CEVA Tomorrow

Mix one part contract logistics and one part freight management and what do you get? One of the world’s largest networks with presence scattered around the world.

Gianfranco Sgro, President, CEVA Southern Europe, Middle East and Africa and Shamsudeen Ahmed, Regional Director, CEVA

What’s in a name these days? It is very easy to lose track of company titles amidst the infinite consolidation happening in the market. First we had TNT, until private equity group Apollo Management purchased its logistics division in 2006, renaming it CEVA. Then, in mid-2007, CEVA merged with EGL Global Logistics and integrated it under the CEVA brand.

This merger, according to Gianfranco Sgro, President, CEVA Southern Europe, Middle East and Africa, brought together two entirely different companies. “TNT was a European-centric company, while EGL was more a US-based company,” he explains. TNT, as well, focused primarily on freight management services such as air, ocean, and ground-based transportation and services such as customs brokerage, local pick-up and delivery service, materials management and trade facilitation; while EGL specialised in contract logistics.

Each company’s breadth differed by region. “In North America, the predominant culture was freight, due to TNT’s presence,” says Sgro. “In North Europe and South Europe, I would say contract logistics was dominant. In Asia Pacific, I would say it was a merger of equals.”

The balance of the companies in East Asia made the region the perfect place to begin.

“We started in Asia Pacific as a test for us, and after six months we witnessed positive results, including a higher growth rate,” says Sgro. “Irrespective of normal organic growth, merging the two companies brought us an additional 20 per cent growth, on top of forecasted growth. All of these figures brought us to the conclusion of merging in all the regions.”

And merging in the Middle East, he says, was no big deal. “The legacy we had in this region was almost entirely from Eagle. TNT was not present here.” In fact, TNT’s presence stopped at the Turkish border.

EGL, according to Regional Director, Shamsudeen Ahmed, had been offering purely contract logistics in the region. “We were in Saudi for the past 30 years,” he recalls. “We were here predominantly looking after the freight management business, mostly in the oil and gas industry. We also had operations in Oman for the past 25 years.”

CEVA ’s Dubai headquarters

This legacy can only stand to benefit from TNT, says Sgro. “The great power of having the two companies together is that we are leveraging both parts of the business,” he explains. “The freight management of TNT will be leveraged through the existing network, also we are bringing all the know-how, IT solutions and capabilities, and people from contract logistics in order to boost growth.”

The greatest challenge, he insists, is merging two corporate cultures. “The point is to understand that contract logistics and freight are two different aspects of the business. There can be merging at a certain level, and not at other levels.”

“We used to discuss these in terms of left brain and right brain,” he explains. “Contract logistics is more engineering, more technical, more prudent. Freight is more emotional. The big error of this merger would be to try and have one of these as a dominant culture.

‘The big opportunity for us, which is 100 per cent achieved, is to respect these cultures, and to try and leverage them as much as possible. This is the first step, and then taking care of other things like IT is easy.”

Going local

Sgro insists one of CEVA’s next steps is to expand in the region in a big way. “We are commiting the company to a three billion dirham investment over a short to medium period, or five to 10 years,” says Sgro. “Today in the Emirates we have a 20,000 sq metre presence. In 2010, we will have 310,000 sq metres, of which 60 per cent is already fully committed.”

“It’s so difficult to get space here that people tend to think 99.9 per cent of the work is done when they get space. We don’t believe that and are investing in other aspects such as people, who we are bringing from Europe and Asia in order to support the growth that we expect. We are bringing in people on a permanent basis.”

He says the second aspect of development is IT. “We will have our state of the art IT system which we use all over the world.”

And the third is specialisation. “Then we will focus our strategy on specific sectors – not only oil and gas, in which we are already strong, but other sectors such as automotives, industrial parts, electronics, fashion, telecommunications and consumer goods,” he says. “These are sectors we already play a leadership role in, in most of the world, and we would like to reach that role very soon here. We know that we have to fight with some other guys, but we will succeed.”