Nestlé France outsources transport logistics

By Ahmed ElAmin

- Last updated on GMT

Related tags: Supply chain, Logistics, Supply chain management

Nestlé France has outsourced its supply chain transport to Geodis
for the next three years,under a contract that guarantees the
Switzerland-based agrifood giant guaranteed performancetargets.

Nestlé France, a subsidiary of the Switzerland-based agrifood giant, manages the company's grocery division in France.This involves the transport of dry groceries or controlled temperature products sold under the Nescafé, Maggi, Guigoz, Mousseline and other brandnames.

Third-party logistics (3PL), as a sector within the transportation industry, is growing exponentially as manufacturers try to cut supply chain costs.In recent years, co-operation between shippers and service providers has become more long-term in nature and has been combined with a high level of integration in the organisational structures and informatics,according to a European Commission study published earlier this year.

Food processors and other industries contract 3PL providers to broker transportation and other supply chain management services. As such it is a form of outsourcing supply chain management so that the processor can concentrate on in-plant operations.

For the last six years, Nestlé France centralised its pre- and post-production transport in order to reduce costs.According to Geodis, Nestlé next decided it wanted to focus more on reducing its overalltransportation costs, rather than continuing to negotiate prices with selected carriers.

In 2004 Nestlé chose Geodis to do a preliminary study of its supply chain flows in order to identify potential areas forimprovement. After six months, Geodis submitted a report recommending a flow coordination system that would enable costs to be pooled.

Following the preliminary study, Nestlé decided to appoint Geodis as lead logistics providerover the next three years for all its transport flows. In return Geodis has made performance guaranteesrelating to quality, optimisation and total cost reduction. Geodis will be looking to improveNestle's transport and supply chain flows, logistics, management of service providers and invoicechecking, among other factors.

"Their common goal is to share the gains resulting from the reduction in total costs, driven,among other things, by synergies between pre- and post-production flows,"​ Geodis stated ina press release. "All of the group's French and European entities will be involved in the project,including Geodis Calberson and Geodis BM."

Under the agreement, Geodis will manage all pre-production flows for the six Nestlé France factories.The flows involve 17,000 transport orders every year from 250 foreign and 182 French suppliers.

Geodis is also mandated by Nestlé France to coordinate all distribution flows to the country'ssix national major retailers. The task involves coordinating transport of goods to 125 delivery points in France with an annual volume of 860,000pallets.

The transporters themselves are selected by Nestlé France, and will remain contractually tied to the manufacturer.They will invoice Nestlé directly. Geodis will receive the orders and monitor their execution.Under the contract Geodis has the option to operate on the transport on its own behalf up to amaximum of 15 per cent of the total volume.

Geodis's says its experience in this type of flow coordination operation and information systems are able to support projects of this size.

The company says its systems interface with existing tools used by the customer, other transport and logistics providers and raw materials suppliers.

Geodis claims to be among the top five logistics service providers in Europe. The company posted about €3.6bn in revenue in 2005 and is listed on Euronext Paris stock exchange.

On average, logistics costs account for 10 per cent to 15 per cent of the final cost of a finished product. The European Commission estimate includes costs such as transportation and warehousing.

Annual logistics expenditure in Europe amounts to about €1 trillion, about the same as in North America, the Commission stated in its policy outline.

Another study, by Datamonitor, forecasts that the overall logistics spend in the European retail market is set to increase by €10bn by 2010.

"The driver for all industries looking to outsource the movement of their goods is the need to reduce costs in order to increase profitability,"​ said Chris Morgan, Datamonitor logistics analyst and author of the research. "Employing an expert to maintain various stages of its logistical supply chain allows a company to focus on its core competencies and 'stick to the knitting'."

Logistics covers the planning, organisation, management, control and execution of freight transport operations in the supply chain.

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