Most fleet owners try to harmonise and consolidate their supply chain as much as possible, for obvious reasons: less suppliers means less complexity and more leverage to negotiate discounts or bonuses. The conclusion could be that the international suppliers have a natural advantage over local suppliers.
However, local heroes can offer you a different set of advantages:
1. Price Competitiveness: In mature markets, the local hero is usually the price challenger and, if wisely selected, a valuable partner in a multi-bidding scenario. They can increase the dynamics between the suppliers and push your supply chain to a better level of service at a lower price.
2. Market Knowledge: a local supplier might offer you a strong connection with the local market, quick updates of tax changes and other competitive advantages. Close links with local dealers and importers can make a difference when negotiating pricing.
a. In APAC markets like in Africa, working with local suppliers is a necessity. The established suppliers are not present in most of the countries (except India) and you will have to reach out to local suppliers.
b. In Latin America, the international players are represented in the main fleet countries, but the gaps need to be filled by local suppliers. Some of the international players will also propose that you use their partnerships with local heroes, offering you both the advantage of local knowledge and regional integration.
c. In Europe, checking the possible benefits of working with local heroes can be interesting for less mature fleet markets, for example in Eastern Europe.
In a nutshell, you’ll need to assess these questions first:
- Do I need a local hero? If your global or regional supplier is not present in a specific country, the answer will be positive.
- Do I want a local hero? If you believe that competition (pricing and service) is beneficial for your supply chain, you’ll probably answer yes.
- Can I handle a diversified supply chain? Do you have a fleet team or external fleet manager that can integrate data from local heroes into your reporting and deal with local issues?
If you decide to integrate a local hero into your supply chain, you’ll need to answer the following questions:
1. Funding of the local hero. Understanding the funding will help you assess how serious your local hero is about providing leasing or fleet management services. You don’t want your supplier to be fully bank/risk capital funded and you want to see investors that can demonstrate genuine interest in the leasing and fleet management business.
2. Profit and Revenue. Cash flow and liquidity are essential for a leasing company. Check if your supplier will be able to pay its invoices and is capable of absorbing additional orders.
3. Pricing. Local heroes often use lower pricing as a means to attract new customers, but at the end of the day, the upfront pricing needs to be put in perspective of potential recharges during the contract and mileage/damage assessment at the end of the contract.
4. Contracts and service scope. Make sure the service scope is identical to the service scope of your other suppliers. Check the tyre and maintenance provisions; look at the content of the insurance coverage, especially deductibles, and check whether your local hero is self-funding its repair costs. In less mature countries, it is advisable to check as well whether genuine spare parts are being used and whether your employees can use the OEM service and maintenance networks.
5. Tools and back-office. Visit your supplier in their offices, ask for a tour and interview the customer service team leaders. Have a look at the tools and systems that are being used. You need to be convinced about the professionalism of your supplier.
6. SLA. Put a service level agreement in place to make sure your drivers will be treated equally, regardless of the supplier.
7. Remarketing network. Check where and how the end-of-contract cars are being sold. A solid remarketing network means a better guarantee for price consistency and more control over end-of-contract costs. A supplier with a weak remarketing network is taking a risk on pricing and liquidity and might see its funding cost go up.
8. Invoicing. Is your supplier capable of providing you with an invoice format that won’t slow down your accounting team? Can they deal with cost centre changes in a quick and efficient manner? Are credit notes issued separately or netted? Not all questions are crucial, but it’s best to be prepared.
8. Innovation. Can you expect your local hero to modernise your fleet management and introduce new technologies? What is their opinion about mobility and are they prepared to integrate various new solutions into their product range? Make sure you don’t select a supplier that projects you back into the 20th century.
In conclusion, if you are well prepared and if your company can absorb the workload related to a diversified supply chain, there are many arguments in favour of including local suppliers. Preparation is, as always, the key factor for success.
| 11/07/2017 | Yves Helven