The Renault Nissan Purchasing Organisation (RNPO) will reduce its supplier base by one-fifth in the next five years, as it strives to further cut costs by placing bigger orders with fewer partsmakers.
â€œI expect the number of our common suppliers to shrink 20 percent in the next five years,â€ said Odile Desforges, who heads the joint purchasing operations of Renault and its partner Nissan. She declined to say how many suppliers RNPO has at present.
RNPO was set up in 2001. It now handles roughly $33 billion (currently E25 million) of purchasing a year or 70 percent of the two companies' procurement. There are no plans to go for 100 percent joint purchasing, Desforges said.
RNPO's remit has grown to include the purchase of logistics, capital goods and electronics, in addition to chassis and powertrain parts.
Desforges said the quality of parts bought from traditional Renault suppliers had â€œimproved drastically.â€ That has been an important factor in overcoming Nissan engineers' famed reluctance to use those parts because of quality concerns.
A recent independent survey commissioned by suppliers showed that the number of faulty parts per million for parts from original Renault suppliers had fallen under 100 at the end of 2004 compared with 150 a year earlier.
Desforges didn't say how much she hopes to save by the planned consolidation of suppliers. But she pointed out significant cost reductions.
Each time a family of goods is added to RNPO, it saves 0.5 percent on purchasing costs. That reflects the price concessions suppliers are willing to make in return for greater volumes and a potential long-term relationship with a big customer.
In addition, Desforges said purchases through RNPO reduce component procurement costs for a new-car project 5 percent.