November 26, 2014 Logistically Peaking

Volume 17 | Issue 9

While French-based ID Logistics boasts 14 affiliates on four continents, its biggest moneymaker by far has been its Brazilian operation. CEO

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From the moment ID Logistics was created in 2001, its French CEO, Eric Hémar knew that he wanted the contract logistics group to be an international force to be reckoned with. Specializing in the development and implementation of customized solutions for the supply chain (large manufacturers and retailers), the fledgling group wasted no time in branching out beyond France’s frontiers. In 2001, ID opened an affiliate in Taiwan and, a year later, it touched down in Rio de Janeiro, setting down roots in what was to be its most profitable overseas market: Brazil.

A dozen years later, ID Logistics is present in 14 countries with 170 affiliates and 13,000 employees dispersed among Europe, Africa, Asia, and South America. Of its total annual revenues – which in 2013 reached 735 million Euros (roughly US$940 million) – 43 percent are culled from international clients. However, a whopping 13 percent alone are derived from its operations in Brazil where ID possesses 31 affiliates in five Brazilian states and employs a labor force of 3,500.

Last year, ID Brazil racked up revenues that totaled R$265 million (roughly US$110 million). “After France, Brazil is ID’s biggest business in terms of both earnings and volume – and its most important market,” says Nicolas Derouin, CEO of ID Logistics Brazil. “And business is booming; over the last three years, we’ve enjoyed annual growth rates of around 30 percent.”

Local Adaptations
In contrast to its current accelerated growth, ID got off to a slow start. From the beginning, the group’s strategy has been to branch out geographically – focusing on large countries with equally large populations avid for consumer goods – in conjunction with the global expansion of its large retailer clients, many of which are French. ID broke into the Russian market when Leroy Merlin, a French home improvement and garden retailer, set up shop there in 2010. Two years later, it arrived in South Africa, accompanying the food conglomerate Danone. In the case of Brazil, ID’s first major contract was with French hypermarket chain Carrefour, which, in 2003, hired it to carry out warehousing operations in Rio.

“We had an initial phase in Brazil, where we spent time adapting to Brazilian culture and realities,” explains Derouin. “On one hand, big companies such as Carrefour that choose us to work with them globally possess processes, technologies, products and service standards that are uniform throughout the world. As such, we supply them with the same solutions in Brazil asin France. However, at the same time, the human factor is very important in the logistics sector. Even when using the same systems, one still has to integrate local components, i.e. people.”

“For instance, in Brazil, personal relationships carry much more influence in the workplace than they do in Europe. In professional contexts, a lot more attention is given to niceties, to people’s personal lives. Moreover, Brazilians’ reactions can be more emotional. This often translates into greater enthusiasm with respect to new projects and ideas. In Europe, sometimes workers are more conservative and reticent to change. Brazilians tend to be more energetic and creative. So the issue is how to adapt these characteristics into our management style to optimize output.”

ID also had to adapt to geographic and physical specificities as well as those of the Brazilian marketplace. In terms of the former, it meant grappling with Brazil’s continental size and all the vast distances – and infrastructure challenges – involved. As Derouin points out: “In France, and even in Europe, issues such as long delivery times, poor road conditions, and security measures to safeguard cargo really don’t exist.”

Market differences were also a factor. In Europe, outsourcing logistical services to third parties has long been the norm. However, in Brazil, many retailers and manufacturers have traditionally relied upon their own in-house logistics teams. ID had to prove that its state-of-the-art technology and know-how would provide enough added value to trump clients’ costlier, less efficient in-house systems. Initially, ID also encountered many instances in which Brazilians chose to hire workers at minimum rates rather than invest in technology in order to optimize production and square footage. “There used to be a perception that labor was cheap and technology was expensive, although this has changed in the last decade,” says Derouin.

Expansion and Diversification
Once ID had got the local hang of things, the company began to expand and diversify. In 2005, an important contract with Carrefour in São Paulo gave it a foothold in Brazil’s biggest marketplace. It gained particular visibility with its introduction of cutting-edge voice speaking technology, a vocal command system that allows for more agile and productive operations. A pioneering system at the time in Brazil, its implementation underscored a key ID strategy; the use of new technology to add value and increase competitiveness.

At the end of the same year, ID landed its second big client: Leroy Merlin, also in São Paulo, which contracted the company to carry out warehousing services. Over the next five years, ID continued to focus on diversifying its client portfolio and activities. While branching out across Brazil, it also moved into new product categories, such as perishable foods, and moved beyond retail into entirely new economic segments, notably manufacturing. A major coup, for example, was landing U.S.-based Meritor as a client; while giving ID a foothold in Brazil’s massive automotive industry, it also marked the beginning of the company’s managing production lines. Soon after, ID also began offering transportation services upon signing a 2008 contract with Leroy Merlin.

Since 2011, the company has expanded by continuing to build an increasingly diverse portfolio, attracting new clients while moving into new areas with old clients. Currently, ID focuses on four principal sectors in Brazil: retail, consumer goods, automotive, and cosmetics; the latter the result of a major contract with Nivea. “Brazil’s auto market is one of the biggest in the world and the cosmetics segment is very aggressive as well,” declares DeRouin. “Meanwhile, retail continues to expand enormously – not just tradition supermarkets and hypermarkets, but e-commerce as well.”

The burgeoning e-commerce segment is of particular interest to ID as it looks towards the future. The company recently signed a contract with Privalia, a multinational online fashion outlet with operations in Brazil and Mexico in addition to various European countries. Spurred on by this deal, ID is seeking to further develop its expertise in fashion and textiles, particularly viewed the segment’s ties with online sales platforms. Due to the nature of this model – which eliminates the physical retailing middleman – ID has become very adept at unit picking (especially after the 2013 purchase of CEPL, the French leader in unit picking).

“Unit picking requires specific expertise in that we’re taking the product from the distributor and delivering it directly to the final consumer,” explains Derouin. “In bypassing traditional stores, the logistical process becomes much more complex because the orders are individual and far more specialized.”

ID’s ability to stay one step ahead of the rapidly changing market is a consequence of its intense commitment to innovation and use of new technology. “This is the true reason for our success in Brazil,” claims Derouin. “Today, the logistics market in Brazil is mature. We have a lot of competitors, both national and multinational but we are one of the leaders in the industry. But what sets us apart is our ability to add value to the supply and distribution chain of our clients. As we look to the future, we plan to accompany our clients as they expand throughout Brazil, providing them with solutions that are increasingly integrated, complete, sustainable, and innovative.”

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