Geodis’s Marie-Christine Lombard on New Hurdles in Global Supply Chains
The CEO of the freight-forwarding giant says moving production out of China reduces risks but comes with complications
Companies are making big changes to their supply chains in the wake of the Covid pandemic and rising tensions between the U.S. and China, and logistics businesses are following them to new destinations as they try to clear the hurdles to new manufacturing and distribution strategies.
Marie-Christine Lombard, chief executive of France-based freight-forwarder Geodis, says moving production out of China and closer to markets in Europe and North America isn’t simple. Lombard spoke with The Wall Street Journal about the pressures companies face as they pursue nearshoring and reshoring goals while also trying to reduce carbon emissions.
A podcast of the full interview is available here. Edited excerpts are below.
WSJ: What are the biggest supply-chain lessons companies learned in the wake of the pandemic?
Lombard: The multinationals and everybody else in the chain are looking for less dependency on China. But on top of the pandemic, you have climate change and the imperative to reduce CO2 emissions. To do that, you need to shorten the distances products are traveling. That means more manufacturing closer to consumer markets, which is a big change because all the companies had gone to China to lower production costs.
I don’t know if it’s a good thing, but the crisis has created a focus on supply chain.
Usually nobody was talking about supply chain and how complex that was and the risk of disruption and so on. Today, it’s on everybody’s agenda. It has become a focus. How is our supply chain resilient? Is it sufficiently resilient? Is it dependent on countries, and so on. So yes, there is complexity to move to a more resilient supply-chain system. But once the move’s done, I think it would actually be possible to simplify the situation. It’s the transition that is always complicated.
WSJ: What are the main challenges companies face when they try to bring production to Europe and North America?
Lombard: You need to find the right manufacturers and you need to have raw materials that are close to manufacturing plants. It’s easier said than done because not only do you need to take into account the cost of labor and the capabilities of finding the right raw materials, but you also need to have cheap energy.
What we see today because of the Ukraine war and many other geopolitical tensions is that energy costs have gone up tremendously. If energy costs are going up, you have difficulty attracting back manufacturing.
WSJ: Which countries are companies looking to as an alternative to China?
Lombard: It started before Covid, to be honest. And the pandemic has accelerated the thought. Vietnam was already on the radar. And Vietnam is indeed a potential alternative to China.
Everybody’s talking about India as a potential alternative, but it is not so clear that India can effectively replace China because the transport infrastructure within the country is not very good.
You have to check many boxes. You need to have qualified labor in manufacturing. And you need to have quite big infrastructure, be it ports, airports and road access. And it’s not easy to find this. So India has been looked at by many clients, but no major moves have been made yet.
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Lombard: Transport is changing. As manufacturing moves closer to consumer markets, freight is moving over shorter distances—over land, by road. And if you want to be green, that means investing in green trucks and that’s where the equation becomes even more complex. If you go for a very small van, then most likely you will go for electric vehicles. If you go for big trucks, then how do you make those green? Is it hydrogen? Is it electric? Is it natural gas?
It has to be clean, but it has to be affordable as well.
WSJ: Will some companies look at the complexities of changing their supply chains and decide they’d prefer to go back to relying on a single country like China?
Lombard: The world is becoming more complex because now you see more trade barriers and geopolitical risks. Moving to a more resilient supply-chain system adds complexity. But once the move is done, I think it will simplify the situation.
So I would say actually for us as a logistics company, more complexity is good. Because we are providing solutions to match the dilemmas for our customers, and we are everywhere.