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Geodis Exec Explains Acquisition: Retailers Want to ‘Control’ Capacity

The 30,000-seat Geodis Park in Nashville is America’s largest soccer stadium, the naming rights snagged by a company that’s hardly a household name but likely powers the transport of products used by many of the sports facility’s fans. 

The French logistics company inked the deal earlier this year to make its presence in Tennessee—where it has North American headquarters in Brentwood—more visible to a community it’s operated in for more than 70 years as its overall business continues to scale. 

Geodis’s U.S. footprint counts more than 15,000 employees in more than 230 locations, with its growth most recently punctuated in the summer with its purchase of last mile logistics firm Need It Now Delivers in a deal underscoring a major trend in the supply chain services market. 

“When you look at the overall supply chain, it’s still fragmented,” Geodis Americas president and CEO Mike Honious said. “It’s amazing how many companies are out there and how many small companies are trying to take advantage of the scenarios that happened in Covid. They’re building businesses up in the 3PL segment to where they want to sell those businesses, and what’ll happen is you’ll see more consolidation over the next few years. I think the economics right now have cooled it off somewhat, but that’s only because we’re doing a reset [from] Covid and companies have overbought on inventory and they need to sell through that.” 

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Even with the cooling, Geodis continues to look at other acquisition targets, according to Honious, who said the focus in the U.S. is building out a road network. He confirmed the company has no interest in getting into long-haul trucking, citing the plethora of companies already in that segment, and will instead stick to a regional strategy. 

Need It Now Delivers offers a good example of that gameplan.

The deal, which is expected to close by the end of the year, brings into the Geodis fold a freight network business that’s expected to end 2022 with $750 million in revenue, 65 locations and 300 points of distribution. Geodis and Need It Now, had they been part of the same parent last year, would have had a combined revenue of $3.7 billion.

Locus robots used in a Geodis warehouse. COURTESY

The 35-year-old Need It Now has made a name for itself around omnichannel and last mile delivery, a key competency to be touting given what’s trending among shoppers.    

Need it Now CEO Eric Mautner said at the time of the deal’s announcement the combination of the company’s two resources will create a “more expansive network of flexible, efficient and reliable services that will ultimately allow us to successfully meet projected industry dynamics, such as continued e-commerce growth and increasingly complex supply chains that require the need for omnichannel capabilities.” 

It melds well with a relatively young division Geodis has, called eLogistics, which counts four warehouses in markets where Need It Now also has a presence in middle and final mile. Geodis eLogistics is focused on e-commerce fulfillment and last mile, particularly for small businesses.

“The reason why we bought Need It Now Delivers is the retailers, and even the e-commerce companies, they want more control over their capacity,” Honious said. “They did not enjoy the pandemic and Covid and dealing with the issues that we saw, especially around the final mile delivery companies controlling capacity. So they want more flexibility.” 

E-commerce prior to the pandemic represented 32 percent of the Geodis U.S. portfolio. It surged to about half of the business in 2020 and currently sits at 43 percent. It’s likely to hover in the 40 percent to 50 percent range longer term, according to the CEO. 

“E-commerce hasn’t dropped to the levels prior [to the pandemic]. It continues to grow as a segment overall,” Honious said. “The current economy, as we know, is a little bumpy right now, but it’s different based on what vertical that you’re in. What is happening right now will be different a year from now and it has continued to be that way throughout my career. We’ve built a business on that type of model.” 

Honious would know. He worked on the brand side prior to joining Geodis more than 15 years ago, serving in a number of operations positions at Gap Inc. He was tapped for the top spot to lead Geodis’s Americas business about two years ago, promoted from his post as the company’s chief operating officer. 

“E-commerce hasn’t dropped to the levels prior [to the pandemic]. It continues to grow as a segment overall,” said Geodis Americas president and CEO Mike Honious. Photo by EMMANUEL DUNAND/AFP via Getty Images

The industry veteran said the company’s success rests on a business model that accommodates a diverse customer base, allowing Geodis to be flexible in working with different types of businesses. The model, in some ways, also shelters it when the market contracts. 

That’s been the case on the real estate side with the company mostly inking deals tailored to mid-sized businesses, unless a specific customer calls for the buildout of a much larger facility. To date, the Geodis domestic real estate portfolio’s vacancy rate is less than 4 percent, which is about in line with the 5 percent or less it has had historically. 

“The real estate market’s tight and I don’t necessarily see that loosening up,” Honious said. “Now, there’s obviously companies that have been in the news. They’re in an overcapacity situation and they’re doing different things to mitigate that, but our real estate strategy hasn’t really changed over the years. We are a supply chain company, so our top priority is our clients.” 

Within fulfillment centers, Honious said he’s seeing customers’ continued demand for product customization in the way of embroidery or stenciling, for example. Customers send the information electronically and an area within the facility dedicated to customization handles the order. 

The CEO also said more retailers are willing to invest in technology and automation in an effort to address the tight labor market. 

“It’s industrywide. You’ve seen a lot of news articles on this. Obviously, we’ve had to deal with it like everybody else. There’s X amount of jobs and there’s X amount of people, but I actually like to take a broader view and I think this is important because this really helps understand what’s really happening out in the workforce,” Honious said. 

He went on to say the trend of early retirement partially brought on by the pandemic, mixed with a new, younger workforce joining companies now defines the current labor market. Employers, he said, must adjust to attract and retain employees.

“You need to have an engaging environment, one that people appreciate working at,” he said, adding fair wages and flexible scheduling are also key. “All of these [factors] come together and it has been a big learning for us, but understand the fact that we see the trends happening and we’re adjusting our policies around that to make sure we are flexible, we are engaging and we also want to make sure that we have constant [employee] feedback.”