Case study Nissan PDF

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NORTH SOUTH UNIVERSITYProduction ManagementSubject Code – 314(Case study of Nissan)Prepared For: Muhammad Maruf Ibne Wali (MfW)Lecturer, Department of ManagementNorth South UniversityDate of Submission: 10/08/Prepared ByName IdIsrat Jahan 1430921030Umme Sumaiya 1431111030Md. Mafijul Islam 1511261030...

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NORTH SOUTH UNIVERSITY

Production Management Subject Code – 314 (Case study of Nissan)

Prepared For:

Muhammad Maruf Ibne Wali (MfW) Lecturer, Department of Management North South University

Date of Submission:

10/08/2018

Prepared By Name

Id

Israt Jahan

1430921030

Umme Sumaiya

1431111030

Md. Mafijul Islam

1511261030

Md. Asifuzzaman

1510391030

Introduction The case talks about natural calamities such as earthquake, tsunami and others factors posing a great threat to the functioning of a business and affecting its operations on a large scale. Nissan was established as Nihon Sangyo in the year 1928.It was renamed as Nissan, the name that was used in the Tokyo stock market in 1930. In the very beginning, when Yoshisuke Aikawa founded the company, it was not completely into automobiles but instead made auto parts and consisted of Tobata Casting and Hitachi. Eventually, Nissan became a huge company that held 74 firms by the time of World War II to become Japan’s fourth biggest industry. On March 11, 2011 an earthquake struck off the coast of Japan. The impact of such disaster was devastating. The automotive industry comprising big Companies such as Toyota, Honda and Nissan were hugely impacted by the disaster. The case particularly talks about Nissan, damage caused to the Company by the earthquake and consequently its response to the disaster. Several protective measures were taken up by the Company post the disaster to gain back the momentum of business operations and generate considerable flow of income to stabilize situations. These include sharing information with global regions, allocating supply given capacity constraints and excess dependents across national boundaries, managing production processes and making speedy decisions without lengthy analysis which consumes time. Also several operational changes were announced by the Company in 2012, post the disaster to make the business more sustainable and less prone to severe disruptions. Q-1: The case identifies several aspects of the Nissan response that were particularly beneficial. Expand on the points made in the case to identify the potential costs and benefits of these actions. Answer: Nissan as a company always tries to flexible their supply chain without any bad impacts. It helps them to reach their customers as well as their suppliers. But these very big impacts were their near position but they didn’t want to lose/hampered their supply chain and production. So they tried to create and took some effective initiative to successfully continue their chain. Nissan’s actions after the earthquake and tsunami adhered to the principles detailed in its earthquake emergency-response plan. Immediately after the disaster, Nissan’s Global Disaster Control Headquarters, headed up by the chief operating officer, was convened to evaluate the impact on operations and to oversee the restoration of activities. A Recovery Committee was established to coordinate the global recovery actions, in particular the work of optimizing the entire supply chain. The Recovery Committee emphasized a few simple yet meaningful practices in coordinating the company’s response to the disaster to continue the flexible supply chain like Sharing information: Nissan is a globally operating Company so it always tries to share information with their global operational regions about any affected situations. Non-Japanese firms associated with the operations of the Company might directly or indirectly get affected by the mishap. Hence, sharing reasonable information can keep them informed for the betterment

of their own interests. However, there are certain limitations faced by the Company regarding this. These include, an additional effort to provide information to the concerned global regions might distract the people handling on the ground crisis and their formation provided could also be used selfishly for their own personal interests. These two issues were a major concern to the Company. Hence, to overcome these, Company decided upon asking each region to send two staff members to Japan to gather information concerning their interests rather than providing them unwanted information which could be later misused. Holistic approach was adopted by the Company in solving problems which is good for the Company as a whole. This idea of sharing information led to valuable contribution from global regions instead of becoming a burden on the Company. Allocating Supply: After few time of disaster some consequences were faced Nissan. Like capacity constraints and dependencies across the Nissan operational network. However, allocating component parts was a critical decision for the Company. Allocation of supplies is another important area of aspect which is to be considered by the Company and seriously looked into. This determines continuity of operations and vigilance. The Company particularly focused on high margin goods for allocating supplies instead of low margin goods. For example, the supply of Integrated Global Positioning System (GPS) was confined to high-end models of cars rather than low-end models. This helps in optimal utilization of scarce resources available, enables manageable supply allocation in different regions and further enhances revenue generation of the Company during the time of such catastrophe. Managing Production: In such a situation, the production process of any Company gets affected. But Nissan slowed their production upstream and downstream considering anticipated bottlenecks. This further saved them from costly overtime. For any Company, in such a situation, in-stock and in-transit inventory would be the first priority than producing new goods. Hence, the Company focused on these. The Company also used the in-transit inventory time to identify and implement supply alternatives of critical components. This indicates effective time management by the Company. The Management of the Company could also secure air freight to get the critical parts out of their country faster and reduce the apprehension towards in-transit stocks. Empowering Action: The well-developed emergency response plan established beforehand helped the Company in making quick decisions after the disaster. Foreseeing situations arising from a major disaster and preparing well for them enabled the Company to take prompt actions when the time came. Management of the Company was empowered to make decisions without any lengthy analysis from a central authority. The Company also used flexible approach by modifying its delegation of authority to speed up critical decision-making process for recovery concerns. One of these decisions includes launching the Global Disaster Control Headquarters after mere 15 minutes of the disaster. The team further, worked upon the situation effectively by assessing damage while overseeing restoration efforts at various facilities. Latest information including details about employees’ safety and damage caused was absorbed and appropriate actions based on this were taken. Hence, the company used proactive measures post the disaster situations rather than consuming time and delaying decisions which were indispensable. This

was possible only through preparing a backup recovery plan well before the disaster, integrating tasks and taking several imperative decisions timely. Q-2. What else could Nissan have done to prepare for and respond to the disaster? Try to articulate the costs and benefits of your suggestions. Answer: Nissan had well developed an earthquake emergency- response plan ahead of time. Therefore, many other measures which could have been undertaken by Nissan to respond to the disaster includes1. Attachment of higher level executives or top level management: The senior executives or top management should participate actively in the disaster recovery planning process. They should responsible towards various process of the plan to ensure its effectiveness in the company. Sufficient time and resources should be committed towards developing such a plan. 2. Maintaining a data center: Nissan should maintain a database involving all the information towards stock details, production processes, manufacturing operations, employee details, material required details and other business concerned activities. The database should be kept away from the disaster area to ensure safety of important documents and vital records. 3. Risk assessment: The recovery team should undertake risk analysis and its consequence in the business. Every units of the organization must be analyzed to determine the impact of disaster scenarios on them. Even the worst situations such as destructions of the building should be effectively panned for and proper measures should be taken by the team to face these situations. 4. Document the plan: A detailed plan should be prepared which follows a standard format and provides for a detailed process. The plan should follow harmonious forma to ensure its flexibility. It should include more details which are to be used before, during or after disaster. The process must also specify methods for making changes or updating the plan in case of significant changes in the system. The detailed process can be developed by backup alternatives. 5. Test the plan: After organize it is necessary to test and evaluate the plan on a regular basis (annually) before implementing it. The procedures to test and evaluate the plan should be documented and formed. Other benefits of testing the plan include:  To control the viability of the plan and compatibility of backup facilities.  To distinguish the red areas in the plans which need proper modification.  To inspire the personnel in updating the disaster recovery plan.  To extend proper training to the managers and team members.  To define the ability of the company to recover from the disaster.

Q-3: What could Nissan have done to assess the risk of disruption in their supply chain? Answer: Nissan did have an organization dedicated to the risk management started back in 2008. The global disaster control could have planned and identified the risks a bit more strategically, especially when it came to geographical interdependencies and risk contingencies. They likely created a probability matrix which took into account the impact and the probability of such events occurring the specific areas where Nissan does business. Now Japan is located in an area where earthquakes are frequent and Nissan identified that risk. However, according to the case study the impact of tsunami was underestimated and this was a major flow in the probability matrix. Then Nissan would conduct a quantitive and qualitative analysis to plan the types of responses necessary. However, the underestimating in the identification phase prevented a proper risk analysis to respond to the tsunami risk. Using such familiar with Japanese regardless of the methodology to identify risks, the organizational risk owner is the Global Disaster control which is responsible for Nissan's risk management. To avoid these bottlenecks in the supply chain Nissan could have streamlined to an even higher extent all critical parts to be interchangeable with parts in different regions. This would practically eliminate the need for contingency reserves of critical and diverse coming needed from Japan and other regions. Per the case study, parts and supplies had to be forgone from one factory and sent to another factory. This network of interdependency created bottlenecks and had the parts been the same across the broad, this could have been avoided. However, this could be costly as production in one country could be much more expensive in another with such a large company not all interdependency can be eliminated entirely so a contingency plan reserves were sufficient enough. Q-4: How did Nissan’s product line strategy help or hurt its ability to respond to and recover from the disaster? Answer: Nissan had adopted a simplified product line strategy in comparison to its rivals. Given the capacity constraints after the disaster, the Company went for a build-to-stock strategy for models with greater demand and build-to-order strategy for models with higher customization and lesser demand. Since, the disaster had affected the production process of the Company to a great extent; such a strategy helped the Company to produce goods which assured of generating revenues instead of increasing its burden. The production of models with lower demand were confined to build-to-order strategy so as to avoid any wastage of materials, maintain efficiency of operations and also earn good revenues. Limited resources or affected supplies encouraged such strategies and proved beneficial in such crucial time for the Company. Apart from the above mentioned benefits, these strategies further helped Nissan in simplifying its business operations and product offerings along with substantial increase in its sales. This was urgently required by the Company to boost its sales and earn sufficient amount of revenues to enable persistent business operations without any barriers. Flow of income also improved the financial strength of the Company arising from such crisis which is a major concern. Several functions such as sales, marketing and supply chain management were integrated to decide upon allocation of supply globally so as to generate greater revenues.

As per the case, Nissan’s six production facilities had been damaged but the strategies adopted definitely pulled the Company from such draining scenarios as they addressed exactly the issue witnessed by Nissan. The various benefits of build-to-order strategy can be described as follows:  Main advantage of build-to-order strategy is to gain specializations of products manufactured.  And this occurs by manufacturing the product as per customers’ specifications and expectations.

This strategy eliminates unnecessary inventory from the Company by making goods which are actually demanded by the customers. This further gives no scope for dead stock. Q-5: How will the operational changes announced in 2012 affect Nissan’s exposure to future disruptions? How will it affect its steady-state operations? What trade-offs is management making and why? Answer: Post the disaster, Nissan adhered to several operational changes in its business to face the future challenges of disruption. These involve increasing the localized production of its cars in several regions of America from approx. 70% to 90% by 2015. Efforts were made by the Company to reduce dependency on Japanese-made components in its foreign factories. The Company had also put sincere efforts to better understand the dependency of secondary suppliers apart from primary suppliers within its supply chain. The disaster taught many lessons to the Company which stimulated them to adopt a modifying approach for the betterment of the future of the Company. This included modification of their purchasing process particularly of critical components to enhance continuity of business and making the supply risk concentration beyond tier 1 level less severe. Every Company strives to work even better next time; therefore, Nissan had to prepare even better to protect itself from the next disaster struck. An actionable business continuity plan which comprises of all level suppliers must be prepared as a response to any natural calamity or threat. Also developing a more effective supply chain and risk management techniques make the business more sustainable. These changes, if correctly brought up and executed can clearly contribute towards a better future disaster recovery plan and make the business less prone to severe disruptions....