LOGISTICS – SUPPLY CHAIN MANAGEMENT IN FRANCE

A. SUMMARY

Logistics services, also known as supply chain management, include transport, warehousing, order fulfillment, and pallet rental. Logistics services companies provide mail, courier, express & parcels, land transportation, freight forwarding, logistics, third party (3PL) and fourth party (4PL) services. Logistics services have recently evolved towards supply chain management, to manage and accommodate the needs of individual customers’ supply chains.

Logistics services in France are one of the largest industrial services sectors, with sales of over $ 120 billion. A growing number of French firms involved in manufacturing and retailing view logistics as a high-cost capability that should be outsourced. Close to forty percent of French companies now sub-contract all or part of their logistics activities, a percentage which has been steadily growing for the last few years and is likely to continue to grow in the coming years.

Due to its strategic and geographical location in the European Union, with its 15 member-states and market of over 380 million people, France offers significant opportunities for the development of logistics services in the years to come. France is located at the crossroads of Europe’s major markets and distribution channels, spanning both Northern and Southern Europe. As such, it is a natural logistics hub to serve the ever expanding and demanding European marketplace. France also provides a unique point of entry into Southern and Eastern Europe, as well as North Africa and the Middle East, areas that, in spite of some political instability, represent fast growing consumer good markets, according to the World Bank. The European logistics market was valued at over $ 700 billion in 2001. Wages account for about 30 to 35 percent of the total costs, with other operating costs accounting for 60 to 65 percent of total costs. Logistics is responsible for about five million jobs in Europe. Outsourced sub-contracted logistics services in Europe amounted to about $ 320 billion in 2001, representing about 8 percent of Europe's GDP.

In 2001, France was the second most attractive country in Europe, after the United Kingdom, in terms of new operations established by foreign firms. In 2001, foreign companies established 266 new operations in France, including 155 new industrial operations and 40 logistics platforms, thus placing France as the most successful country in Europe for attracting new industrial and logistics operations. According to a recent survey conducted by Ernst & Young among business leaders in Europe and in the United States, France is considered as the second most attractive location in Europe after the Benelux countries for locating logistics platforms. A significant and increasing number of global companies, including numerous U.S. firms have set up or relocated in France European distribution centers to take advantage of the strategic positioning of France, as a leading consumer market located at the crossroads of the U.K., German, Italian and Spanish markets.

B. MARKET TRENDS:

The logistics market in France continues to grow at a slightly higher rate than GDP. Rapid growth is especially seen in the outsourcing sector, which is growing at two to three times the rate of the overall logistics market. Integrated logistics sub-contractors have experienced steady growth over the last few years with an average annual increase of about 10 percent. The recent slowdown of the economy has temporarily affected this sector, which is nevertheless expected to continue to grow, but at a slower pace for the next year.

Airfreight traffic.

Airfreight traffic in France ranked fifth in the world in 2001, with 1.4 million metric tons landed in and shipped from French airports, half of it transiting through Roissy-Charles de Gaulle Airport outside Paris. Airfreight traffic is growing at an annual growth rate of 6 percent. The industry is composed of 250 airfreight agents, 640 operational sites, 450 agencies overseas and has a turnover of $ 760 million. France’s airport network includes 27 airports servicing 130 countries. Paris airfreight traffic is steadily growing and far greater than that of France’s European neighbors.

Highway freight traffic

Highway freight traffic in France was estimated at $ 20 billion in 2001, with 8.1 billion metric tons transported and 32 billion kilometers. The highway transportation industry is highly fragmented, with 37,000 firms and 296,000 employees – of which 75 percent are drivers. While highway freight traffic has been steadily growing for the last two decades, the fleet of trucks remained at the same level during the same period, at about 540,000 units, reflecting significant economies of scales, productivity gains and organizational enhancements. Eighty-two percent of the highway freight traffic is sub-contracted to transport firms – which undertake trips of an average length of 131 kilometers. The remaining 18 percent of trips are still undertaken by companies themselves – and are 42 kilometers long per trip. The total number of trips of over 500 kilometers only represents 5 percent of the total number of trips in France.

Rail freight traffic

Rail freight traffic totaled over 55 billion kilometer tons, including 13.8 billion kilometer tons transported for combined rail and highway freight traffic.

Waterway traffic

Waterway traffic represented about 59 million metric tons of goods transported in 2001. The network of waterways in France covers 8,500 kilometers and is well connected to the main harbors of the north and south of Europe via the Rhine-Rhone North-South axis that serves the most significant regional markets in the European Union.

Express delivery

Express delivery has evolved extremely rapidly with the liberalization of postal services in Europe and in France in particular. For traditional delivery services activities, average weight per shipment is 100 kilograms and average price per kilogram $ 0.32. For national express delivery services, average weight per shipment is 28 kilograms and average price per kilogram $ 28.5. International express delivery services operating in France are extremely active and most global express delivery firms have significant operations in France. FedEx has its European hub in France, while UPS, DHL, and TNT, among others have significant operations in there.

Maritime shipping

Maritime combined shipments going through French harbors account for 350 million metric tons per year, representing half of France’s foreign trade. France has five of Europe’s top fifteen harbors with (Le Havre, Marseille, Dunkerque, Bordeaux and Nantes-Saint-Nazaire). These ports offer state-of-the-art computer and telecommunications system. Le Havre was the only French post selected to participate initially in the Container Security Initiative (CSI). All these ports are able to expedite and facilitate traffic and information flows, ensure short transit times, and provide deepwater access and direct access to major road and rail connections so that goods can be deliver goods within 24 hours to all major consumer markets in the European Union.

Warehousing & Logistic Platforms

France offers versatile and attractive opportunities to acquire land or rent existing buildings at highly competitive prices for warehousing and logistics platforms. Prices for premises for such activities are much lower that those in most other European countries. At the same time, such operations benefit from a state-of- the-art infrastructure in France. A new generation of logistics parks is being developed in France, with sizes ranging from 20 to 60 hectares and several warehousing units that can store from 70,000 to 300,000 square meters of merchandise. Key players in this segment are the American real estate developer Prologis/Garonor and the French companies Logistis and Sogaris.

C. LOGISTICS PROVIDERS:

As a result of the steady growth of the demand for outsourced logistics services, in France and in Europe over the last decade, large logistics providers have emerged with a European dimension and are now operating on the French market, including Geodis, Norbert Dentressangle, FM Logistic, Giraud Logistique, Exel, TDG, Danzas, TNT, Logistics.

Foreign companies are well introduced with a 30 percent market share of the French logistics subcontracting market.

The most significant logistics operators on the French market have a Europe-wide network. They include Hays Logistics, Exel Plc, Tibbett Britten , ABX logistics, Ziegler, Katoen Natie, TNT Post Group, Danzas/Deutsche Post, UPS, and Frigoscandia/Prlogis.

The major warehouse management system operators in France are Acteos (logidrive); Aldata (Gold Stock); CLE (Geode);Courbon/Siemens (WES); DL Consultant (Infolog GE); Edic sa (Cormag); EXE Technologies (Exceed Fulfill); GeneriX; GFI Informatique (Magellan);Hardis (Reflex); Klee Group; KLS (Gildas);LIS (Dispatcher); Logarithme (Logistics Manager Execution);Manhattan Associates (PKMS);PENTA sa (Penta); and Pixao (Galatee-Icare)

The major supply chain management consulting firms operating in France are
Accenture, Agenoria, Axel Boss (Valtech), Business Consulting (former Andersen), Cap Gemini/Ernst & Young, Diagma, KPMG Consulting France Newton Vaureal & Co, PEA (Groupe Euriware), IBM Business Consulting Services, Unilog Management

D. FRENCH COMPANIES’ LOGISTICS STRATEGIES

The majority of French companies have a dedicated logistics department – 60 percent in the case of SMEs of less than 100 employees and 93 percent in firms of more than 500 employees, including 67 percent in the building construction sector and 90 percent in the automotive and aeronautics sector. Firms having a logistics department, depending on the company, have it reporting directly either to the corporate executive office (37 percent), to the manufacturing department (30 percent), to the commercial department (16 percent), and to the administrative and financial department (7 percent). Many companies still consider logistics as part of the transportation process. About 46 percent of the companies have the supply, production, warehousing of finished products and product distribution integrated within the logistics function. However, support to sales activities remains in most cases under the umbrella of the commercial or sales department.

E. EVOLUTION OF LOGISTICS SERVICES IN FRANCE:

Logistics providers have become key players in the supply and distribution chain, and are now fully associated to the development strategy of the clients they serve. In some instances, the logistics providers have developed specific subsidiaries aimed at providing logistics engineering services to their clients, called “Fourth Party Logistics (4PL)” as opposed to the traditional logistics providers with warehousing, known as “Third Party Logistics” (3PL).

Using highly sophisticated “warehousing management systems”, the 3PLs and 4PLs are becoming more and more involved in complex logistics processes, linking several rows of suppliers and distributors, acting as coordinators of flows, and concentrating their investment on human resources and information management expertise such as “supply chain execution” and “supply chain event management”, while subcontracting the real-estate portion to specialized real estate providers.

Most recently, logistics providers have concentrated their effort in enhancing the chain of transport, e-procurement and “supply chain event management” via the development of “collaborative planning” and “efficient consumer response,” which entails developing joint strategies between suppliers and distributors. The objective is to build a system beginning with the end-user and ending with the producer, in which the distributor and the supplier work in close coordination to maximize client satisfaction and cost reduction. It is based on a zero-paper quality information flow and seeks to avoid shortages in flows of merchandise from the production point to the cash register at the consumer end.

Over the last five years, an increasing number of companies have been moving towards this supply chain management approach (57 percent), a trend that should be confirmed in the coming years.

On average, 65 percent of the companies, including 79 percent of the companies with more than 500 employees, have a “logistics performance management plan” which measures the ratios of services, shortages, delivery times, productivity of machines, productivity of the employees, cost of logistics, cost of transportation and financial assets. About two-third of the companies integrate logistics in the development of new products or services. Fifty-three percent of the companies are aware of the logistics strategy of their competitors while 47 percent are not. Thirty one percent of the companies include logistics performance ratios in their budgetary plans, while 17 percent of the companies integrate in their strategies elements of the services provided to their clients, in addition to the logistic costs. Twenty-nine percent of the companies are making a thorough analysis of the consequences on logistics of important decisions they make. Also, 23 percent of the companies do not have a logistics performance management plan indicators integrated in their budgetary plan.

Sixty-seven percent of the companies are using an industrial and commercial plan to measure production orders per production line, utilization rate of production lines, inventory levels, operating time of workshops, amount of workforce necessary per function, production capacity of suppliers and sub-contractors. In the automotive and mass consumer goods production sectors, the use of industrial and commercial plans is common.

F. CONCLUSION:

The opportunities for logistics companies in France remain high, given the rapid evolution of how logistics functions are handled within companies, both French and foreign. Clearly also, the geographical and infra-structural conditions of France make it an attractive platform for logistics services.

In the years to come, as out-sourcing becomes increasingly the norm, companies in Europe will be seeking innovative and cost-effective solutions to their logistics and transportation needs. This reality signals the existence of great opportunities for companies – both new and existing – providing logistics and related services in France and the rest of Europe.

G. KEY CONTACTS:

Key Web Sites:

European Distribution Center in France:
Web Site: http://www.logistics-in-Europe.com/gb

Logistics in France – Invest in France Agency:
Web Site: http://www.afii.fr/NorthAmerica/KeySectors/Operations

French Harbor Logistics

Magazines:

Strategie Logistique
SEPROL
31, cours des Juilliottes
94700 Maison Alfort
phone: 33-1 41 79 08 88

Transport & Technologies
SEPROL
31, cours des Juilliottes
94700 Maison Alfort
phone: 33-1 41 79 08 88
Web Site: http://www.logisticstrategy.com

Associations:

Association Française pour la Logistique (ASLOG)
[French Association for Logistics]]
119, rue Cardinet
75017 Paris
phone: 33-1 40 53 85 59
aslog@N0SPAM.wanadoo.fr
Web Site: http://www.aslog.org
Michel Journet – Delegue General

Comite de Liaison des Organisations Professionnelles du Transport et de la Logistique (CLTL)
[Committee for Professional Organizations of Transportation and Logistics]
19-21 rue du Rocher
75008 Paris
phone: 33-1 42 93 53 88
fax: 01 40 08 08 10

Conseil National des Transports
[National Council of Transportation]
Web Site: http://www.cnt.fr

Fédération des Entreprises de Transport et de Logistique de France
[Transportation and logistics Industry Association]
Web Site: http://www.e-tlf.com/accueil.htm

Trade Shows:

Salon International du Transport et de la Logistique (SITL)
March, 2004
CNIT Paris La Defense
Web Site: http://www.salon-SITL.com
Organizer: Reed Exhibitiions
70, rue Rivay
92532 Levallois-Perret Cedex France
Web Site: http://www.reedexpo.fr

Logistics in Provence (Provence Promotion)

Logistics The first gateway to Europe (Invest in Normandy Development)

Logistics in France Atlantique (France Atlantique economic development agency)

Logistics in Northern in France (Invest in Northern France)

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