International Trade and Supply Network
Renault’s Logan Case
1. What are the complexities involved in factoring out the effect of customs and duties in designing the supply network of Logan (i.e., where to build the CKD parts and CBU, and what markets to serve from what sites)? Should Renault build all CKDs in Romania, or should they source CKDs locally?
Renault had to take many factors into consideration when designing the supply network of Logan. They could export the car as a completely built-up vehicle (CBU), which would allow all production and assembly to be centralized but would be faced with excessive import duties. An alternative was to export the Logan as completely knocked down units (CKDs), the definition of which varied by country. They could also purchase from local suppliers instead of using CKDs from Romania. If Renault was selling a high volume in a particular country, it may make the most sense to use local suppliers since their competitiveness was found to increase with volume. Renault would need to consider logistics involved in shipping CKDs from Romania. For example, even if a part could be imported with no tariffs, the logistics of getting the part there may cost more than using a domestic vendor or another site.
2. In general, what are the quantifiable and non-quantifiable factors that one should consider in designing a supply network?
The factors that should be considered in designing a supply network include levels of local assembly contents, documentation requirements, economic factors, regimes, tariffs, and trade agreements. They should also consider currency exchange rates, inflation of local currency, and other economic factors in each local market.
3. For Logan, what new opportunities were created by Romania entering the European Union in 2007?
Renault saw Romania as the perfect mother site to supply parts for the Logan both domestically and for other plants in “Russia, Morocco, Colombia, and Iran”. When Romania entered the European Union in 2007 they
1. What are the complexities involved in factoring out the effect of customs and duties in designing the supply network of Logan (i.e., where to build the CKD parts and CBU, and what markets to serve from what sites)? Should Renault build all CKDs in Romania, or should they source CKDs locally?
Renault had to take many factors into consideration when designing the supply network of Logan. They could export the car as a completely built-up vehicle (CBU), which would allow all production and assembly to be centralized but would be faced with excessive import duties. An alternative was to export the Logan as completely knocked down units (CKDs), the definition of which varied by country. They could also purchase from local suppliers instead of using CKDs from Romania. If Renault was selling a high volume in a particular country, it may make the most sense to use local suppliers since their competitiveness was found to increase with volume. Renault would need to consider logistics involved in shipping CKDs from Romania. For example, even if a part could be imported with no tariffs, the logistics of getting the part there may cost more than using a domestic vendor or another site.
2. In general, what are the quantifiable and non-quantifiable factors that one should consider in designing a supply network?
The factors that should be considered in designing a supply network include levels of local assembly contents, documentation requirements, economic factors, regimes, tariffs, and trade agreements. They should also consider currency exchange rates, inflation of local currency, and other economic factors in each local market.
3. For Logan, what new opportunities were created by Romania entering the European Union in 2007?
Renault saw Romania as the perfect mother site to supply parts for the Logan both domestically and for other plants in “Russia, Morocco, Colombia, and Iran”. When Romania entered the European Union in 2007 they