A lot has been written about the impact of COVID-19 on digitalization in the region. Studies point to a jump in digitalization of three years in just a few months. That coupled with long-lasting changes in consumer preferences and behavior stemming from an increasing need to stay connected, but socially distant, both represented a tremendous opportunity to bring new ways of doing business to the fore. Though some industries were inherently more prepared than others to tackle this shift, chances are that changes in the supply chain represented one of the biggest challenges for companies of all sizes. In fact, as many as 95 percent of organizations will be or have already been impacted by coronavirus supply chain disruptions.

The need to digitize is not a novelty and it has been part of the conversation for years now. Inefficiencies around time and money, coupled with sustainability and visibility concerns, are pushing stakeholders along the entire supply chain to invest in technology to keep up with more demanding expectations. According to Forbes, 92 percent of executives agree supply chain visibility is important to success. However, only 27 percent have figured out a way to achieve it. Visibility goes beyond the now "expected" track and trace functionalities, and into areas like document collection, data sharing, or solving the information divide. All these topics are again at the forefront of Mexican logistics, with new SAT regulations impacting it this year in a major way.

Impact of Changing Regulations

Technology has become critical to ensure that carriers, intermediaries, and shippers involved in the movement of cargo within as well as in and out of Mexico can continue operating without major disruptions. In June 2021, Mexican Tax Authorities passed rule of the Miscellaneous Tax Resolution for the year 2021, which imposes new recordkeeping requirements on all players. Though this is a clear positive step in the government's fight against contraband and smuggling, the new rule is expected to strain operations even further, especially those that are the least digitized.

Carlos Sesma Jr., a partner at law firm Sesma, Sesma & McNeese, explains some of the pain points and opportunities in this transition. “Challenges around these regulations are varied. Some are related to control, third-party information management, data privacy, and correct risk allocation. Others are more linked to the operation, including the implementation of new technology, an increment of administrative duties, and actually ensuring that the flow of operations continues with all these additional requirements. For businesses to continue operating, they will have to prepare and make sure their partners are ready as well.”

There is no question that technology will be needed, as both shippers and carriers will be required to complete the invoice or CFDI electronic tax form and a new supplement of the bill of lading. This will need to include evidence of the cargo, origin, destination, etc., and must be readily available for inspection throughout the transport process. With the supplement to the bill of lading including up to 160 questions in some cases, digitization enters center stage, not only as a means to comply but as an enabler for innovation. It will be essential in making the process go faster, enhancing coordination and communication, and ensuring the seamless exchange of information between shippers and carriers, all key aspects for compliance success. With technology now so ingrained in the process, there is a competitive and operational advantage at stake for companies that can use software as a differentiator to offer security and full legal compliance to their partners.

Always Forward

It's time for all stakeholders in the supply chain to look inward and review the points of risk and opportunity in their processes. Think about what pieces of your supply chain might be affected and reach out to your partners and make sure they are preparing as well. The three main recommendations Nuvocargo offers its partners are:

  • Taking advantage of technology for efficient information exchange between all parties involved in a shipment. This will allow you to move quickly and avoid additional delays and disruptions in your operation.
  • Securing legal counsel for risk management and handling all matters related to compliance and errors in documentation. It's important to stay ahead since failure to comply could result in fines, penalties, operational delays, and the embargo of shipments.
  • Last but not least, investing in training for financial departments to issue required documents in a timely manner, pay extra attention to detail when filling out the forms, and ensure information related to cargo and transportation is accurate.

There is a big opportunity to identify process improvements for document ingestion and to bring in an added layer of transparency to the entire process. In that respect, the new regulations can force the industry to level up its operations and to use the regulations as a competitive advantage. At Nuvocargo, we are excited to leverage technology and innovation to make this transition simpler for our shippers and carriers, as well as to continue doing our part to move the industry forward.

Originally published in Mexico Business Week on November 3rd, 2021.