Getting agile and flexible at the Alliance 

What were the main objectives of the project to standardise digital communications?

The main objective was to standardise all the messages to cover the finished vehicle logistics scope, from the factory to the dealership. And we also wanted to [involve] the largest possible number of OEMs and LSPs to the drafting of these standards, because this will reduce the delay and cost of starting business with new partners. This was one of the main objectives.

It was important when we started a few years ago, but it’s all the more important now. In the current situation of the business we must be quick to adapt to challenges and we must also prepare for consolidation in the industry, both among the OEMs and among the LSPs.

So, we must be agile and adapt to the challenges in the situation. Above all, we must dedicate our financial and IT resources to achieve real operational progress. And, therefore, we must stop spending our resources merely to get compatible with one another; this is a waste of resources. It’s always a lengthy process that slows us down, whereas we should be agile and flexible. It takes months to adapt to one another’s IT systems when we have a new business partner, and this time and money could be better employed somewhere else.

How did the project start?

It all started when the ECG [Association of European Finished Vehicle Logistics] digitalisation working group was created in February 2016. So, it dates back for some time. This working group was created under the common impulse of the Renault-Nissan Alliance and the ECG board. I am the current co-chairman of this group for the OEMs, whereas Michael Bünning [led it before recently retiring] on the LSP side.

One of the early objectives of this working group was to standardise the new messages that will come more and more from vehicle telematics. So, there are a bunch of new messages that will be necessary and we thought it would be a good thing to standardise them right from the start. Since cooperation to establish standards was very much in our genes in the Renault-Nissan Alliance – because that’s what we usually do – this was an idea that we wanted to promote and extend to other partners, both LSPs and OEMs. 

And nearly at the same, the VDA [German Association of the Automotive Industry] created their own digitalisation working group and their main objective was to standardise all data exchanges for finished vehicle logistics. So, in order to make this possible they needed to work with LSPs and with non-German manufacturers. We’re already ECG’s partners in their own working group. So, after having met, both organisations decided to share their agendas and resources to complete the task. In fact, we agreed to accomplish both tasks – to standardise existing and future IT messages linked to finished vehicle logistics.

After that, the Alliance and the VDA went to [international automotive association] Odette with the project, as we were all members of this organisation – ECG wasn’t, but the Renault-Nissan Alliance and the VDA were – so we thought that their expertise in IT standardisation would be of great help in the project. Their board was interested in exploring this new field of vehicle logistics and they decided to join in. So, it all started like that.

What was the role of the OEMs and the LSPs, respectively?

The role of the OEMs was to represent their own part of the IT systems. Generally, it’s the LSPs that get adapted to the OEM systems, contractually, so we as OEMs had to describe all our processes on our side and the LSPs had to describe their side, and we had to find the most efficient way to deal with all the IT exchanges – what we needed, what they needed – and to put everything in the messages so they can be adapted to every situation.

It sounds like valuable work, but why do you think it didn’t start sooner than 2016, since it does not depend on a technological innovation?

This project needed the participation of a large panel of OEMs and LSPs. And the more companies you have to agree on a standard, the more chances it has to be known and adopted. So, it’s also the best way to cover a large number of cases and situations in the standard. And, therefore, to make it more useable. This required a lot of work and some centralised leadership and organisation. No individual company would have been able to do that.

This could only be provided by the participation of many companies to share the workload and the participation of some cross companies like the VDA, ECG and Odette to provide the frame, the technical specialists and the common leadership we needed. And each of them taken individually wouldn’t have been able to do that – ECG because only the logistics providers are members, they don’t have OEMs; the VDA is only the German manufacturers, no LSPs and no other nationalities; and Odette hardly know anything about the finished vehicle logistics, they are very specialised in inbound logistics.

So, taken individually, none of them would have been able to undertake the project. Only after all of them decided to join forces to achieve this, we had the critical size and structure to start the project and, taken together, we had everything we needed.

Would you agree that outbound logistics lags far behind inbound when it comes to digitalisation?

The world of finished vehicle logistics is way behind the inbound world in terms of digitalisation, and this can be explained very easily. It’s the fact that, when you deal with parts, you deal with the whole industry. Every logistics provider, be it for automotive parts or for cans or bottles or pillows, etc, they all share the same methods and the same IT systems, the same organisation – everything works the same way. There are huge companies working in that sector, and a lot of them. So, it’s very profitable and very widespread to have IT progress in that field.

Whereas finished vehicle is a very small and specialised sector. There are small companies, a few big ones, but they are not so big. They don’t have the financial [resource] and manpower to invest a lot in IT systems and digitalisation, and there are only a few IT providers that are specialised in this business. And besides, we had the 2008 crisis, which severely hit the sector and it took [LSPs] years to recover financially and start investing again in IT systems. So, all in all, it delayed progress in the sector.

What kind of investment would be required to implement the recommendations?

It’s mainly a matter of IT systems at OEMs and LSPs, and some organisational processes. In fact, it shouldn’t be very difficult. The system described in the standards may be a bit frightening because it constitutes a complete and coherent process – it covers the whole scope of vehicle distribution. Nevertheless, we know that all companies do not work the same way, so some could get frightened by the amount of work necessary to adapt their IT systems and organisation in order to fully adopt the standards.

We have, of course, considered that and in fact it’s not really a problem because the messages themselves contain more than is necessary to cover many different cases, and the system itself is a modular one. It can be adopted partly and progressively. You are not compelled to adopt the whole system, so a company may start with the messages they consider interesting and they don’t need to take all the messages.

And so, they start with the messages they don’t have, [then] there is nothing to replace. This could be the case, for instance, for telematics exchanges and for geolocation data. This is something very few [companies] have now, so they can start with that. They can also take advantage of replacement of some parts of their IT system, when these need to be renewed they can make them compatible with the standards and leave the rest for later. Making the new version compatible is already a step forward.

An even more interesting solution will be when the business partner, as is done today, will have to get compatible with another one who already uses these standards. So, if, for instance, we start using the standards, this will compel our LSP partners to adapt to these standards.

It will make the company compatible not only with one new partner but all those who use the standards, and this is a very profitable multiplying effect. This should constitute a mighty incentive to adopt the standards. All companies in our business which share this experience of getting IT compatible with a new partner, be it a customer or supplier, will very easily be able to evaluate the potential. As regards Renault-Nissan, for instance, we will start with the new Mercedes [trucks for car carriers], which are useful for telematics, and these new messages are meant to be compatible already with the standards.

Would you expect LSPs to start implementing the recommendations now?

It will take some time, because IT developments are a slow process. But yes, what we expect is for LSPs and OEMs to declare their intention to adopt the standards and to prepare for that right now. Even if it comes into operation after some time, the work should begin now so as not to lose time. Of course, since it needs some budget, it needs to be put in the budgetary plans, so it may take some time. But the will to do that should be expressed as soon as possible and now is a good time.

So, it could take a year or so to put this into action?

Yes, I think so, at least one year. But some of the standards can easily be adapted by some OEMs because we did not think completely out of the box – some of the OEMs already had part of these standards nearly ready in their IT system. So, this could go as fast as maybe one year, but it depends of course on each partner.

Once the recommendations are implemented, is there some way of tracking the impact?

This can’t be done by a single company, so it needs to be done by cross organisations like Odette and ECG. They are best suited to measure the global impact while respecting the confidentiality of the reporting, because not every company will be willing to share that they are adopting this and that standard. Whereas cross organisations like Odette and ECG could very well gather this type of information and share it with the others. But we will have a meeting where this will be the subject of discussion: how are we going to promote the standards and how are we going to measure the impact and implementation?

You mention a global impact. Does that mean the Alliance will be using these recommendations worldwide?

This was elaborated at a European level first. And Odette, [which] is publishing the standards as well as the ECG are European organisations, not worldwide, but we intend to use these standards outside Europe also. We have been proactive in this within the Alliance and we have already shared the standards with Nissan Japan, and contacts have also been initiated with AIAG [Automotive Industry Action Group] in the United States, of which Nissan and ECG are both members. I spoke with the AIAG board and the executive director of ECG, Mike Sturgeon, also had some discussions with them. The AIAG board members have already declared that they are interested in these standards, and maybe they will join in afterwards.

What would you say are the challenges to implementation on a global scale?

I think there are good chances of implementation in America. As I said, AIAG is already interested in that. There is also a requirement from the European branches of major carmakers, because when you are Ford or Toyota in Europe of course you depend on the IT systems that are managed in your native country, and so it can be a very good opportunity for them to adopt the standards. People from Ford, for instance, were really willing to join in but their problem was that they depended on IT systems managed from the United States. So it would solve the problem for OEMs if they all adopted the same standards.

Are there other digitalisation projects that the Alliance is working on? Which logistics processes do you think would benefit most from more work in this area?

There are lots of potentially interesting subjects, and some of them we are already working on inside the ECG-OEMs digitalisation working group. One of the most promising, I think, is the harmonisation of vehicle labelling on the flows, what we call close range vehicle identification. We think it would be quite a good opportunity for the business to have the same content and the same position, the same technology for the label accompanying the vehicles. The recommendation would be to have the VINs [vehicle identification numbers], plus a barcode, plus RFID.

Has a timeframe been laid out for that project?

The common recommendations are going to be issued very shortly. Then it will be for each OEM to progressively implement this type of label. The vast majority of LSPs are ready to start discussions with the OEMs to implement RFID on the labels. The main problem is that it’s a rather unbalanced economic situation, because in the case of new labels all the costs are for the OEMs and all the benefits are for the LSPs. So it needs to be discussed and shared on a win-win basis to justify the implementation of such labels with RFID tags.

Do you think such work will enable outbound logistics to catch up with inbound in terms of digitalisation?

The road is long, but progress is accelerating and maybe having a lot of very good IT systems on the inbound side won’t remain an advantage for long, because if we start anew with the finished vehicle logistics systems by jumping over several steps, by using the new technologies, maybe we can quickly become very efficient.

One advantage we have is that, when you move parts, each individual part or crate doesn’t have a very sophisticated means of identification. You can put on some labels [or other] cheap means of identification that will emit some position data. Whereas with finished vehicles, [following] the implementation of telematics and vehicle connectivity, we will have much more [information] than the inbound goods will have; we will be able to send not only the vehicle position but also some technical data, and with this we can achieve very good results.

There are also more possibilities that we are working on within the Alliance and within the digitalisation working group of the ECG. We are far from having exhausted the subject.

Renault-Nissan-Mitsubishi’s Hervé Moulin will speak on outbound technology during Automotive Logistics and Supply Chain Live, held September 15-17