European logistics giant expands in the Americas, Asia.
European logistics giant Geodis Group has been expanding in the United States and elsewhere in the Americas through acquisitions and organic growth.
In June, Geodis Wilson, its freight management unit, acquired Minneapolis-based One Source Logistics and announced plans to double its freight forwarding business in the coming five years.
It’s the latest move by a company that also was in the spotlight in 2009 when it acquired IBM’s in-house logistics unit, and announced plans to turn it into a multicustomer fourth-party logistics business.
Five units comprise Paris-based Geodis Group, which since 2008 has been part of state-owned company SNCF, which operates France’s freight and passenger railroads, including the famous high-speed TGV.
Geodis’ units and their 2010 revenues are:
• Freight forwarder Geodis Wilson, 2.4 billion euros ($3.5 billion using a 1.45 conversion factor).
• Geodis Logistics, the contract logistics division, 900 million euro ($1.5 billion).
• Trucking division Geodis BM, 700 million euros ($1 billion).
• Geodis Calberson, its groupage and express division, 1.7 billion euros ($2.5 billion).
• Geodis Supply Chain Optimization (Geodis SCO), formed through the purchase of the IBM business, 900 million euros ($1.3 billion).
While the company doesn’t have plans to bring its trucking or express businesses to the United States, Jean Louis Demeulenaere, Geodis’ chief executive officer, told American Shipper: “Our ambition is to be a global logistics provider. We want to be able to deliver end-to-end solutions and integrated services to a portfolio of global customers,” which provide 45 percent to 50 percent of the group’s revenue.
John M. Gallahan, regional vice president for the Americas, oversees Geodis Wilson’s operations in the United States, Canada, Mexico and five South American countries: Brazil, Chile, Argentina, Colombia and Peru.
Gallahan said five years ago Geodis was heavily Europe-centric, but the company has since focused on expansion in the Americas and Asia.
“The strategic direction is to be truly a balanced global network, and much of our investment and much of our attention and focus as a management team has been to grow those areas where we were maybe undersized at the beginning,” he said.
All told, Geodis has about 30,000 employees in 120 countries. About 6,400 work for Geodis Wilson, and the company annually arranges shipments of about 444,150 TEUs of ocean freight and 203,981 tons of air freight.
Geodis Group’s U.S. headquarters is in Iselin, N.J., and about half of the 1,000 U.S. employees work for Geodis Wilson.
Demeulenaere said a goal is to strengthen the company’s freight forwarding business, especially on the transpacific trade lane. The company will have U.S. sales of about $650 million to $700 million compared to $500 million last year, and is seeking to speed growth by acquiring yet another company.
Given the size of SNCF, which had 2010 revenue of 33.2 billion euros ($48.1 billion), Geodis has considerable resources to draw on.
Roots. Geodis Wilson was formed in 2006 when TNT sold its freight management arm to Geodis. Before being owned by TNT, it was known as Wilson Logistics, a 167-year-old company based in Sweden. Geodis Wilson has made several other acquisitions since then, including the 2008 purchases of German air and sea forwarder Rohde & Liesenfeld and the United Kingdom’s Oughtred and Harrison.
Gallahan said Wilson’s Nordic roots means Geodis Wilson has always had a strong northern European presence. Because of its roots in Wilson, “when you look at the capabilities that we had here and the strengths that we had there from the beginning, it was designed around being able to support global activity for our long-held customers in the Scandinavian region or the Nordic region, such as Volvo,” he said.
Geodis Wilson also has a significant U.S. presence, and the Rohde & Liesenfeld purchase helped strengthen areas where it lacked offices, including South America, Australia and South Africa.
Gallahan noted Wilson was strong in the oil and gas business and Rohde & Liesenfeld in mining. Industrial projects have become Geodis Wilson’s largest vertical markets.
In 2009, the company opened a new headquarters for its industrial projects division in Houston, which allows it “to be closer to the decision-making centers of a growing client base.”
The company has been doing considerable project logistics for the oil and gas sector in Colombia, West Africa and Libya (though that was on hold this summer because of the revolution there), and for mining projects in Argentina and Chile. “We’re expanding that into Peru and Brazil,” Gallahan said.
Geodis Wilson has full packing and crating operation that can perform services at its Houston facility or a customer’s location. For example, last year, Geodis Wilson shipped a refinery from Southern California to Colombia.
Other key vertical markets for the company include the automotive industry, which is one of the reasons that Brazil is a major location; retail and fast moving consumer goods; high tech; marine logistics; aviation; and pharmaceuticals. In July, it said it was creating a group to focus on performing logistics for luxury hotels and resorts, building on expertise it has from existing clients.
The company noted that when new hotels or resorts open they need everything from furniture, fixtures and silverware to thousands of towels. Once up and running, the same properties need ongoing supply chain services.
Geodis also has a marine logistics operation supplying cruise lines that has doubled its activity in the past year, Gallahan said.
Cruise ships, he noted, are “entertainment and hotel complexes traveling across the sea,” and their mobility adds another level of complexity to the supply chain. On-time delivery becomes even more important, because a ship is not making money when it is sitting in port being repaired.
The company has licensed customs brokers in about 15 locations, and this is a growing area for the firm.
“We are expanding into consulting and other types of activities in the area of customs compliance,” he said.
The company has also been expanding its U.S. distribution services, such as crossdocking cargo from ocean containers into domestic trailers or containers, arranging onward transit beyond the port, picking and packing, and repackaging or relabeling products.
Acquisition of One Source will help strengthen the company’s U.S. transportation capabilities, Gallahan said.
The company has expanded facilities in the New York and Chicago suburbs and it’s also a significant part of its activity in Los Angeles and Miami.
The company also has a cross-border product with Canada that’s been running successfully for several years, and “we’re looking at expanding cross border operations with Mexico,” Gallahan said.
Sea-air cargo has also been a strong product for Geodis — mostly product from Asia that moves to Southern California and then is flown to Latin America from Los Angeles or trucked to Miami and loaded on planes there. But the company has also handled cargo flown from South Asia to Atlanta and then put it on ships going to Latin America, he said.
“It’s still a very interesting product and hits a nice price point with some of the supply chain people in Latin America where they are able to meet their time frame but pay a little bit less than a full air product,” he said. Among the products moving are consumer electronics, parts for assembly, and two-wheeled vehicles such as mopeds and motorcycles.
Gallahan said both organic growth and acquisitions would play roles in the company’s U.S. growth.
“We have had locations that are growing in the Americas close to 50 percent year on year, so it’s been successful even though we haven’t had the greatest markets to be in. Certainly we didn’t see that growth in the early part of 2009, when we were going through the crisis. But since then we definitely have recovered strongly,” he said.
Broadening 4PL Base. Geodis SCO, the segment it acquired from IBM for $365 million in 2009, is run separately from Geodis Wilson and the company’s logistics business.
Demeulenaere said about 15 percent of IBM’s logistics spend was with other Geodis units at the time of the acquisition, and that share has not changed since.
“No business has been systematically brought over to Geodis,” he said.
Hardware is about a $17 billion business for IBM and provides about $1.2 billion in revenue annually to Geodis.
In the decade before Geodis acquired the unit, IBM progressively wrung most extraneous costs out of its supply chain, which handles logistics for products such as servers, spare parts, and reverse logistics, Demeulenaere said.
In 2007-2008, IBM started to brainstorm on what it could do next to lower logistics costs, but “felt they had maximized their supply chain,” he said. “It was difficult for them to improve the competitiveness of the solution they had implemented.”
IBM decided that to lower costs, it needed to leverage the platform it had built by adding volume. But since this was not its core business, it would outsource what Demeulenaere calls its “flow management platform.”
IBM launched a tender on the market at the beginning of 2008, and at the end of the year selected Geodis from among the companies that had bid. Included was a 15-year contract to manage IBM’s logistics.
Gary Smith, who ran the logistics business at IBM for 16 years before joining Geodis SCO as executive vice president, said IBM concluded “the future lies with companies who can execute the 4PL model not just for IBM, but perhaps IBM plus Dell, plus companies A, B, C, D and E, where it would bring more volume, more network coverage, and more leverage to the marketplace.”
IBM still provides about three-quarters of Geodis SCO’s business, but he said the unit has been successful in landing some business, mostly medium and smaller type companies to date.
“I think that is strategic on their part, they want to put a toe in the water before they jumped all the way in after the IBM acquisition. That was a substantial piece to chew on and they wanted to make sure that they could do this on a smaller scale,” Smith said.
Geodis SCO manages about 500 logistics suppliers for IBM in 50 countries. About a dozen are used for intercontinental movements, but Demeulenaere said the large number of companies is needed in order to provide a high level of service for last-mile delivery.
Outlook. Geodis executives are optimistic despite the slowing economy.
“Geodis was profitable in the first half of the year, but like everyone else we’ve been faced with the fact that this growth has been slowing down in the second quarter,” Demeulenaere said. “In the freight forwarding business we were at 25 percent growth in the beginning of the year and in June it was between 5 and 10 percent.
“In other business, groupage, express and overland business, we feel that the economic situation in Europe and probably for the domestic business in the U.S. is going to be tougher in the second half.
“Nevertheless we are in a very good commercial dynamic. We feel that we can compensate this decrease in volume by the capacity to take market share. So we are still planning to achieve the projections that we built at the beginning of the year knowing that the market has really degraded,” Demeulenaere said. “We will have to face the decrease in freight rates in the coming months.”