1 September 2008

SM talks to Odile Desforges, senior vice-president, Renault purchasing chairman and managing director of the Renault-Nissan Purchasing Organisation (RNPO)

The RNPO was the first joint company created in the alliance between Renault and Nissan. Established in 2001, it acts as an intermediary for both organisations, dealing with suppliers and setting rates before providing buyers at each company with the information.

Renault alone has a procurement department of 2,000 staff. The RNPO has, according to a spokesman, "thousands" of vendors, but 600 "major suppliers". It is led by senior vice-president, Renault purchasing chairman and managing director, RNPO, Odile Desforges.

RNPO controls 90 per cent of spend across the two firms; its goal is to reach 100 per cent. This year it will spend $94.7 billion (£47.8 billion), up from $91.5 billion (£46.1 billion) - 83 per cent of spend - in 2007. The jump includes responsibility for the procurement of after-sales parts and accessories.

It also includes marketing and communication spend for Nissan, including TV advertisements and posters. The remaining 10 per cent of spend is in difficult areas including real estate and HR services.

Here, Desforges speaks about the operations of the RNPO so far.

What have been the greatest benefits of joint procurement across the two firms?

Joint purchasing through RNPO has made it possible to generate economies of scale. Our goal is to cut purchasing costs by 14 per cent in three years (2006-2008) compared to 2005, and we are in line with this commitment.

We have also improved quality. RNPO helps us to select the best suppliers with respect to quality. [Information exchanges between Renault and Nissan favour the use of best practices]. Renault has been inspired by the strict quality procedures of Nissan and Renault has inspired Nissan through cost analysis and price target-setting approaches.

How much do you save each year through joint buying?

We can give rough estimates of savings through joint buying but it does not apply to all our purchases in RNPO. Through volume, we are capable of saving 0.5 per cent on a component.

Having common suppliers also makes it possible to design shared components, which generates 2-5 per cent research and development savings on a given component. The savings can reach 10 per cent when the component is produced in a single plant for all our assembly plants.

What is your philosophy on supplier relationship management and supplier rationalisation?

To adapt to the growth and internationalisation of the group, Renault has, over the past 10 years, gradually increased its numberof suppliers. Today, we work with 720 and we currently do not plan to reduce this number.

How have you dealt with rises in commodity prices ?

One solution is helping our suppliers to accelerate their productivity plans. Another is to switch from an expensive material to one that is less costly. And we try to reduce the use of some raw materials, such as the rare ones used in exhausts.

Procurement has a very prominent and respected role in your organisation. How has that been achieved and what advice do you have for other buyers?

You must bring added value to your organisation through, for example, good knowledge of suppliers and the cost of required technology, fair and transparent supplier selection processes and by conducting regular checks on supplier performance. You must also be proactive with suppliers to create new solutions for improved performance in terms of quality, cost, delivery lead times and innovation.

What are the priorities for automotive procurement at the moment?

Cutting costs remains one of our major goals, but we also focus on quality. We want components to meet our criteria and be delivered on time to our plants.

Finding competitive suppliers for our new production sites in Morocco and India is crucial. We also have to deal with the rise in raw material prices. In addition, environmental issues are becoming increasingly important for us. For instance, 95 per cent of the materials in a Laguna can be recycled.

Where from across the globe do you source?

Our sourcing is truly global. We create plants in areas where the automotive market is growing, such as India and Eastern Europe. When we build a plant, we develop local sourcing to benefit from the cost of labour, secure supplies and cut logistics costs.

We also buy components from low-cost countries to supply our various production sites to keep our cars well priced.

With high fuel prices are you under pressure to procure lower-weight components?

Lower-weight components have been used in the new Laguna. Reducing the weight of our vehicles favours low fuel consumption, improves road handling and offers better performance (acceleration and braking distances). Our engineering department works on this and we are ready to collaborate with suppliers on this.

Chrysler's new procurement chief, John Campi, has been very critical of the company's previous treatment of suppliers. Is poor treatment of vendors commonplace in the sector?

Our suppliers are not poorly treated. Renault and Nissan have developed a specific relationship with their suppliers - "the Renault-Nissan Purchasing Way". This relationship is based on three key values:

• Respect - of our partner and our commitments • Transparency - in co-developments, problem solving, decision-making processes and expected endeavours • Trust - developed on a daily basis and based on the respect of commitments.

We want to share these values with a core of suppliers who will benefit from our business growth worldwide, provided they give us good performance.

What is your secret to recruiting and retaining the best staff?

Renault is attractive to candidates and our purchasing department has a very professional reputation. Our staff work with many counterparts in and outside the company. We also ensure staff receive adequate and continuing education. They are also given the opportunity to progress within the group, in purchasing or outside it, in France or abroad.

What are the current environmental or sustainability issues you are managing?

Our Eco2-labeled vehicles are produced in ISO 14001 [an environment management standard] plants, emit less than 140g of CO2/km and must be 95 per cent recoverable. To achieve this, as mentioned previously, we work on reducing the weight of our vehicles. We also ask our suppliers for the chemical composition of the components they sell us.