Usco Case Study

After carefully reviewing the Mexican logistics market opportunity and the pot tial impact NAFTA will have in free trading between Mexico-USA-Canada we have decided to venture into the Mexican arket as a 3PL (Third party logistics). We believe our expertise, sophistication, current customer base and success in th USA and Puerto Rico will allow us to provide an excellent service and bring an added value to our future customers in M il ico.

Based on all the scenarios and analyzing each one of them in detail we decide1 not to partner with Banco Mexicano or ~ any of the other banks for the following reasons: 1. ':Iedo not ljke tbe Qossible cOQQectiolLwith the Governsent, 2. Banks] ,ij lack 10~iS~iC kno~~, <» this area is not th.eir area Of. expertise, 3. Bureaucracy and 4. The fa~ that banks ~anted out of '. the 10 stfes"tl'G"Sirless or at least to partner With profeSSional firms who could help them cut their losses on their warehouse

peration. We do not want to partner with someone that does not share our company main focus and objective.

Even though Privately Owned public warehouses appeared to be a good fit for a joint venture, we decided not to partner with them. One of the reasons is that we do not share the same target market segment as, this company's main ~ business comes from warehousing agricultural products. But it was the high cost of acquisition and the upfront payment] ",<iJ what mostly does not match our company's culture and strategy, If they receive the revenue payment up front then, what U incentive do they have on making the joint venture work? USCO wants a partner they could share the risk with.

This is why we have decided to enter the Mexican market via a Greenfield operation. We believe that having a trucking Company as our strategic partner will be key to our success. The trucking company would compensate our lack of knowledge of the Mexican territory and culture. They will be subject to high quality standards such as, trailers and trucks not older than 3-4 years and well-maintained equipment. USCO will be handling the warehousing part of this venture with the option of partnering with a custom brokerage service if needed.

USCO target segment are the Fortune 500 companies exporting to Mexico, specially the one's that we do business with in the US. We understand Mexican executives usually make their own decisions on logistics partners in Mexico, however, we believe they could be willing to change due to our value added and expertise brought to our current customers in the US. At the same time, we would like to leverage our relationship with Banco Mexicano and the other