Jaguar Land Rover Extend Their Manufacturing Operations into China and India
Since Jaguar Land Rover was taken over by Tata Motors of India in March 2008 they have been on a roller coaster ride. Trying to sell luxury cars during an economic downturn and selling large 4×4 vehicles to an increasingly ‘green aware’ consumer have both been a challenge. However earlier this year JLR started to return to profit after two years of losses.
Tata Motors has done a very good job of helping to cut costs, streamline manufacturing operations and rationalize JLR’s supply chain. One area where JLR wanted to cut costs was in the management of their B2B infrastructure and in June 2009 GXS signed a Managed Services deal with JLR to look after their B2B infrastructure. I will update you on how the implementation is going in a later blog entry.
The fact that China has now become JLR’s third biggest market has not gone unnoticed with Tata Motors and for this reason JLR recently announced plans to open new production facilities in China. Increased consumer spending in China, especially on luxury brands, has meant that there has been a significant demand for JLR vehicles in this region. China is the world’s largest car market and Jaguar has seen its sales grow by 38% and Land Rover by 55% in the first quarter of 2010 when compared with a year ago. However unlike other luxury brands such as Daimler and BMW, JLR manufacture their vehicles in the UK and they are then shipped across to China. This obviously eats into the profits when you take into account the shipping and logistics costs associated with each vehicle. In addition to logistics costs, JLR and indeed any car manufacturer looking to sell new vehicles in China, have to pay steep taxes on imported vehicles. So for this reason JLR has decided to establish its own plant in China and also India where they are seeing similar levels of growth for their vehicles.
Carl-Peter Forster, Tata Motors Chief Executive, said the Chinese venture, would initially assemble lower end Land Rover models from completely knocked down kits. Land Rover has assembled a small number of its Defender Utility Vehicle in South East Asia and South Africa. Jaguar builds none of its cars overseas. The Land Rover Defender is the prime candidate to be built in the new plant as it is widely used in developing nations, for example by the United Nations, due to the fact that its relatively basic engineering allows for quick and easy repairs. JLR plan to build two models in China and it will take two years to set up the new manufacturing plants. However due to government regulations JLR will have to setup a joint venture operation with a Chinese domestic car manufacturer in order to get their production plans off the ground.
Sending over fully knocked down kits provides a very quick way of establishing a presence in a country such as China. As everything, including every last nut and bolt is shipped across to China it means that the initial supply chain to support such production will be very simple and at the same time it provides a period of time for the Chinese workers to get use to the ‘JLR way of doing things’. The one area where JLR will need to focus on is in the aftermarket sector because JLR will need to ensure that spare parts can be shipped across to China in a timely manner, in order to be able to support the vehicles that are being built in the region. Being able to establish business processes to support the ordering and delivery of spare parts will help JLR when they get to the stage of fully manufacturing vehicles in China. At that point JLR will need to try and source many parts and components locally in order to help reduce their logistics costs.
Many of the joint venture operations that have been established in China have seen numerous supplier parks being established in the region. For example, Bosch, Delphi and other leading automotive suppliers have had to establish a presence in the region in order to support their customers such as GM, Daimler, PSA and BMW.
The GXS Managed Services environment that has been setup to support the JLR business will need to be extended to support JLR’s potential new suppliers in China and of course to ensure that other key suppliers of production or aftermarket parts are able to ship these to China with ease. One of the difficulties of working with Chinese based suppliers is ensuring that they have simple to use and easy to maintain B2B systems from which they can send business related documents electronically to JLR. Given that GXS has just helped to onboard over 850 EDI suppliers, it will be critical to JLR to be able to extend their supplier community into China and make sure that all information is exchanged electronically.
Fortunately GXS Intelligent Web Forms and GXS Trading Grid for Excel are two quick to deploy, simple to use and easy to maintain solutions that could potentially help JLR to onboard their China based trading partners in a relatively short time. I recently posted a blog entry highlighting that Microsoft Excel is one of the most popular business tools being used in China today, so the fact that these suppliers have the potential to exchange EDI documents via this type of platform will be of great benefit.
As JLR will be extending their manufacturing footprint, then improved visibility to global shipments to China and later to India, will be very important for JLR. GXS Active Logistics has been deployed across many automotive companies who have been keen to track shipments on a global basis. GXS Active Logistics has also been deployed to support aftermarket operations in terms of being able to improve visibility of shipped spare parts and provide improved customer service due to the fact that a service centre knows exactly when parts are going to be delivered.
JLR is going through an exciting period of growth and GXS will be helping to ensure that their B2B infrastructure can grow and adapt to support their expanded manufacturing operations around the world.