French-based logistics company Gefco Group has secured an €8 billion ($8.8 billion), five-year deal with its former majority owner PSA Group, with fourth-party logistics (4PL) services for global operations featuring prominently within the contract.
Under the agreement, Gefco will design and implement global logistics and transport solutions for the three PSA Group brands: Peugeot, Citroën and DS.
Gefco will have exclusive responsibility for managing the complete supply chain for wholly owned PSA activities, including for inbound, finished vehicles and spare parts logistics. Gefco has responsibility for engineering logistics networks, managing suppliers and logistics providers, and tracking material and vehicle flows via its IT systems.
The agreement will cover all of the approximately 50 countries where the PSA Group operates, and will increase Gefco's buying and pooling power, according to the company.
The contract does not cover PSA’s joint venture operations, including those in China with Dongfeng, which owns 14% of PSA, or with Changan. However, Gefco will work with the carmaker to develop future projects both on its own and together with external partners in new regions.
The contract is an important development in Gefco’s business with PSA since the carmaker sold a 75% stake in the logistics group to RZD Russian Railways in 2012. Around the time of the sale, PSA provided Gefco with its first contract since the company was created as part of the carmaker in 1948.
The contract signed then also gave Gefco an exclusive contract over PSA’s global logistics except joint venture operations, with a renewal clause after five years that would have given PSA the option to contract with other providers.
According to Gefco, the new contract is a vote of confidence in its capabilities and competitiveness in serving PSA’s supply chain. The carmaker’s executives have also confirmed that working with Gefco will support PSA’s ‘Push to Pass’ recovery strategy, which is designed to reduce costs and improve profitability, as well as helping it move into new markets.
“The agreement will be a powerful driver of improved operating performance at the PSA Group. We have every confidence in Gefco’s ability to partner with us as we navigate a challenging transformation, pursue new business opportunities and develop internationally,” said Yannick Bézard, PSA’s executive vice-president for purchasing.
PSA retains a 25% stake in Gefco.
Becoming a 4PLBoth PSA and Gefco have confirmed to Automotive Logistics that the contract also includes a number of important changes and developments, notably a more structured approach to 4PL services, which will include a more centralised approach to the engineering, design and tracking of PSA’s supply chain.
The move to a 4PL structure with PSA will more closely resemble the way Gefco has worked with General Motors’ logistics operations in Europe since 2012, when it signed a seven-year exclusive contract to cover the carmaker’s production and sales network across the wider European region. To manage that business, Gefco installed an entirely new division that covers network design, tendering and invoicing, with ‘firewalls’ set up between Gefco’s asset business, which includes trucks and rail wagons it owns in Europe.
The same 4PL model will be adapted for PSA, according to Anne Lambusson, who heads Gefco’s internal CPSA team, responsible for managing services for PSA. Gefco “will of course work on implementing synergies” between the two contracts, as well as between all other operational, functional and regional teams at Gefco, she told Automotive Logistics.
Lambusson was appointed in July to manage PSA’s contract.
Under the new deal, the broad scope and actions of Gefco’s business are the same as the previous contract, however Lambusson and PSA have insisted that this is not simply a rollover of the existing agreement. “What is changing is the implementation of a 4PL function in certain geographic areas,” she said.
In an exclusive interview with Automotive Logistics in 2014, Gefco chaiman Luc Nadal mooted the potential for providing a 4PL function to PSA in the future. As Gefco had long been owned by PSA, its services for the carmaker were not specifically structured as a 4PL, but rather purchased services and transport on a more plant-by-plant or regional basis.
“For GM, we had to think about the 4PL function itself, while PSA has always had a strong logistics team on its own,” said Nadal at the time. “We used to do 4PL-like business for PSA without knowing it, partly through engineering studies. Now that we really know what it means to be a 3PL or 4PL, it changes how we think about other customers.”
In a statement, Nadal (pictured) emphasised the importance of Gefco meeting PSA’s cost reduction targets. “All of Gefco’s teams are actively committed to meeting our customers’ need for efficiency,” he said. “Every day, they demonstrate their ability to support our customers as they grow internationally, while working with them to tackle their long-term growth and profitability challenges.”
The potential to grow its transport and value-added service with PSA more strongly is also emphasised in the new agreement. In announcing its ‘Push to Pass’ organic growth plan earlier this year, PSA revealed an ambitious target of releasing a new car, in each region, per brand, in each of the next five years. Even then it was evident that this push across the supply chain and the production network would require considerable focus on managing logistics costs and efficiency.
Outside of this contract, the two have also agreed to team up to develop supply chain and manufacturing solutions for future projects, including further geographic developments, to be carried out in collaboration with external partners or by PSA alone.
The PSA Group today accounts for about 35% of Gefco’s global turnover of roughly €4 billion; it’s a percentage that has decreased in recent years as the provider has diversified its business both with other automotive manufacturers and other industries.