Mukesh Ambani’s Reliance Industries is in talks with Volvo, one of the biggest truck and logistic companies in the world, for a joint venture that will specifically cater to Reliance Retail’s back-end logistics requirements. According to sources, the joint venture between Volvo India and Reliance Retail is likely to include a new manufacturing facility where Volvo will assemble completely knocked down trucks specifically for the retail major. Reliance is expected to invest in the JV and the trucks made by the venture could be co-badged both Reliance and Volvo. Sources say this unique arrangement between a retail company and its logistics vendor is unprecedented globally. Reliance has already appointed Delhi-based Eicher Motor as its preferred vendor for light trucks. Eicher is also manufacturing specialised vehicles for Reliance Retail. Reliance group Mr.Ambani had also said that, “Reliance is building an over-arching pan-India transportation warehousing logistics infrastructure.”
Earlier in 2007, Volvo India included logistics, freight forwarding and transport — as well as allied areas like cargo handling and clearing, packing, warehousing and store keeping — in its roster of activities in India. The business unit, Volvo Logistics, is intended to support “internal Volvo Group customers and some external customers connected to global sourcing of our components,” company officials had said.
If it goes through, Volvo’s possible tie-up with Reliance Retail will offer the company a captive consumer that will help it move to the next level of volumes. Volvo currently produces around 2,600 trucks a year and sells 1,600 domestically.
Source:The Economic times
There are various questions to ask here with the cited example of Reliance and Volvo partnership.
- Why is a retailing company interested in acquiring and building transportation services? A possible answer is the poor existence of transportation infrastructure in the country and the non availability of service providers with infrastructure (transportation,warehousing) capability. Though there are service providers like DHL, UPS etc.., they do not own the transportation network. They own the service packages. On the other hand Indian transportation companies lack the service capabilities and need beefing of information systems and other facilities. So owing their own transportation for Reliance not only helps their retail operation but also helps to unleash an industry potential in TPL which is fragmented and will need structural reformation very soon.
- When developed countries are talking about outsourcing - Reliance is doing vertical integration?
- What are the other things on the agenda for Reliance group as a whole to move in to the trucking industry? What are the synergies in this ?
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This is related to Supply Chain Management Services that Mukesh Ambani’s Reliance Industries is in talks with Volvo, one of the biggest truck and logistic companies in the world, for a joint venture that will specifically cater to Reliance Retail’s back-end logistics requirements. According to sources, the joint venture between Volvo India and Reliance Retail is likely to include a new manufacturing facility where Volvo will assemble completely knocked down trucks specifically for the retail major. Its great that supply chain has achieved remarkable position worldwide.
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