Car-rental company Hertz has overhauled its outbound logistics procurement and distribution strategy, greatly reducing the number of carriers that it uses. Rather than controlling its overall logistics movements, Hertz has moved towards an outsourced model for its logistics engineering.
Paul Sykes (pictured), European sourcing manager for transportation and vehicle re-marketing, told delegates at the Automotive Logistics Europe conference that the company had shifted its outbound strategy from one focused on control of timeframes and low cost.
“For a long time, Hertz tried to step outside of its core activity and to also be something of a logistics company,” he said. “For us, it is critical that the car is available to customers. Our model was that we needed to have control over the logistics services we received. However, we don’t follow the same routes movements and patterns that OEMs.”
With Hertz’s main outbound movements being between many different rental locations, the result was the use of a large number of logistics providers, each assigned to specific routes and focused on meeting Hertz’s designated lead times. In some cases, that could mean the use of 50-60 carriers per country.
“We had never really focused on relationships with the [vehicle logistics] supply base. We worried more about moving cars in our time frame for a low cost,” admitted Sykes.
However, faced with the difficult task of managing so many carriers – most of them small-to-medium sized – and struggling to gain full visibility over its transport costs and operations, Hertz has changed course. It has switched from managing specific routes itself to working with larger carriers across most or all routes in each European country. “We needed to rationalise and reduce suppliers – today we have ideally one provider per country,” said Sykes.
Sykes said that by doing so, Hertz is able to offer to providers both a more enticing amount of business, as well as more room to improve routing and operations. “We used to present our requirements in a highly fragmented way. In a way our business was a mystery to our providers, and to us,” he said. “Now we are trying to offer all routes to providers as a whole package.”
Sykes added that the rental car company was also trying to improve its communication with providers in an effort to move closer to a ‘service’ model for its outbound logistics. “This does not mean that we have opened our chequebook completely,” he said. “We are still very focused on cost, but the prime focus is now on service.”