BRAZIL: Improving Your External Relationship Management for More Effective Temperature-Controlled Logistics

There is growing recognition that companies no longer compete as individual entities, but rather as part of a broader network (1, 2). The strength of these networks is largely determined by the quality of relationships that connect companies and the business processes that sustain them. While the resource-based view of the firm attributes competitive advantage to the ownership, control of resources, and the unique capabilities of a single firm, the relational view extends this theory, considering interfirm relationships as an important unit of analysis for understanding differential performance in business and according to this relational view, rents are created when companies combine, exchange or invest in unique assets, sharing complementary knowledge, routines, resources and capabilities, as well as effective governance mechanisms. Implementing cross-functional and cross-company business processes provides managers with responsibilities that facilitate the exchange of knowledge and skills across internal and external organizational boundaries, and this is very special in logistics, where the core business is radically different from the one a traditional company uses to handle.
We’ve all heard that Brazil is a giant. And, like the giants we know from fairy tales, it has its own unpredictable nature that can make things difficult. This analogy can be used in our logistics and supply world. When in such a situation, what exactly happens and how do we manage the giant’s bad mood?
First of all, we should take a closer look at this giant. Brazil is 8.514.000 km2 in area and is home to 204 million people. (2010 data). In 2014, Brazil’s estimated nGDP was as high as US$ 3,072t. Just to compare, Canada has 9.984.000 km2 and is home to 34 million people, with an estimated GDP of US$ 1,793t. Brazil is a giant that offers a Human Development Index (HDI) of 0.755 and his bad mood becomes apparent when we notice Canada has a an HDI rating of 0,913. To keep things working, Brazil logistics issues result in costs that represents GDP’s 11.7%, a tad higher than USA’s 8% 2013-based costs.
Government policies are an important part of this huge logistic bill. One example of such this issue is the tax dispute between states, which creates situations that result in pharmaceutical goods being manufactured in Northeast states but having them consumed in the more populated Southeast region, creating a huge logistics problem. In other words, we send products 2.000 km for no other reason than politics, mainly using highways that are not in the best shape. Air transport in Brazil does not have the capacity that permits full service on drugs distribution, forcing us to use planes for major hub transfers but living with a potential last-mile syndrome. This is a real nightmare for cold-chain transport planners and an ever-present difficulty for distribution companies that must guarantee 2-8oC within 48 hours, most of the time with no insulated trucks. The use of subcontracted drivers just adds another level of unpredictability to this equation.

Enormous contrast in Brazilian highways – from modern and safe ones to others impacted by rainy season on the North region.