Logistics companies in El Salvador must prepare

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Logistics companies in El Salvador must be prepared for increasingly frequent and complex external impacts.

When considering the operation of logistics companies in El Salvador, the factors that most affect the supply chain are external ones, i.e. those over which service providers do not exercise direct control.

In recent weeks, we have witnessed how a public health problem in the People’s Republic of China has jeopardized the normal flow of products to and from the country. Under most circumstances, such a situation has an exceptionally low probability of occurring. Despite this fact, however, its impact can be extremely negative for consumers.

Generally speaking, foreign trade-dependent enterprises should plan ahead for such scenarios in order to avoid greater consequences that may affect their businesses. In El Salvador, this is especially true given the particular conditions of the country’s supply chain. Every year, for example, the nation experiences heavy rains that periodically cut off important trade routes.

In addition to other natural events such as hurricanes and pandemics, logistics companies in El Salvador can also be adversely affected by political and bureaucratic disruptions of trade.

The latter was evident in May of 2019 when the region’s trade was negatively impacted when the Central American Single Declaration, DUCA, was implemented. Although the idea of streamlining customs requirements in the region to make them more uniform is a good one, problems such as congestion and delays at borders occurred due to computer problems. This resulted in a significant loss of time and resources within the supply chains on the isthmus.

Logistics companies in El Salvador can lessen risks

Whether an adverse circumstance is case-specific or structural, logistics companies in El Salvador, and in the region as a whole, should be prepared to manage these risks and avoid disruptions in their processes. There are some practices, however, that enables logistics services providers to mitigate these types of risks and disturbances.

The first measure to take to mitigate supply chain risk is to redefine inventory policies based on practical realities on the ground in Central America. Logistics companies in El Salvador must keep enough stock and avoid working, as much as possible, on the basis of just in time supply. In Central America, there is too much risk associated with operating in this manner.

In more developed markets, border issues, infrastructure, or remote connectivity do not pose such risks. In El Salvador and the rest of Central America challenges in these areas can affect the flow of commerce on a daily basis. This approach may have important financial repercussions which are, nevertheless, more profitable than stopping sales.

The second measure to take is to put together a network of strong, competent, and responsible partners. It has been many years since logistics companies in El Salvador have stopped concentrating on stocks and have adopted the concept of outsourced flows. The result of this is that the country’s supply chain has developed more links. When one of them fails, the whole structure can crack. In this sense, it is important to constantly evaluate the quality and commitment of a company’s logistics partners, as well as to ask the following question: If services levels are inadequate under normal circumstances, how will they be under adverse conditions?

The third measure to concentrate on is the development of contingency plans. It is of critical importance that time be spent on the process of planning for emergencies. In this regard, all the trade routes that a company’s products travel in terms of suppliers, distances, means of transport, time, and costs must be mapped. For each of these five factors, it is necessary to know what Plan B will be should a disruptive event take place. The identification of alternative suppliers is especially important in terms of dealing with unplanned contingencies.

The fourth measure to take is to make sure to stay informed. Many issues facing logistics companies in El Salvador and the whole of Central America can be anticipated based upon trend analysis and lessons learned from past experiences. Furthermore, logistics company-vendor-customer communication is of key importance. The best logistics companies in El Salvador have their own information and crisis management mechanisms. These are also exceptionally reliable.

Logistics companies in El Salvador, as well as throughout the region, must make sure to be prepared for increasingly frequent and complex external events that may disrupt their supply chain operations. In this sense, taking the correct measures in anticipation of such occurrences can mean the difference between failure and success.