Copyright 2009, Traffic World, Inc.
French logistics provider Geodis will use its December acquisition of IBM's global logistics operation as a lever to build a new lead logistics provider division inside the company and extend its service platform to the United States and Asia.
"The 4PL (service for IBM) is key to us," said Jean-Louis Demeulenaere, deputy CEO of the Geodis Group. "But through management of the IBM business, I will try to find best practices (in IBM) and implement them in our network."
"For shippers, (the deal) means that there is another large, very capable major supply chain manager" on the world market, said Evan Armstrong, president of Armstrong & Associates. "If you're a U.S. company looking to do business in Europe, Geodis is definitely one of the companies you should consider."
Geodis purchased the global logistics operations of IBM for an undisclosed sum in December, then signed a "very long-term contract," Demeulenaere said, to manage the computer company's "dozens and dozens" of 3PL relationships around the world. Geodis will compete with those 3PL businesses on a transparent basis even as it manages IBM's other providers, he said: "The goal is to find the best suppliers possible in any location of the world."
Longer-term, the deputy CEO said, Geodis wants to acquire a freight forwarding presence in the Americas, then freight forwarding and contract logistics operations in Asia and finally shore up its footprint especially in Eastern Europe. If successful, Geodis could leverage its takeover of IBM's global logistics unit into a competitor with UPS Supply Chain Solutions, DHL, CEVA Logistics and other worldwide providers, with all the ramifications that might have for shipping customers' services, rates and terms.
Geodis is already a big company, with more than 25,000 employees and $7 billion in revenue. It operates 17,000 trucks and 32.3 million square feet of warehouse space in about 800 facilities, according to Armstrong's research; the IBM acquisition and contract could add more than $1.4 billion in revenue, making it one of the largest outsourced logistics contracts ever.
However, "Geodis is a very French company," said Thomas Cullen, chief analyst at U.K.-based Transport Intelligence. "It's a very French focus." Fifty-six percent of Geodis's business comes from France; the rest of the world outside Europe accounts for just 12 percent of revenue.
Geodis is also state-owned, after SNCF, the French government's rail service, bought most of its remaining publicly traded shares earlier this year. SNCF President Guillaume Pepy was quoted at the time saying, "This will make transport and logistics the main job at SNCF."
The IBM deal will bring 2,200 new employees into the Geodis organization, Demeulenaere said. As the logistics provider ramps up its worldwide service for IBM, he said he expects to add as many as 100 new employees in 2009 to sell the new portfolio, primarily in the Americas and Asia.
IBM's logistics operations include shipping finished goods such as servers, a spare parts network and some reverse logistics work for mid-life products, Demeulenaere said.
Geodis will start by leveraging IBM's massive shipping volumes to attract new customers, though Demeulenaere said existing customers shouldn't notice any change in service levels. The French provider already operates integrated truckload, LTL, freight forwarding and contract logistics services for which IBM and others have been customers for years.
Any resemblance of the IBM deal to the ill-fated Vector SCM joint venture with General Motors is superficial. "Geodis is going to be able to control their destiny instead of having a dual board of directors, which is what GM had with Vector SCM," Armstrong said.
IBM's computer-intensive logistics portfolio should strengthen Geodis's appeal to other high-tech customers, Demeulenaere said. IBM's spare parts framework might be extended to serve the automotive industry, he said.
Geodis plans to have its 4PL operation running IBM's global logistics network in 59 countries within three months, the deputy CEO said.
"I think for Geodis this is a very good deal," Armstrong said. Technology companies are the largest component of the Fortune 500, and logistics services to that segment carry some of the highest profit margins, he said.
The global economy is obviously a wild card in Geodis's plans, though Demeulenaere didn't sound worried.
"Like all of our competitors we are suffering a sharp decrease in volumes," he said. "It's been quite sudden and brutal in the last quarter.
"Yes, it's difficult," he added, "but we reacted quite quickly and were flexible enough to be reactive and proactive…. There will be consolidation in coming months but we will stay optimistic for the medium term."