Renault’s relationship with Russian carmaker Avtovaz, which builds the Lada, has been extended across its alliance with Nissan in a move that could have widescale impacts for managing the supply chain for the carmakers in Russia and the surrounding region. The companies announced last week that they will expand shared operations in areas including purchasing, platform sharing, components, logistics, manufacturing, research and development as well as sales and marketing.
The three carmakers aim to increase combined market share to 40% of the Russian market by 2015 (compared to 30% today), while also aiming to develop Lada specifically for markets outside of Russia. Renault purchased a 25% stake in Avtovaz in early 2008.
A press release revealed that the companies will share platforms, implement the same production system and standardise processes at the Renault plant in Moscow (where it builds the Logan), Nissan in St Petersburg and for Lada in Togliatti. A common purchasing organisation was created earlier this year, based in Togliatti, with the goal of sharing more common and locally sourced suppliers. For logistics, the Alliance will extend its joint organisation–which was combined last year between Renault and Nissan–to Avtovaz, focusing on quality, reliability and cost of inbound and outbound logistics.
Lada’s supply chain could become outsourced …
While Renault would not provide any more detailed information at this time about the impact that combined operations will have for its inbound or outbound networks, or on its relationship with logistics service providers in Russia, the increased sharing of suppliers, as well as engine and other component swaps between factories, could lead to more opportunities for combining inbound and outbound logistics flows. It could also lead to the introduction of more global tier suppliers for Lada, and at the same time more locally-based suppliers for the Alliance.
The Avtovaz plant in Togliatti is one of the largest in the world, with capacity for around 1m vehicles a year; it has typically built the large majority of its components in house, although it is also considered to be inefficient and outdated. More than 100,000 people worked there before more than 25% were culled during the recent downturn. Shared purchasing and supplier development with the Alliance could inevitably lead to more outsourcing of production and supply chain operations than in the past.
While the Alliance becomes more local …
While the Alliance is a smaller player in Russia than the market-leading Lada, Nissan opened a plant last June in St Petersburg, while Renault has seen recent success with its Logan model built in Moscow, where it recently added the Sandero. In an interview earlier this year with Automotive Logistics News, Renault revealed that it was aiming to increase local sourcing to 75%. However a large portion of components arrive in Moscow from Renault’s large parts and logistics centre in Pitesti, Romania, for which the company has planned to add further logistics providers to maintain service. Read more here.
And at this week’s Odette conference in Germany, Pascal Devernay, vice president of global logistics functions at the Alliance, also revealed that the company would be shipping parts and painted bodies from its Bursa plant in Turkey via the Black Sea to Moscow. He added that the Alliance is exploring new routes from Japan to St Petersburg and considering several options for inbound to Togliatti, which includes the Black Sea, as well as rail routes from Vladivostok.
Cooperation with a global reach
The extension of the collaboration in Russia is part of the Alliance's initiatives for cutting cost following the merger of each company's supply chain divisions. The Alliance has already said it will increase common savings by four times in Europe this year, but the integration in Russia and extending regions highlights its ambitions to combine logistics and supply chain operations globally.
Earlier this year, the Alliance also announced an extended cooperation with Daimler, which includes similar shared operations as announced with Avtovaz. Read more here.
Details of the cooperation, as well the ongoing development of the Russian market and its logistics challenges, will be discussed next week at the Automotive Logistics Russia conference in St Petersburg. Among the speakers at the event will be Jean-Philippe Jouandin, supply chain director for Renault Russia. More details can be found here.