Renault Nissan’s push to find common savings and efficiencies for logistics between the two alliance partners – including the creation of a new structure, called Alliance Global Logistics – has gone considerably faster than anticipated, according to an interview with the managing director of the organisation, Christian Mardrus. This year, the combined organisations are on pace to economise about €130m ($178m) out of a global budget of €3.7 billion, more than double the savings made in 2009, and five times greater than the annual average savings achieved in the ten years of alliance between the two carmakers.
The Alliance Global Logistics organisation was created in 2009 by CEO Carlos Ghosn, in an effort to “go faster” at integrating operations for certain parts of the company. Mardrus has led the organisation since then, and earlier this year Colin MacDonald was appointed vice president for Alliance Logistics Europe, which covers the combined logistics for both carmakers across Europe, Turkey, North Africa and Russia.
In an interview last month with both executives at the Technocentre outside Paris – and published this week in the October-December issue of Automotive Logistics, Mardrus and MacDonald said that the alliance now has a streamlined decision-making process to execute the sort of ideas that had long been brewing among the logistics teams of both Renault and Nissan. The alliance organisation has meant creating joint teams for all the major logistics areas, from network planning to inbound, outbound and spare parts logistics. According to both men, the early signs are that the combination has been a resounding success.
Examples of new areas of combination include the launch last year of the alliance’s first-ever joint tender for global ocean shipping. “The idea is not only to bundle the volumes but it is also to share the same specs,” said Mardrus. “This is where it is not so easy. Before issuing the tender you have to work with the teams to identify the same requirements in order to converge. And then after you can get big benefits – this is what we did last year, and now we have signed two-year contracts with huge savings.”
Further changes include offering greater flexibility to logistics providers by offering shared consolidation centres, not only in Europe but also further afield in India, where Nissan has a parts consolidation centre in Chennai and Renault has one in Pune. “We tell logistics providers to use whichever is closer, we don’t care whether it is Renault or Nissan,” said MacDonald. “The point is use them, minimise the inbound transport, maximise the container fill, and get the cheapest solution.”
But neither Mardrus nor MacDonald pretends that combining all logistics is feasible or even relevant, whether it is physical assets or management. Mardrus points out that the global alliance structure is not playing a large role in markets such as North America, Japan or eastern Asia right now, where Renault is hardly present. Although he did acknowledge that as Renault seeks to enter the Chinese market, it would certainly be doing so with the infrastructure and network already in place for Nissan.
The approach to logistics outsourcing and contracting is also a complex area, and one where the carmakers have traditionally differed. For inbound, Nissan has typically adopted a more third-party logistics outsourcing approach in Europe, relying on outsourced providers to help manage more of its carrier base. Renault, which has about four times as many plants in Europe as its partner, has traditionally had a more centralised and in-house approach to managing carriers. MacDonald said that the alliance has yet to make a strategic decision on whether it will shift the balance of this approach for either carmaker.
On the other hand, for outbound logistics, Renault has long had a more exclusive relationship with Groupe CAT, whereas Nissan has typically used 2-3 year contracts before going back out to market to retender the network. While both Mardrus and MacDonald affirmed that it would maintain its current contract with Groupe CAT – which lasts until 2012 – they did not rule out adapting a more market-led approach outside of the contract.
“We have spent a lot of time on the relationship [with Groupe CAT] to improve it, so that we can try to get some syngeries within the contractual boundaries. And, we are making good progress there,” said MacDonald.
“Outside of that contract, it is more easy for us to follow the Nissan way of going out to tender in the market and living with maybe two year contracts, and reengineering every two years as a consequence.”
For the full interview, read here (
In the printed version of Automotive Logistics magazine, there were a few errors in the Renault Nissan story that have now been corrected for the online version. These include the following:
-The logistics body created to converge logistics between Renault and Nissan is called Alliance Global Logistics. In the article it was incorrectly referred to as Global Alliance Logistics
-The total savings projected from combining logistics in 2010 is projected to be €130m. The printed figured varied slightly.
-The savings generated in 2009 from combined activities was €55m, and not €25m as printed in the magazine. The annual average savings during the ten years of the alliance for combined logistics, prior to the new organisation, was €25m per year.
-The savings generated in Europe for this year is projected to be €60m, with the breakdown estimated to be €30m saved for inbound logistics, €10m saved from packaging and inplant logistics, and a further €20m saved for outbound logistics. The printed figures varied slightly.