0 Replies Latest reply on Feb 22, 2010 8:28 AM by dustinmattison

    Latin America as an Incubator for Supply Chain Thought Leadership

    dustinmattison Apprentice

      Enrique Carrillo is the newly appointed Director of Information Technology for Baxter International in Latin America, a position he says has become more of a value chain role in most companies across the region. Instead of being a typical infrastructure, software, architecture role, the new CIO role is geared more toward value management and leveraging technology to enable the value chain.


      Latin America, he says, is at the perfect stage to be an incubator of thought leadership for three reasons. First, for most companies, Enrique says, Latin America is still considered an emerging market, with the exception of three countries, which are Mexico, Brazil, and Colombia.


      Secondly, the maturity of the supply chain infrastructure, and the information technology infrastructure, in most countries, is finally getting to the point where companies can execute best-in-class solutions that were not previously available in the region due to cost or infrastructure limits.


      Third, before the economic crisis, companies were fairly content with their rates of growth in the region. Once the recession hit, Enrique says, US executives began paying more attention to what was happening outside the four walls of the US, specifically looking at emerging markets, like Latin America, where market share was likely being neglected and there was ground to be gained.


      Supply Chain Challenges and Opportunities in Latin America


      In terms of infrastructure and supply chain knowledge, Enrique sees Mexico, Brazil and Colombia leaning more toward the maturing levels on the continuum. "When it comes to solutions, most companies in the IT sector are looking at those three countries as regions where they can capture market share and work with clients to support their needs as partners, rather than what I like to call the 'onesie-twosie' type of opportunities that come up just as spillover opportunities from multinationals that have operations in the region," he added.


      When asked to comment on challenges and opportunities in Chile, Argentina and Costa Rica, Enrique said he believes the opportunities are out there, but to find them you have to look beyond the maturity of the supply chain, you also have to look at the forecast for these countries. "When you look at Latin America," he said, "we are not talking about the United States of Latin America, we’re talking about distinct countries, 20 in total, depending on how you count them, so you have to look at the political and economic forecast for each country from one year to the next.


      In Central America, for example, Enrique Carrillo believes the Costa Rican outlook for the first half of this year — especially the industrial sector and supply chain — is trending upwards as global demand picks up. In 2009, he says, many optimistic forecasts were not achieved. This year, he believes, will be the year that optimism will be achieved.


      El Salvador, he says is also improving, and there is external demand, but it is strictly tied to the recovery of the United States. Guatemala is seeing recovery, and the political situation in Honduras is slowing returning to normal, while Panama is heading in the opposite direction despite the boost provided the infrastructure projects surrounding the Canal expansion.


      On the South American side of Latin America, Enrique believes there are tremendous opportunities in Argentina, and while they are still struggling to return to the international credit markets, the political issues are being resolved.


      Brazil's economy, Enrique believes, is on a sharp rebound. "I think that the domestic sector and the middle class are definitely the primary drivers of economic growth, and that has been underscored by falling unemployment and the recovery of the retail sales." Chile, he says, will have to be watched based on the elections, but everything appears to be very positive at the moment. "From a supply chain perspective, when we’re looking at Colombia, I think they will see a moderate recovery. Last year was up and down for them, and that translated into flat growth for 2009," he added.


      In 2010, Mexico's credit rating, which Standard and Poor's downgraded to a BBB, is going to be a source of concern. This, Enrique thinks, will cause attentions to be diverted to emerging countries within Latin America. In contrast, Moody's upgraded Peru's credit rating from a Ba to a Ba3, which, according to Enrique, means the international credit agencies are looking at Peru as a place to expand business, and obviously, that means supply chain will play a role in Peru this year -- something many companies will take advantage of.


      And finally, regarding Venezuela, Enrique Carrillo believes the devaluation announced on January 8, 2010, was necessary "from a bolívar to a US dollar perspective" for improving the competitiveness and balancing increasing budget deficits, but it will probably cause a surge in inflation.


      With Venezuela's two-tier exchange-rate system, the rate will move from 2.15 bolívars per dollar to a preferential 2.6 bolívars per US dollar, but that is exclusive to food and medicine, Enrique says -- all other transactions will be an established 4.3 bolívars per dollar. Free markets are leaning toward six bolívars per US dollar, so companies that want to do business in Venezuela are constrained from a supply chain perspective as far as getting goods in and out of the country with this two-tier exchange-rate system.


      The Big Picture Perspective of Supply Chain in Latin America


      Looking at the entire region from a pure supply chain perspective, Enrique Carrillo believes we're witnessing an evolution of sorts. Companies are more focused on supply chain costs, including total cost of ownership, supply chain assets, infrastructure assets and information technology assets. They are also looking at implementing best-in-class solutions as opposed to customized solutions or localized solutions with local vendors -- something Enrique says is necessary for survival.


      "Everybody is now looking at business in a box," Enrique said, "where you can actually expand your business on a predetermined model, and can process things from a supply chain perspective in a way that it becomes a 'pick list,' much like a configurator when you go to the website at Dell to configure your computer."


      Supply chain now has a more important role, and it has evolved even in the last five years. From Enrique's perspective, "Supply chain management was viewed as distribution and logistics in Latin America, and now people are understanding that supply chain is a key business driver, just as information technology is an enabler and key driver of efficiencies at a company. So, the merger of business and supply chain solutions are happening at a rapid pace, and I think it will continue to happen in 2010.”


      IT Solutions in Latin America


      In Latin America, the mainstays of IT continue to be ERP systems primary because they can link many disparate systems, but companies are looking beyond having one ERP system to manage their manufacturing sector. Today, they are interested in using it to drive their "order to cash" and their services in a more collaborative environment with key partners and vendors.


      Enrique says, "CRM and electronic data management systems are at the heart of it all. Everybody is looking at basic intelligence as a key aspect for improving efficiency and taking out waste within the organizations."


      Based on the new rules, and the political and economic conditions of the region, companies are also deciding whether they should continue with traditional distribution networks. There was a time when most companies facilitated direct shipment from their Latin American factories. Today, Enrique says, various constraints have made it more difficult to move goods in and out, so many companies are looking at creating more of a centralized distribution network.


      Companies in Latin America are also focusing on putting more controls into their demand management supply chain solutions to not only optimize inventory, but the total cost of the supply chain operation. "This is new," Enrique says, "and it will take companies some time to get there, but companies are moving in that direction."


      "In Latin America, just as in any other region," Enrique says, "you have companies at various stages on the maturity scale, from those that are just beginning to get to the level of identifying best-in-class supply chain management solutions to companies that have not been able to accomplish their objectives internally and are looking to external partners to help them get it done."


      The World's Supply Chain Paradigm Shift


      In Enrique Carrillo's personal experience, based on his time as Senior Partner and Managing Director for the Value Chain Practice at Azurian, and as a partner with IBM, companies are in the midst of a paradigm shift -- moving supply chain from a sort of "back-end operation," to a key business partner that is taking center stage in business and governance decision-making processes. Just a few years ago, he says, sales and marketing dictated the pace, and supply chain was more of a "reactionary must-have activity," or "necessary evil." Today supply chain is at the center of strategic decision-making and planning.


      The Future of Supply Chain in Latin America


      Enrique Carrillo advises companies to stay tuned, because there is a lot of work to do in the region and there is much more to come -- the infrastructure in falling into place; there are new ports, new railroads and new roads being built -- and security is improving from a transportation perspective. Centers of Excellence for manufacturing and distribution are being created, and shared services are being established in major Latin American countries as well.


      "I think we're moving in the right direction," Enrique concluded, "people are paying more attention." Proof, he says, is that Logipi's Dustin Mattison called to arrange this interview.


      Meet Enrique Carrillo


      Enrique Carrillo is the Director of Information Technology for Latin America North and South at Baxter International. Prior to joining Baxter International, Enrique was the Senior Partner and Director at Azurian SCM, which specializes in delivering Information Technology and Value Chain Management consulting services to Latin American companies. During his career he has excelled at being a catalyst in developing and implementing progressive business strategies leveraging IT intelligence to gain competitive dominance, raising the standards of organizational leadership and executive management through high level professionalism and focus on results.


      Enrique has enjoyed 18-plus years of success driving vision and executive-level leadership for Fortune 500 multinational organizations and global supply chain networks such as IBM, Daimler-Chrysler, HP, Tatung, Michelin, GM, Phillips Electronics, Nortel Networks, Johnson & Johnson and GE. He is a veteran in management consulting, professional services, manufacturing and technology industries, with a globally focused career bringing significant experience in Value Chain Management, Information Technology, Strategy, Finance, Change Management, executive leadership, and building and growing international business units. http://logipi.com/public/item/249457