Supply Chain Briefing

January 9, 2017

The Mexican government took away subsidies on gas, and so prices soared in the New Year.  A 20% hike in gas prices has spurred on protests, looting and chaos at border crossings. Although the objective was to let the cost of fuel adjust to the market, the gasolinazo (which is how the price hike is known) is anything but just a market adjustment in the eyes of the people.  They are not happy!

It is already creating havoc in the Mexican supply chain.  What should we be thinking about to stay on top of this supply chain trend?

What Should We Consider and/or What Impacts Could Arise?

This isn’t likely to be a temporary change since it brings gas prices to market levels, and it seems to signal a change in direction from the government.  Thus, one obvious change will be the need to build these costs into our transportation costs throughout the supply chain for items moving around/ through Mexico.  20% seems like a reasonable number to use for analyses.

It has temporarily created supply chain disruption in the form of looting, border jams and the like.  Since it is a signal of changes to come, perhaps we should account for a bit more supply chain disruption.  Do we have backup plans?  Do we have alternate routes?  Will a 20% increase in transportation cost create any supply chain redesigns?  What will other supply chain partners change due to this increase (if anything)?  Will we be ready for which of those are likely to impact you?