Polo Palmen, Nestlé: Driving cost reduction savings in the Americas
Shortly after the last Fleet LatAm advisory board meeting held at the Global Fleet Conference in Miami in June, I had an interesting chat with Polo Palmen who is the regional procurement manager for food and beverage company Nestlé in the Americas.
Based out of Panama City, Mr. Palmen supervises a fleet of 7,500 vehicles throughout the Americas. He has held the position since May, 2018.
Could you first start by telling me which countries you are responsible for?
Palmen: Through what we call PA 2.0, Nestlé went through a procurement facelift in 2016. This changed a lot of our procurement strategies and this included creating three hubs around the world, being in Switzerland, Panama, and Malaysia.
I am working out of Panama so I’m responsible for the Americas, meaning all the countries in North America, Central America and South America, with the exception of Venezuela right now due to its current economic situation.
Nestlé headquarters in Vevey, Switzerland (source: Nestlé)
And what does your job entail?
Palmen: My main KPI is to drive cost reduction savings so my objective is to improve profitability.
While I am responsible for optimizing the overall strategy of how fleet managers operate their fleets and find the most cost-effective ways of tendering and purchasing, our fleet managers supervise our relationship with leasing companies and manufacturers and are more focused on the hands-on operation of the fleet.
What challenges are you facing in the Americas?
Palmen: Well, we have very good operations running out of Europe with well-developed leasing companies, so we basically want to copy this model in the Americas.
This is a bit difficult, however, due to the cultural differences and the way leasing has been done in the Americas over the last 20 years or so.
Therefore, changing the mindset in the region is the initial challenge. First, we need to start with Nestlé employees and then we need to work on talking with the different companies throughout the region.
Does Nestlé favor open-end or closed-end leasing in the Americas?
Palmen: As you know, Europe favors more closed-end leasing while the US and Canada are used to open-end contracts. Mexico is more of a hybrid.
For us at Nestlé, we prefer closed-end agreements, and this is mainly to curb aftersales risks. We don’t want the burden of worrying about selling the car once leasing agreements are up. Canada, however, does have a good aftersales market.
To stimulate competition, we always have at least two leasing companies competing with one another when considering a fleet of 200 cars are more.
And in which countries is direct purchase preferred?
Palmen: In Central America, not including Mexico, we purchase more. However, most of the main countries in Latin America call for leasing. In Brazil, Mexico, Colombia, Peru, and most of Chile, we do leasing. We used to favor leasing in Argentina as well, but due to inflation we are now moving toward purchasing.
What about new mobility solutions that are not car-based. Is this a consideration for Nestlé?
Palmen: We are always keeping new mobility solutions in mind, and especially so in Brazil. Currently, we are looking into solutions such as e-scooters or public transportation mobility cards. In the end, I just need to find the most cost-effective way to make this work.
How much of an impact are electric vehicles making at Nestlé?
Palmen: Supported by government regulation, there is a stronger push for these types of vehicles in Mexico and our fleet in the country is 90% hybrids. As for full-electric cars, however, there just aren’t as many options.
Nestlé wants to be more sustainable by reducing its footprint on the environment but most of this is affected by the manufacturing of our products. Our vehicle usage is just a small part of our footprint.
As for the US, implementing a green fleet in such a large country is a bit tough. Besides Nestlé being a large company with so many cars there, the US also has state-to-state legislation which complicates things further.
We don’t have an official goal for our green incentive, but we are aiming to keep under 130 grams per kilometer on CO2 in the Americas. In Europe, it is much less. I’d say about 105 grams on average. The European Union is seeking 95 grams so we will be working on lowering numbers there.