in terms of business practices and the efficiency, quality and availability of transport and communications infrastructure, fundamental elements for the existence of modern logistics. For the companies that operate here, it is a period of risks and opportunities. Risks due to the enormous changes that need to be implemented and opportunities due to the enormous scope for improving service quality and increasing productivity, fundamental for increasing business competitiveness.

Despite being broad, the movement for change is still recent. Until about 4 years ago, logistics was the missing link in business modernization in Brazil. The explosion of international trade, the economic stabilization produced by the Real and the privatization of infrastructure are the factors that are driving this process of change. Between 1994 and 1997, Brazilian foreign trade jumped from a volume of approximately US$ 77 billion to approximately US$ 115 billion, that is, a growth of 50% in 3 years. On the other hand, the process of privatization of infrastructure has been moving at an accelerated pace, with almost all railroads and several port terminals already in private hands, and with the expectation of privatization of the Telebrás system later this year.

The rapid growth of international trade, and mainly of imports, generated an enormous demand for international logistics, an area for which the country had never adequately prepared itself, both in bureaucratic terms and in terms of infrastructure and business practices. On the other hand, the end of the inflationary process induced one of the most important changes in the practice of business logistics, that is, the growing movement of cooperation between customers and suppliers in the supply chain, within the concept of Supply Chain Management. Prior to economic stabilization, continuous price changes caused by inflation created huge incentives for speculative practices in the purchasing process, and made any attempt to integrate into the supply chain impossible. The speculative process also generated huge inefficiencies in the use of assets, due to the need to dimension resources for the peak of monthly demand, generated by the process of concentration of purchases at the end of the month.

Just as an example, we can cite the case of one of the largest wholesale distributors in the country, where the number of trucks that arrived to unload in the first week of the month was twice as high as the average throughout the month, which generated long lead times. waiting at the beginning of the month and great idleness in the other three weeks.

At the corporate level, the modernization process has been led by two industrial segments, the automotive industry and large retail. In the last five years, all four automakers installed here had made radical changes in their supply policies, starting to combine international purchases with local ones, based on the just-in-time system. These changes implied a strong demand for more efficient and sophisticated logistics. To this end, automakers have been attracting to the country international companies providing logistics services, known for their operational excellence. As a consequence, there is a growing movement of alliances between local and international logistics companies, with a clear modernizing effect on the former. A good example of this process was the formation of CRTS, a joint venture created to serve Volkswagen in its international logistics operations, formed by two national companies, Colúmbia and Translor, and two international companies, Schnelecker and Ryder.

In the case of the retail sector, the Associação Brasileira de Supermercados – ABRAS, is leading the ECR Brasil Movement, together with companies that produce non-durable consumer goods, whose objective is to increase cooperation in supply channels, aiming to reduce costs and improve quality. services. The first analyzes estimate that within 3 to 5 years, a reduction in costs of around US$ 3 billion will be achieved, through better logistical coordination between customers and suppliers. Large multinational companies such as Coca-Cola, Nestlé and Gessy Lever are participating in this effort.

A recent survey of 60 large companies in the supply chain of non-durable consumer products indicated that 87% of respondents were very enthusiastic about the ECR Brasil movement. The recent entry of large international retail groups in the country, such as Wal-Mart, has contributed to this modernization movement.

Large investments are being made with the aim of improving logistical operations. The Pão de Açúcar supermarket chain has been investing heavily in automation and communications processes, which allow it to connect electronically with its suppliers. Lojas Americanas, which until 3 years ago did not have any EDI – Electronic Data Interchange – connection with its suppliers, currently has more than 70. jumping from 40 to 1996. This wave of investment indicates the vital importance of communications infrastructure for modern logistics.

However, all this business effort comes up against the huge deficiencies still found today in the transport and communications infrastructure. There are enormous opportunities to increase productivity and improve the quality of services.

With expenses equivalent to 10% of GDP, Brazilian transport is overly dependent on road transport, the second most expensive, behind only air. While in Brazil road transport is responsible for 58% of transported cargo (in ton-km), in Australia, USA and China the numbers are 30%, 28% and 19%, respectively. Considering North American standards, where the cost of road transport is three and a half times higher than rail, six times higher than pipeline, and 9 times higher than water, one can see the potential for cost reduction if the participation of the road comes to follow international standards, making room for the growth of cheaper modes. Considering just the migration opportunities from road to rail, savings of more than US$ 1 billion per year can be estimated.

The long years of nationalization of ports, railways and pipelines in Brazil, as well as the implicit subsidies that existed in the past and that still last, with less emphasis, for the road modal (diesel subsidy, the almost non-existence of tolls and the lack of proper regulations on drivers' working conditions) largely explain the distortions in the Brazilian transport matrix and the enormous inefficiencies still observed today.

The greatest opportunities for reducing transport costs reside in ports. According to studies by the World Bank, its inefficiencies alone add 7% to the cost of products exported by the country. Just as an example of the innumerable inefficiency indicators, it suffices to verify that the port labor productivity was, until two years ago, only 20% of the European one. It was not uncommon in Brazil for ships to wait up to two weeks to dock, when the international standard is less than 24 hours. While the productivity of the cranes in the ports of Rio and Santos were respectively 9 and 12 containers per hour, in Buenos Aires it is 22 and in Hamburg, 28.

Until the beginning of the privatization process, two years ago, our railroads presented a lamentable performance, represented by low availability, limping services and alarming productivity. While the average productivity in North American railroads, measured by ton-km per employee, is 8 million, in the former Federal Railroad Network the value was 1 million and in Fepasa 500 thousand. Low productivity is reflected in higher costs for users of railroads in Brazil. While here the average price is US$ 23,0 per 1.000 ton-km, in the USA it is only US$ 16,25. This, despite the huge differences in the quality of services, represented by high availability, fast delivery and reliability of deadlines that are observed in the USA. The pipeline network in Brazil is extremely modest (50 times smaller) when compared to the USA. On the other hand, due to the small scale still existing, the price charged is about 3 times higher.

The privatization process of ports and railways, as well as the new legislation regarding pipelines, create enormous opportunities for increasing productivity, reducing costs and improving services. Although very recent, the results of these changes are already beginning to appear. In the case of the first privatized railway, just over 18 months ago, the average travel time on the main route was reduced from 11 to 6 days; the level of use of locomotives rose from 37% to 65%; the number of employees was reduced from 1.800 to 900. As a result, prices have already suffered average reductions of between 15% and 20%.

The ports are also beginning to show results through substantial price reductions and improved services. On the other hand, sensing increased competition on the part of other modes and pressured by the growing demand for service quality on the part of shippers, road transport companies are undergoing a modernization process, which implies the adoption of sophisticated information technologies, such as routers, satellite tracking systems, and EDI. There is also a great effort towards expanding the range of services offered, with the aim of migrating from a vision of transport to a vision of logistics operators. In this way, they are preparing for the new competitive environment that is beginning to form in the transport and logistics sector in Brazil.

The changes are many, but the path has already been established. For Brazilian companies, there is still a lot of space to conquer. It remains to continue working in the search for greater productivity and better services, which will lead to greater competitiveness.