Case Study - Rolf Group, Russia
Customer profile
Rolf Group is one of Russia’s leading automotive businesses and is the largest importer and retailer of foreign-made cars in Russia. With 17 years of successful operations, a distribution network that covers over 90% of the Russian population and 2007 revenues of $3.6 billion, the Group is one of the most profitable in the automotive sector worldwide.
The rapid growth of the Rolf organisation (revenue has doubled year onyear until 2007, when revenues nevertheless increased by one billion dollars) is a reflection of the rate the Russian marketplace has developed. Such growth has given rise to a range of significant new demands, both on the organisation itself and on those it interacts with.
The challenge
Historically, Rolf would bring finished vehicles for Mitsubishi and Hyundai into Russia via the international port of Kotka in Finland, to be delivered to a market which was centred around Moscow and St Petersburg (as recently as 2005, these two destinations between them accounted for around 80% of sales ), simply because these were the areas where most customers who could afford foreign cars resided and the network of dealerships was at that time not particularly well developed in the regions.
Over the last four or five years, however, volumes have increased exponentially and dealership networks have grown and developed to keep pace – typically main brand dealerships such as Ford, GM, Mitsubishi would now each have around 120 dealerships. A few years ago, they would have had half that number, if not fewer.
This explosion has created new supply chain issues for companies like Rolf, where the challenge is to get higher volumes of vehicles to customers and dealers at an increasing number of locations spread across a much wider geographic area.
According to Stephen Fletcher, at that time CEO of Supply Chain Solutions, the logistics business of Rolf Group, these changes have driven substantial investment in logistics – and significantly, in information systems.
“Finished vehicle logistics used to be all about road transportation,” he confirms. “Basically, everything came through one port and went to one location, so the need for information systems wasn’t particularly high.
The marketplace was characterized by lack of supply, so whatever you brought in, as soon as you got it into the country it would go to a customer and everyone got paid for their part in the process. Now, partly because manufacturing companies are better able to respond to production needs and partly due to the slow down within the US economy during 2007/8, availability of products for the Russian marketplace has improved, so that in 2008 supply started to balance demand. Increased volumes have led to multiple entry points being considered, including Russian ports, Black Sea ports, even ports in the Far East. At the same time there are more points of end delivery as well as an increased number of intermediate depots where vehicles can be processed, or simply held for a period of time; all of which has pointed towards a much greater need for sophisticated information and visibility systems to manage the supply chain.”
Stephen believes that whilst the worldwide economic crisis gave rise to the slowdown of most economies – particularly within the automotive industry, actually requirements for IT within a challenging marketplace become a higher priority.
The solution
Rolf Logistics was originally a department, which previously relied on existing management systems used by other parts of the Group. However in order to become an effective provider of third party logistics for finished vehicles, the company needed its own information systems and to be able to interact with customers.
“We were looking for a system that enabled us to collect information from a variety of places in different locations and disseminate it to our growing base of customers,” Stephen Fletcher explains.
In looking for applications able to support that ambition, Rolf first considered developing an bespoke solution in-house, (which has been a common approach in the past, both in Russia and elsewhere), particularly in view of the peculiarities of the Russian marketplace, which has specific legal requirements for documentation and accounting practices.
“However, what we quickly understood was there were plenty of organisations that had faced the same kinds of issues in other marketplaces and so solutions already existed that had been developed specifically to address them, which would meet our requirements,” he adds.
Rolf therefore looked at a range of different applications and evaluated them, both in terms of those that had been used elsewhere successfully and those able to be developed proactively to respond to the needs of the business and which could facilitate quick, cost-effective implementation.
“We needed to meet the needs of our customers and we wanted a system that would allow us to learn and in the future, adapt,” Stephen explains. “Vehnet’s commercial approach to delivering the Advance Yard Manager application to us meant that we didn’t have to buy into or make massive capital investment. We were effectively on a pay per use basis, which allowed us to understand the economics better. We didn’t have to commit to spending a whole load of money without knowing how big our business was going to be.”
The process
Although the Advance Yard Management software is a standard system, its unique ‘Builder’ modules enable it to be tailored to the needs of each particular customer organisation. Vehnet’s long experience within the finished vehicle logistics industry and its deep understanding of the sector’s requirements guarantees that Advance technology incorporates all necessary functionality, yet its flexibility enables the system to be infinitely adapted for individual customers. Each new development in functionality, driven by different customer demands, eventually becomes incorporated into the standard tools set, in turn benefiting all Vehnet customers.
In the case of Rolf, before building the system Vehnet spent considerable time with the Rolf operations and IT teams, in order to fully comprehend exactly what the business wanted to achieve.
“To some extent we adapted to the system rather than the other way around,” Stephen Fletcher says. “For a company like Rolf, in a fast growing marketplace, with a culture of ‘home-grown’ expertise, working alongside Vehnet allowed us to learn on the job and adopt best practice.”
Rolf has invested in a series of acquisitions aimed at allowing Rolf Supply Chain Solutions to continue its growth and capture more market share. These include Elit Trans, a customs, storage and technical service terminal and Petrolesport, with a long term agreement to deliver port services (both are located at St Petersburg). In addition, Rolf is building a terminal at Lobnya, on the outskirts of Moscow, which will provide space for up to 10,000 vehicles as well as a technical service centre for post production operations and refurbishment, and a dedicated parts distribution centre, also in Moscow.
Vehnet is implementing integrated management systems for Rolf at the three finished vehicle locations – as well as at another port in Estonia and a series of further compounds – in anticipation of Rolf Logistics managing the flow of over 250,000 vehicles. The system will handle vehicles from receipt at ports, into the yards, damage inspections and storage, through PDI and accessorization, to loading and distribution to dealerships.
Customer conclusion
“We chose Vehnet because we knew that they had a proven track record in our industry and the Advance Yard Management software offered the opportunity for us to extend its usefulness in terms of functionality in the future. We understood it was a good investment because we could see ourselves growing into that functionality.” Stephen Fletcher.