MGT 314

Nissan Motor Company Ltd.: Building Operational Resiliency

Submitted to:
Muhammad Maruf Ibne Wali (MfW)
Dept.: Management

Submitted by:
Section: 01
Name ID

Zahid Bin Ahmmed 1520424030

Ashik Chandra Raut 1521461030

MD. Sakib Ahmed 1520263630

Fahim Ahmed 1520235630

Sabbir ahmed asib 1431009030

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.

Through the case analysis we can identify many aspects of the Nissan that were particularly
beneficial.

 Sharing of information: Nissan brought all of their global regions into the response
process. The gathering and sharing of information was decentralized and collaborative.
Each region was asked to send two representatives to Japan to gather information and offer
solutions so that the company, as a whole, could conduct a collaborative effort with input
and information from all regions. The cost was very low because only two representative
go there however, the benefits would be noticeable. Having local regional representatives
in the circle of company-wide decision making allowed regions that would be greatly
affected to be prioritized over regions that would be less affected, decreasing the overall
company impact of the disaster.

 Allocating supply: The Nissan operational network allocation of component parts was
crucial. The allocation of supplies likely had substantial benefits. The sales, marketing, and
the regional supply chain management functions were brought together to identify how to
globally allocate supplies to focus on highest margin goods. Loss of sales revenue was
thwarted from becoming idle inventory when unaffected regions were able to allocate their
supplies to high margin vehicles. This was accomplished because regions producing low
margin vehicles forwent their GPS units, knowing they were not necessary to sell the low
margin vehicles, and sent the GPS units to regions that would use the units needed for high
margin vehicles. This allowed for greater revenue generation, likely in the hundreds of
millions of Yen instead of decreasing sales by delaying the production of high margin
vehicles. The associated costs were the forgoing of attractive, but not necessary, sales
features of low margin vehicles to facilitate the greater revenue benefits derived from
higher margin vehicles.
  Managing production: Managing production would have had little incremental costs but
noticeable benefits. Nissan slowed production lines and considered in-stock and in-transit
inventory to anticipate bottle necks. This prevented normal amounts of parts from backing
up into idle inventory and requiring housing and sitting costs. It also decreased costly
overtime associated with normal amounts of production. Considering in-transit inventory
time to find supply alternatives also likely saved millions. The shipping costs for air freight
and quicker transportation would be costlier than sea shipments, but the benefits.

 Empowering action: Nissan became flexible so that regional management could execute
decisions quickly without lengthy analysis from central authorities. In essence, Nissan
potentially thwarted the loss of millions of dollars in sales by speeding critical decision
making and recovery related issues by the downward delegation of authority for a limited
period of time. As new information came in from different regions, corrective actions could
be executed quickly. However, the costs of removing a strong central authority may have
effected quality expectations. Nevertheless, the associated benefits were quicker decision
making which prevented resources from becoming idle, thus preventing the loss of sales
and reducing costs.

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.

After 2011 earthquake Nissan take many steps for recovering the damages but Nissan could have
done some preparation in response to the disaster.

 Strong building: Although the buildings were tested and reinforced after seismic
simulations, there could have been better measures to prevent items from falling during
earthquakes as noted per the case study. These additional measures could have likely had
nominal incremental costs, but as a benefit, these measures could have been effective at
saving lives from tsunami risks.
 Food storage: Nissan could have greatly increased its food storages to be sufficiently
adequate for its employees, their families and local residents within a critical radius.
  Fire system: Fires broke out in the Tochigi factory. This identifies a weakness for fire
preparation in the planning and identifying stages of risk management. The costs to prevent
these fires may also be nominal since one could roll out the current plan to cover the
overlooked areas where the fires took place.

Although the above assumed costs and benefits are predictions, the real costs and benefits of the
suggested risk prevention proposals are unknown due to a lack of information to calculate the cost
and benefits.

3. What could Nissan have done to assess the risk of disruption in their supply chain?

Answer: High involvements of a corporation like Nisan in world operations are usually vulnerable
to many disruptions. The smooth flow of operations as well as whole system of organization is
affected by these disorders.

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 consideration the impact and the probability of such
events occurring in 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 tsunamis was underestimated and this was a
major flaw in the impact matrix. Then Nissan would conduct a quantitative and qualitative analysis
to plan the types of responses necessary.

Using such experts familiar with Japanese disaster risks should have been a priority and placed
tsunami risks in the high risk zone. 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.

However, this could be costly as production costs 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 or contingency reserves could have been better put in place for critical parts.
Thus, following steps is taken by the corporate to evaluate the chance of disruption:

 Distinguishing current risk and assessing it: The corporate need to pin-point the chance
initial. Then the corporate should analyze the magnitude of the chance and develop a
modification strategy to cut back its impact. The corporate should calculate however such
variety of risk of provide chain disruption will have an effect on its revenue.
 Find alternatives for provide and delivery: The corporate should make good
relationships with its main suppliers so that it can understand which supplier can fulfil the
demands in difficult times.
 Flexibility of Processes: The Company should try to operate flexibly as the business
environment is quite dynamic. Therefore, the corporate should be flexible enough to adapt
itself to the changes in business environment. It helps the corporate in taking actions
quickly while not touching its processes.
 Be proactive: The corporate must be extremely alert regarding supply chain processes to
get a clear vision of supply chain operations.

4. How did Nissan’s product line strategy help or hurt its ability to respond to and recover
from the disaster?

Nissan maintained a simplified product line compared to its competitors. The company adopted a
build-to-stock strategy for just a few SKUs in each model and a build-to-order strategy for the rest.
Management believed that this strategy had not only helped it to simplify its operations and product
offerings, but it actually contributed to a significant increase in sales. Nissan and other Japanese
manufactures adopted many principles of TPS; however, Nissan leveraged a regional decentralized
supply chain structure while supporting a strong central control affecting global operations. This
structure benefited Nissan greatly as it reduced idle production caused by central supply chain
disruptions because many supplies were fabricated regionally. Also, Nissan’s corporate officers
represented a range of nationalities. This diverse regional experience facilitated a holistic ideology
for the company. In conjunction with regional supply chains, Nissan simplified its product line
and adopted a build to stock strategy for just a few SKUs in each model. Per the case study, these
supply chain management principles were key to the responsibility to keep production plans
running of which are crucial to disaster and recover. Nissan’s CFO, Joseph Peter, attributed
Nissan’s ability to respond and recover from disaster as a product from matching. Even though
Nissan’s supply chain disruptions were less than its competitors, the risk mitigation in supply chain
could have still been improved. This is why in 2012 Nissan announced it would increase
localization production of vehicles in the USA from 70% to 90% by 2015.

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?

After the catastrophic earthquake Nissan made several changes in their operational system. For
facing any kind of challenges in future they implemented:

 Reduce the dependency: Nissan hoping to reduce the number of components brought in
to North America from japan by 50% by the end of 2013 fiscal year.
 Increase localize manufacture: The localized manufacturing of cars was increased from
70% to 90% by 2015. Remarkable efforts were made by the company to better understand
the importance of secondary suppliers other than the primary suppliers in its supply chain.
 Reduce the supply risk: The buying processes mainly of critical components were
modified to reduce the supply risk concentration to tier 1 which is a less severe level and
to maintain the flow of business.

Nissan need to be fully prepared for any kind of disaster. Suppliers are very important for doing
business. For making sustainable business Nissan must have to maintain strong relationship with
all supplier and quick response to any kind of threat or disaster. If Nissan can implement the above
requirement their operation level will boost and they can compete with other big car industry.
Nissan trying to develop their risk management system and also efficient supply chain
management. If they implement these changes it will help to improve the future disaster recovery
and help to do better business.