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In a flash.

With additional reporting by Cassia Schittini in Sao Paulo.

Kodak saves time and money with a distribution center in "Brazil."

COMPACT DISKS ARE NOT COMplicated products to ship. But somewhere along the route from Guadalajara to Buenos Aires, Eastman Kodak's plastic disks and other products were getting slowed down, so much so that in at least one case a "just-in-time" delivery took 60 days.

That's pretty bad, especially when both the shipper and the customer waiting for the product are subsidiaries of the same company, Kodak. David Movsky, a worldwide transportation manager at the firm's headquarters in Rochester, New York says the company finally decided it had to move its inventory closer to the customer. Solution: set up a warehouse near Sao Paulo.

Movsky knows his geography. He knows that Sao Paulo is a long, long way from Buenos Aires, but Kodak's Brazilian warehouse is not really in Brazil. The company took advantage of a never-before-used special customs program in Brazil that saves the company transit time as well as tax costs for exports throughout Latin America. That was four years ago, now Kodak is moving about US$120 million annually through its Customs Distribution Depot (or DAD, as it is known by its Brazilian acronym)-the only one of its kind in Brazil. In short, the depot allows the company to move product through Brazil without the hassle of customs.

The kicker is that Kodak workers can enter the warehouse, open and repack containers according to each market's needs. If Peru, for example, does not need an entire container of film, the company can fill the rest of the container with other items, such as throwaway cameras, compact disks, etc. Plants throughout the region send product to the warehouse to keep its shelves stocked.

Custom warehouse. By setting up the Sao Paulo facility, Kodak nailed a few major concerns. For starters, the company's products do not pay Brazilian import taxes nor do they go through the country's full import saga. Instead, they go straight to a special customs warehouse. In that way, Kodak can import and re-export goods to and from its storage facility, without officially entering the country.

When the distribution center first started, of course, many of Kodak's affiliates in other countries didn't believe that Brazil had the ability to do the job. After all this was the same customs service that "lost" a Ferrari in a bonded warehouse a few years ago. Many also questioned the country's costly transportation and its lack of specialized services such as intermodal infrastructure for moving boxes among trains, trucks and planes.

But Maria Cristina Forjaz, manager of foreign commerce for Kodak in Sao Paulo, says the company is making the international logistics work. In addition to the growing flow of goods through the warehouse, she points to Kodak Brazil's growing exports, which now stand at $150 million each year in photographic paper, x-ray film and regular film to Latin America, Asia, Europe, the United States and China.

Still, Kodak's Brazilian operation faces challenges and competition from within the company. A Kodak plant in Uruguay, which also wants to be a company logistics center in South America, says it should be given some consideration. The employees speak Spanish there, which is more common than Portuguese--although in international transportation, English is generally preferred. Also, Uruguay is a free-trade zone that offers certain financial incentives.

Not for everyone. Such a distribution center is not for everyone. Rapid freight companies like Federal Express don't want to set up a South American consolidation operation in Brazil, says Guilherme Gatti, the marketing manager of the company's South American office in Sao Paulo. FedEx has its Latin American hub in Miami. "We just want to move the cargo here [Brazil] as quickly as we can," Guilherme says.

Officials from DHL, Circle International Group and other freight forwarders add that it's impossible for third-party cargo companies to establish this kind of logistics and distribution center because Brazil's dated trade laws don't even recognize logistics companies. "We are the backbone of the economy, but we are not even recognized in Brazil," said David I. Beatson, chairman and CEO of Circle International Group, one of the country's leading logistics companies, during a recent visit to Sao Paulo. Freight forwarders complain that established companies moving goods to and from their own plants, such as Kodak, receive preferential treatment.

Kodak officials say there is no special deal. It's just that they started before anybody else showed any interest. Now, the firm's distribution center in Brazil is streamlining its shipments from, for example, Mexico to Argentina.

One of the reasons for delays in the past was that there were a limited number of ships going straight from one country to the other. But the Mexico-Brazil trade lane is a popular one, as is the one connecting Brazil and Argentina. And now that the products can pass through Brazil without paying duties or going through customs, the cargo arrives in Buenos Aires in just a little under a month, which is much more like a just-in-time delivery.
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Title Annotation:Eastman Kodak
Author:FABEY, MICHAEL
Publication:Latin Trade
Geographic Code:3BRAZ
Date:Jun 1, 1999
Words:843
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