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Renault : Renault Aims to Cut Delivery Times to Two Weeks by 2001 Paris, April 16, 1999 -- Renault is undertaking, in the framework of a company-wide project, a complete reform of its distribution system in Europe, to achieve an average waiting time of two weeks between placing an order and taking delivery of a vehicle, by the year 2001.
The New Distribution system will replace the present system of commercial commitment with an organization based on actual orders entirely focused on the final customer. In this new distribution plan, the dealer network will transmit to the factories, directly and daily, orders placed by customers. The plants, which will receive this order information immediately, will position the manufacture of vehicles by five-day production sequences. The New Distribution system, by manufacturing the exact car the customer wants, will also result in better marketing of the full diversity of the product line and reductions in the costs of commercial negotiations, while cutting inventories by half. Renault thus intends to become the most competitive car maker in terms of delivery times, a decisive factor in customer satisfaction. The New Distribution plan, initiated in early 1998, is now moving into its operational phase. It involves a reorganization of the entire distribution chain, from the dealer network to transportation, and including the Renault plants and suppliers. The goal of the New Distribution plan is to gradually shrink the time between the placement of an order for a vehicle by the customer and its delivery. The objective is to offer, by the year 2001, the full diversity of the product line, for delivery throughout Europe, including Central and Eastern Europe, in an average of two weeks, while cutting inventories by half. Before this performance target can be fully attained, a generalized deployment of the principles and tools of the New Distribution system will be necessary. In fact, Renault intends to make the delivery time, which is a decisive factor in customer satisfaction, a competitive weapon, on the same level as the quality and the prices of its vehicles. The company is thus broadening its ambitions to become the benchmark in car distribution in Europe.
The New Distribution system means replacing the system of commercial commitment and production planning based on anticipating the market and consumer demand with an organization entirely driven by customer orders. In the present distribution system, all commercial entities (dealerships and commercial subsidiaries in Europe) give commitments to the manufacturer on a volume of cars and a breakdown by model two months in advance. The network orders the vehicles the following month by specifying their characteristics (engines, equipment levels, options, colours), without necessarily having identified the buyers. On the basis of these commitments, the company's centralized units (Sales and Marketing Department, Production and Logistics Department) draws up, with the factories, four-week production plans. With this mechanism, two thirds of Renault production is for meeting needs as assessed by the commercial network and one third for personalized orders, with average waiting times of six to eight weeks. In the New Distribution system, the commercial network will no longer commit itself by anticipating the market, but will transmit to the factories, directly and every day, orders linked to customer demand. To enable the factories to produce to order rapidly, the New Distribution system will reduce the manufacturing cycle to five days. The factories will adapt to the system by going through an intermediate phase of eight-day order cycles. Thus production not matched to customer orders will be in the minority (30%) and will be essentially for showroom stocks designed to present an attractive image of the product line and to serve customers whose needs are urgent. In case of temporary order shortfalls, and to guarantee to factories an indispensable stability of production, the factories will be able to prioritize already positioned orders and only after that produce vehicles of the "basic line", selected from among the top-selling cars of the preceding month.
The new distribution system as thus conceived will be dependent on the speed and the smooth flow of information between the commercial, industrial and transportation functions. A computer programme, unique and standardized throughout Europe (known as Sedre: System of Distribution for European Networks) will integrate all commercial operations: order entry, submission of production requests, tracking of the production process, data on availability of vehicles and exchanges of resources within the commercial network. In the same way, factories will engage in real-time communications with first tier suppliers (and second tier suppliers for engine plants) with the help of a new computer tool (the GPI system: Integrated Production Management) to manage the flow of parts. The New Distribution system will also modify the organization of the transportation of vehicles. Its first effect, by eliminating random delivery times, will be to facilitate the programming of transportation schedules. It will also mean an acceleration of supplies for the commercial network, which will be reflected, for example, in a twofold increase in shipments by sea between Spain and France and between France and the United Kingdom. Further, Renault is taking into account the goals of the New Distribution system in the design of its vehicles. An advance in the standardization of components throughout the product line, reducing industrial diversity, will lead to an increase in the flexibility and responsiveness of the factories of Renault and its suppliers.
The New Distribution system is now entering into the first phase of its deployment, which consists of the gradual introduction in all Renault factories and commercial networks in Europe of all the necessary resources to reach the final two-week goal by 2001. This phase, which has just been initiated in the Netherlands, will be fully deployed within a year in 16 European countries, including Central and Eastern Europe. Renault has already carried out three pilot experiments (two in commercial and one in industrial operations) to elaborate and validate the operating principles of the new distribution pattern. These real-life tests took place, in 1998, at Renault's sales subsidiary in the Netherlands, the Rouen site in France, and the Maubeuge plant in France, where the experiment began on production of the Express and was extended to the Kangoo. The time required for a country to shift to the new distribution system will be about six months, to adapt computer systems, modify policies of managing the commercial network, establish a plan for reducing inventories, absorb order books, and train personnel in the commercial network. In a second phase, which will take place from mid-2000 to late 2001, the factories and the commercial network will adapt to the new distribution system. They will gradually commit themselves to respect a delivery time communicated to the customer at the time the order is placed, without yet giving a firm guarantee of the targeted standardized and quantified two weeks' delay. Following these two phases, in late 2001, Renault will possess all the tools necessary to meet an average time-frame of two weeks between ordering a vehicle and taking delivery. Half of this time will be for production and half for logistics (transportation and preparation of the vehicle). This delivery time, to be applied in France and in the countries near France, will be somewhat longer (an average of one or two days) for more distant countries.
In addition to shorter delivery times, the New Distribution system will guarantee that the customer obtains the exact vehicle of his choice. Customers will therefore benefit from the entire diversity of the Renault product line (engines, equipment levels, options and colours), in contrast to the commitment system, which encourages the commercial network to order, and therefore to sell, the mainstream models. Production to order will thus result in reductions in negotiating costs relating to the sale of vehicles in stock which do not precisely match the wants of customers. To the reduction in marketing costs will be also added the savings generated by reductions in inventories, in factories as well as in the commercial network. Overall, the New Distribution system can reduce distribution costs by about FRF 1 billion (about 152 million euros) per year, while enhancing customer satisfaction and improving the sales mix.
The New Distribution system is being developed in the framework of a company-wide project headed by a Project Director, André Bodis. A multi-disciplinary team, which initially numbered about 50 people, today contains about 140 specialists from sales and marketing, manufacturing, transportation, information technology and organizational planning. In the commercial subsidiaries and the factories, steering committees and working groups have been implemented with the assistance of a coordinator. A vast training operation in the operational techniques and utilization of the New Distribution system is now underway throughout the European network. It will ultimately involve 28,000 people in 16 countries: 2,500 dealers, 1,500 sales and marketing managers, 2,700 commercial secretaries, 9,000 salespeople and 10,000 agents. All the personnel of the European body assembly and powertrain plants will also be provided with an information programme. Timetable for the New Distribution Project Conception
Refinement and validation of the New Distribution principles
Two-Phase Deployment 1. March 1999-April 2000: First deployment phase Gradual creation of organizations, methods and tools for the New Distribution system Commercial network:
2. March 2000-End 2000: Second deployment phase Gradual movement to the two week delivery time
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