Individual Assignment: Renault Nissan

Logistics and Supply Chain Management

Logistics and Supply Chain Management Individual Assignment

Module Coordinator: Dr Nicolas Wake Prepared by: Aissam Ouaza April 2012
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Individual Assignment: Renault Nissan

Logistics and Supply Chain Management

Executive summary
What if each client can get exactly the right model with the right color and all the options he or she wishes in a "reasonably short" delay? (Renault Speeds Up Delivery O.R. helps French automaker overhaul its supply chain from a built-to-inventory to a built-to-order perspective By Alain Nguyen). It seems to be a holistic goal for each automotive company, competing in an ever challenging global environment, under changing political circumstances and unpredictable natural conditions. However, some companies like Renault Nissan managed to face the global international crisis, through a recovery program based on a radical change in its supply chain. Overcoming the push-pull boundary, generated substantial cost savings by reducing car inventory levels, and shortening lead times so as to create customer value by selling a better profitable product mix. Such an ambitious strategy involved a huge speed-up of the whole planning process. The significant change that improved the supply chain of Renault-Nissan was the creation of the Global Supply Chain Department (DSCM) in 2008 which has leaded significant improvements in the production process. The DSCM implemented also several best practices in collaboration with core departments like Supply Chain Architecture, Purchasing, Manufacturing, Sales and Marketing and Quality, that accompanied the move from a built-to-capacity to a built-to-order company. In addition, the strategic Alliance between Renault and Nissan brought a unique competitive advantage, combining the Nissans know-how and reliability with Renaults design and cheaper streamlined supply chain, creating economies of scale by coordinated procurement and improvement as well as the use of common hubs for distribution networks. The significant decrease of number of platforms, the resources pooling and the geographical complementarity between both companies, provided the cash for Nissan to survive and the authority for Renault to insure compliance. This winwin strategy has brought positive outcomes to this synergy, and is expected to produce sustainable free cash flows to the Alliance over a high performing supply chain.

Individual Assignment: Renault Nissan

Logistics and Supply Chain Management

Table of contents
IIIIIIIVVVIIntroduction to the Supply Chain of Renault Nissan.4 A cross-cutting global function....4 Outstanding progress..5 Managing the crisis...5 The Renault Nissan Alliance....6 Conclusion.7

References...8

Individual Assignment: Renault Nissan

Logistics and Supply Chain Management

I- Introduction to the Supply Chain of Renault - Nissan

The automotive industry is undergoing a strategic transition. Cost pressure from rising stock levels in the market and increasing incentives needed to sell these vehicles are forcing vehicle manufacturers to rethink their prevalent stock-push approach, building vehicles against a forecast and selling from stock, in favor of a stock-less buildto-order order fulfillment strategy (Joe Miemczyk, Matthias Holweg.Journal of Business Logistics.Oak Brook: 2004.Vol.25, Iss.2; pg. 171, 27 pgs). So, the switch from built-to-inventory to a built-to-order perspective, while offering a more diverse product range with shorter delivery times, has been a must. Within Renault, the supply chain management aims to deliver on time best price vehicles to each customer, that comply with its quality standards, starting from suppliers to plants then to dealerships, by aligning inventory levels to sales demand. To ensure sustainable supply chain performance, the Logistics Department was replaced by The Global Supply Chain Department (DSCM) in 2008, which intervenes even in the product design stage and contributes to customer satisfaction. As far as tangible results are concerned, late deliveries have been shortened by 30% and transport operations losses has fallen by 40% between 2008 and 2010. The DSCM has also generated substantial cost reduction up to 9% in the same period. Moreover, Alliance logistics synergies fort Renault and Nissan have been developed considerably: within 10 years, cost reduction reached 20 million to 30 million. In 2009, it attained 56 million, and then the savings have reached their peak recording 130 million in 2010. Through continued reprogramming of production, and stock levels decreasing, the DSCM played a drastical role to face the automotive international crisis. In addition, synergies have been stretched to physical shipments, parts gathering centers and after sales stores. The DSCM is developing its working relationship with Nissan through the Alliance so as to identify, share and produce synergies that meet future challenges.

II- A Cross-cutting global function

The Groups overall performance is extremely related to several vital tasks which are carried out by the DSCM. Keeping up with tight lead times, ensuring customer satisfaction through commitments meeting, are DSCMs main objectives. Renault positioned the DSCM as an upstream part in decision-making processes rather than a follow up entity, operating downstream and considered as an afterthought. In fact, the Transport-Fit policy or the Design to Logistics principle is a chart followed by the Supply Chain Architecture Department so as to match parts design to physical shipment.
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Individual Assignment: Renault Nissan

Logistics and Supply Chain Management

Moreover, the DSCM is responsible for optimization aspects related to sourcing such as transport costs, which can be mastered through collaboration with the Purchasing Department in choosing adequate suppliers, based on logistics efficiency. In addition, the DSCM tries hard to minimize inventory levels, by updating production forecasts based on weekly dialogues with the Sales and Marketing and Manufacturing Departments, before communicating either customer needs and agreed lead times to production sites. Finally, the Total Quality Management highlighted by the Quality Department commitment and the DSCM support, makes on time delivery as mandatory as quality compliance with Renault quality standards.

III- Outstanding progress

Considered as a core and indispensible entity within Renault, it contributed to implement effective and efficient processes addressed to core functions and the supply chain actors, in order to achieve the Groups stated objectives and commitments. For instance, gains up to 40% in volume for certain components, such as shock absorbers in compliance with safety norms and equipment levels, were achieved through engineering added value in design stage. Secure and cost efficient supply was the result of a constructive collaboration between the DSCM and the Purchasing Department. As a substantial achievement, Sea freight costs were minimized by 12% in 2010. With regards to the manufacturing function, the DSCM achieved the impossible by running 15 successful start-ups between 2008 and 2010 via site production programming, which was a record in Renault history, while ensuring the Groups expected results. Furthermore, the strategic partnership with the Sales and Marketing department which emphasizes on sharing customer expectations helped to design tailored and timeless dealerships stock levels. By reforming its operations and adopting quick win improvement measures, the DSCM managed to reduce its operating costs by more up to 9% between 2008 and 2009, cutting out-of-time deliveries by 30%, and decreasing considerably transport-linked damages up to 40%.

IV- Managing the crisis

During the global economy crisis in 2008 and 2009, the immediate need to stop the bleeding was carried out by the DSCM. Renault suffered less than several competitors in the same field, from the recession by taking into account the DSCMs know-how in reducing stocks and operating costs. A significant plummet in the demand curve owing to the global crisis, pushed the DSCM to reprogram plants to the optimal building-to-order production level, so as to

Individual Assignment: Renault Nissan

Logistics and Supply Chain Management

maintain inventory costs as low as possible. This safety program leaded to output cutting and short-time work. Taking into consideration, the drawbacks of this slowdown policy on Renault suppliers, a collaborative work with the Purchasing Department on the crisis-induced reduction in routine trade, aimed to involve Renault suppliers in the review of supply so as to overcome this critical situation. Nevertheless, thanks to government scrappage bonuses, the demand curve started to get rid of the recession, and output levels were monitored by the DSCM so as to match the current customer orders. The DSCM certainly did well during the crisis, and improved the Groups overall performance through its lean manufacturing best practices, however, perpetual stock optimization is a holistic concept of the DSCMs strategy and may encounter strong boundaries generated by the Global uncertainty. Therefore Renaults supply chain should reach another peak of effectiveness level, through focusing on other avenues for improvement such as Agi-Lean manufacturing and Strategic Alliances, in order to gain a competitive advantage.

V- The Renault-Nissan Alliance

Since the Alliance was formed in 1999, strategic synergies have been generated by Logistics: Huge economies of scale due to common platforms (10 instead of 34) that allow for each to produce where the other has a plant and spare capacity. Product overlap offset by geographic complement (Europe for Renault, Asian and US for Nissan). Merging Renaults performance in design and R&D with Nissans models reliability and strong engineering skills. Benefiting from common hubs in terms of distribution network. Active cost savings and profitability due to value chains similarity of Renault and Nissan. This cooperation has permitted substantial economies, from 25 million between 1999 and 2008, to 56 million in 2009 then to 130 million in 2010. Since 2009, mutual trade-offs and global logistics was managed by the Global Logistics Alliance, which was created by the Group and made up by talented people from Renault and Nissan, to coordinate supply chain operations. By pooling resources and combining core functions, through IT systems and quick win processes, it allows the Global Logistics Alliance to develop economies of scale with suppliers, over sharing flows and cutting non added value operations. Several subsidiaries of the Global Logistics Alliance were created like Alliance Logistics Europe in November 2009, which covers Western and Eastern Europe, the Mediterranean Basin and the CIS (50 million in collaboration). In 2010, Alliance Logistics Russia reporting to Alliance Logistics Europe was set up, gathering both inbound and outbound logistics for the Alliance, and coordinating logistics for the plants in Moscow (Avtoframos, i.e. Renault) and Saint Petersburg (Nissan) and inbound
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Individual Assignment: Renault Nissan

Logistics and Supply Chain Management

logistics for Togliatti (AvtoVAZ). It deals with local suppliers in Russia, and complies with the Alliance stated objectives in terms of lead time, costs efficiency and quality standards, by implementing the Alliance Production Way standard at the Togliatti plant. Additionally, The Renault Nissan Purchasing Organisation (RNPO) initiated shared call for tender from Renault and Nissan on Logistics. For example, the Alliance realized savings up to 12% in 2009 on sea freight, compared to the corresponding expenditure of 2008. Finally, It seems certain that the Renault-Nissan Alliance remains confident to be a potential source of progress in the near future.

VI- Conclusion
The Renault - Nissan productivity like all automotive companies, is very sensitive to economic environment, political changes and natural disasters which can drastically disorder their worldwide supply chain. The strategy of freeing up cash flow leaded by Renault since 2009, was based on setting up a highly efficient and flexible supply chain. Thus, Renault has kept its promise to guarantee its same levels of product availability, while drastically cleaning its redundant safety inventory. Value Chain analysis for Renault Nissan

Firm infrastructure: Combined administration Human resource management: Change for good Technological development: Developing Product Together Procurement: Huge savings from Nissans supply chain Inbound Logistics Operations Outbound Logistics Marketing & Sales Services Margin Margin

Saved costs With less Platforms

Common hubs

Marketed separately

According to this analysis, the Alliance supply chain is considered as a key competitive advantage, differentiating Renault-Nissan against automotive competitors, in a challenging economic environment filled with global uncertainty.
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Individual Assignment: Renault Nissan

Logistics and Supply Chain Management

References : www.renault.com Dossier de presse du 4 novembre 2010 LA SUPPLY CHAIN : UN ENJEU MAJEUR POUR LA PERFORMANCE DE RENAULT .
http://www.strategieslogistique.com/renault-baisse-ses-couts,3261

L'Alliance Renault-Nissan booste par la supply chain .

http://www.wk-transport-logistique.fr/actualites/detail/34790/l-alliance-renaut-nissan boostee-par-la-supply-chain.html

Building cars to customer order what does it mean for Inbound Logistics Operations?

Joe Miemczyk, Matthias Holweg.Journal of Business Logistics. Oak Brook: 2004.Vol.25, Iss. 2; pg. 171, 27 pgs. Umais Shafqat Global business: End of module assignment (scope of Renault Nissan Alliance). Renault case study No time to spare, Renault relies on JDA for Cost-Effective Overnight Fulfillment.

Renault Speeds Up Delivery. O.R. helps French automaker overhaul its supply chain from a built-to-inventory to a built-to-order perspective By Alain Nguyen. Barloworld Supply Chain Software (SCS) helps to minimise cost and reduce carbon footprint, with CAST software.
http://barloworldscs.com/home/news-events/news-archive/barloworld-supply-chainsoftware-helps-optimise-renault%E2%80%99s-environmental-plans.aspx

The Automobile Industry in Japan and Germany -Strategic Challenges and New Perspectives in the Age of Globalization Symposium, Tokyo 12 October 2004. Renault-Nissan and DaimlerChrysler, What are the Lessons to be learned?
Markus Pudelko University of Edinburgh Management School.