Supply Chain Management of Renault Logan

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Cash-to-Cash cycle analysis

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A negative cash cycle means that Renault didn’t pay for inventory or materials until after it sold the final product associated with them. According to the result of Cash to Cash analysis above, it shows that Renault generated revenue before the cash entered the process as cost, which means its efficiency in making response to the market and it used their working capital as efficiently as possible so it had available cash for other activities.

B. Which factors should be considered when designing a supply network that supports the supply chain strategy?

First and foremost, on a global scale the overall objective of supply networks are to; meet customer needs whilst reducing the cost of meeting the customer’s needs. This is an extremely important part of the supply chain strategy as it could seriously impair the profitability of the company.

There are two main functions that relate to customs and international trade. On the one hand are the logistics and administration considerations which include duties, taxes and tax incentives. Furthermore, you have international governing regulations and compliance measures that must be adhered to. In addition to that are customs administration.

Meanwhile on the other hand the company focuses on the global customs and trade environment which include international growth programs and decision making faced by Renault, also reorganising the company and making strategic decisions to align with this regional focus and supply chain strategy. The company should also be able to boost their volume by being able to respond to internationalization and overall improving the global supply chain performance. This section will look at the factors that influenced Renault supply chain network design based on the different countries they consolidated themselves in.

Macroeconomic Factors. This is also true when it comes to taxes, tariffs, exchange rates and shipping costs within a firm. For Renault, they had to make a variety of strategic decisions in designing their infrastructure. Due to the high and wide range of taxes in different countries the firm decided to include parts production and assembly plants in Romania, Colombia, Morocco and Russia. These therefore align with their supply chain strategy of cost leadership as this helps to reduce transportation costs. This is further evident as Russia had extremely favourable conditions for Renault due to the implementation decree 166. It was possible for them to have no duty rates for quite a few automotive parts for a 7-year period, on the basis that they had to augment the amount of indigenous parts.

Romania

Renault had already invested a £489 million plant in Pitetsi prior to launching the Logan. This meant that, with the new expansion and cost reduction strategy now put in place Renault did not have further setting costs to incur as if they were just entering the Romanian market. II. They addressed this by establishing a degree of local assembly contents in their various jurisdictions. This distribution network design process must be in line with the overall supply chain strategy for the company to be able to maximize profit.

On a macroeconomic scale, the admission of Romania into the EU rendered them the ability to import cars from several other countries using the free trade agreements available as one of the advantages of being an EU member. Moreover, Romania being part of the EU also facilitates the entrance strategy into Morocco and reduced the duty rate of import from Romania to Morocco from 50% to zero.

Morocco

The political environment in Morocco was stable and did not pose any major concern to Renault and their market entry activities. One of the main motivating factors for Renault entering this market was to take advantage of this location to enter the Egyptian market by using Morocco as a trading centre. This also aligned with their strategy since they could import CKD parts to Morocco and Egypt from the EU zone on duty free rates. These low-cost advantages, coupled with the proximity between EU and Northern Africa allowed Renault to exercise some centralisation around their distribution networks from Europe to North Africa, with Morocco and Egypt the ports of entry.

Economically Morocco also proved very attractive with advantageous trade agreements with the US which provided zero duty free rate on CBU imports into the country. Further opportunities presented themselves like Morocco representing the second largest market in North Africa.

Colombia

Geographically, Colombia proved attractive due to its proximity to America and the other Latin American countries. CBUs assembled in Colombia were primarily sold locally or exported to the other Andean countries like Ecuador and Venezuela. This was even more feasible considering that export to these countries for zero custom duties even though Renault could only achieve this zero percent duty rate if they assembled the CBU to the satisfaction of the regional contents. However, as far cost reduction is concerned there are potentially high costs which could be incurred in the wake of relatively wasteful suppliers. Furthermore, Renault carried significant transportation costs to Colombia.

Overall, because of the relatively less advanced nature of the market in Colombia, Renault had a real opportunity to consolidate themselves there and gain extensive market share.

South Africa

The possibility of entering Sub-Saharan Africa and forming a strategic alliance with Nissan represented a great opportunity for Renault. This meant that they could leverage their core competencies, and rather than going through the traditional market entry phase they were ready to enter at a more advanced stage. In addition, they could get relatively cheaper labour for their manufacturing car assemblies. However one of the downsides is the rising fuel prices, which could run well as an opportunity for the Renault Logan given it is being marketed as a low cost vehicle and could appeal to most of the South African market.

Russia

In the case of Russia, the government was extremely supportive by decreasing duty rates for key multinationals like Renault. This was particularly to encourage Foreign Direct Investment (FDI) and Renault were encouraged to gradually increase their imported parts by 30% over the following 54 months. The factors were already encouraging for Renaults supply