Nissan Operations Management: Providing Value To Customers And Ensuring Sustainability

Nissan Automobile

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In 1999, Nissan developed a new way to manage their business when Renault helped prevent the company from going into bankruptcy with the purchase of a significant amount of stock.  This paper will detail how Nissan now generates value for its customers and achieves a competitive advantage through operations management as well as compare and contrast service and manufacturing operations when it comes to providing value to customers.  Theories and techniques will also be detailed including the critical path method and the program evaluation and review technique and how Nissan uses these techniques in their business.  Data analysis tools and techniques to drive forecasting systems and identify supply chain risk will also be discussed and how Nissan addresses these topics in their business model to be a responsible company and to ensure sustainability.

Nissan uses operations management to generate value for its customers in several ways.  One way they generate value is to hire officers from different global regions, this way they are eliminate any potential miss-communication derived from cultural differences (Schmidt, Kimchi-Levi, 2013).  This allows Nissan to better understand the needs of the regional customers as well as understand any feedback they may receive.  Another way Nissan uses operations management for customer value is in the way they address risk and identify issues as early as possible. In 2011 when Japan was hit with a significant earthquake, Nissan implement a plan developed early to address the situation with a focus “on human life, prevention of follow-on disasters, rapid disaster recovery and business continuity” (Schmidt, Kimchi-Levi, 2013 p.5).  This process allowed the company to address their manufacturing facility and supply chain in an expedient manner in order to supply cars to their customers with little or no delay and prevent the loss of sales due to lack of available inventory.  They also utilized logistic time of shipping from Japan to the United States, about 20 days, in order to identify alternative sources for critical items and used air instead of sea to shorten lead time to mitigate stock out risk. 

Nissan mission statement 2013. “Nissan provides unique and innovative automotive products and services that deliver superior measurable values to all stakeholders in alliance with Renault.

Nissan uses operations management to generate value for its customers in several ways.  One way they generate value is to hire officers from different global regions, this way they are eliminate any potential miss-communication derived from cultural differences (Schmidt, Kimchi-Levi, 2013).  This allows Nissan to better understand the needs of the regional customers as well as understand any feedback they may receive.  Another way Nissan uses operations management for customer value is in the way they address risk and identify issues as early as possible. In 2011 when Japan was hit with a significant earthquake, Nissan implement a plan developed early to address the situation with a focus “on human life, prevention of follow-on disasters, rapid disaster recovery and business continuity” (Schmidt, Kimchi-Levi, 2013 p.5).  This process allowed the company to address their manufacturing facility and supply chain in an expedient manner in order to supply cars to their customers with little or no delay and prevent the loss of sales due to lack of available inventory.  They also utilized logistic time of shipping from Japan to the United States, about 20 days, in order to identify alternative sources for critical items and used air instead of sea to shorten lead time to mitigate stock out risk. 

Mission Statement

Nissan service operations and manufacturing operations have differences and similarities however both work toward organizational excellence.  They are similar when it comes to doing business on a global basis.  From a manufacturing perspective, they decentralized their supply chain while service management they hire people from target regions in effort to avoid any cultural differences.  One way they are different is with the approach to product offering.  The service side of a business had a desire to offer as many options as possible in order to satisfy any and all customer needs.  Nissan made an effort to minimize their product offering which, helped reduce the size of their supply chain and improved their trade working capital by reducing inventory.  This resulted in a more competitive price point and increased sales (Schmidt, Kimchi-Levi, 2013).

Operational management at Nissan will utilize MRP in order to provide the best customer service while meeting and improving their metrics.  Gross-to-net calculation for MRP planning involves looking at all inventory available, all raw stock as well as parents including the full bill of material contained in the parent.  Nissan may have a requirement for a certain vehicle, each vehicle will need an engine so they need to understand inventory on the complete bill of material contained in each engine as well as how many build engines they have on hand and any sub-assemblies that may be built.  Inputs required to get a complete inventory status needed for material requirement will be all raw stock, all work in process, and all final assemblies or finished goods on hand as this will provide a total inventory value.  This information will be used by operational management in order to understand what components need to be ordered and how much labor will be needed to build final assemblies.  It will also help OM to manage inventory turns and avoid stock outs providing the best customer service possible while improving their metrics.

• The Theory of constraints is the information on everything and anything that may cause constraints for a business and or organization to reach key performance indicators and goals. There are five steps to the TOC.  .
• With any major shift in a company, issues and concerns are imminent and must be addressed accordingly in order to successfully move on and implement the changes. In the case of SAP they are faced with a major concern right off the bat in regards to building their own datacenters facilities or teaming up
• The issue with that is though is that he must now make a decision accordingly in which might affect the new target and strategy SAP is trying to transition into. When CEO’s are faced with such decisions, they must dig deeper in order to choose the best solution for their company. McDermott must now weigh out the Pros and Cons against each other for each situation.
• With each decision chosen issues will still arise such as teaming up with a notable name. Even though IBM might be a top company in its field, can it guarantee quality service for SAP like it provides for itself? These are all issues faced alongside the main issue of possessing ownership of the cloud infrastructure themselves.

• Lean operations focus on exactly what the customer wants and eliminates waste through constant improvement. (Heizer and Render, 2014). Lean production eliminates waste such as transportation, inventory, over processing, and overproduction. Lean system uses the five S’s, sort/segregate, simplify/straighten, shine/sweep, and self-discipline/sustain to establish operation. The benefits for Nissan using this system would be building stronger customer relationships by providing them with exactly what they want. The disadvantage of this system would be making a product that does not demonstrate what the customer wants. For example, after the disaster of 2011, Nissan needed to identify which vehicles had GPS but without the lean system in place they may not been able to determine this (Schmidt & Simchi, 2013).
• Total quality management (TQM) principles and tools help improve quality and productivity in business operations. TQM is a system based on the idea that every member of the company is committed to high standards. It is a management tactic to long term success by providing the upmost customer satisfaction. TQM has seven key concepts; policy planning and administration, control of purchased material, product design and design change control, production quality control, user contact and field performance, corrective action, and employee selection, training, and motivation. Nissan improves quality by executing quality management through their company to help ensure the quality of their products. Nissan’s concept to have a quality assurance department responsible for each vehicle from beginning until the end of production implements quality control. Nissan improve quality by managing closely considered in-stock and in-transit inventory within their network and slowed production upstream and downstream of anticipated bottlenecks (Schmidt & Simchi, 2013). Nissan emphasized rapid and flexible action. Management was empowered to make decisions in the field without lengthy analysis from a central authority which in returned improved quality and deliverance of its products.
• Just in time production is a system aimed to mainly reduce flow times, continue improvement and force problem solving to reduce supply cost. The benefits of Nissan using this system is it cut cost by keep inventory numbers low, improve quality by reducing lead time, and reducing damage cost by correcting potential sources of mistakes. (Heizer and Render, 2014). The disadvantage of Nissan using this system is the fact that the amount of inventory on hand would be limited causing conflict with production. Another disadvantage would be because of JIT short lead time; it might not be enough time to make changes that are requested.
• Nissan would benefit from using a forecasting system for production. A forecasting system involves seven steps. The first step in forecasting system is to determine the use and who would need to use it. Nissan could be using this for their production. This would show dates for deliveries of different models. Make sure that the delivery schedule is meet. Next, Nissan would need to know what items needed to be forecasted. They would use this for their manufacturing of automobiles and what current models where be built. Then, creating a timeline for delivery for to the customer in the short and long term. Nissan would need both because they are using to styles for manufacturing. With the built to stock and built to order a longer time line would be need to meet both plans.
• Nissan would need to know what the best model of forecasting for them is. They could use either qualitative or quantitative. With, Nissan needing to be accurate on numbers and delivery data a quantitative model would be the best fit. Once this these are laid out Nissan would need to start gathering data. The data would include historical information about parts used and their cost. They would need to know their suppliers and order to delivery timelines just to name a few. With the data Nissan needs to create a system of inputting and analyzing the data. Nissan would need to keep collecting data and validating and re-validating it to keep on the forecasted target. If they start to miss; Nissan would need to reforecast.

Conclusion

Nissan OMs need to understand the impact to their triple bottom line, people, environment, and profit (Heizer 2014, p.189).  This understanding is the most significant and comprehensive principle of corporate responsibility.  What impact does a manufacturing site have on people in the local community as well as their employees and customers?  While it may employ a number of locals and regionally be able to serve customers very well however the local may be a prime tourist location and building a plant in the area would devastate the tourist’s destination.  It is important to understand building in this location may have a positive impact on people, those they hire as well as customers, and a positive impact on profit however there would be an adverse impact to the environment.  Nissan operation managers need to understand the impact the company has on people, the environment, and the profit in order to make decisions that will support and drive the company’s sustainability. 

In summary, SAP can have a significant impact on Nissan’s metrics. Links and communication with all aspects of the business such as sales and marketing with operational management will help to understand customer needs.  A robust MRP system will drive an efficient process to bring material in from the supply chain and ship to the customer.  The goal is an on-time delivery of a quality product every time while becoming a better company.  The right analytical tools will help identify and eliminate risk to delivery and quality as well as eliminate waste.  Nissan is a company that is driven by people, the environment and profit in order to gain market share and provide favorable results to shareholders while being a responsible company to both people and the environment.

Reference:

Environmental Management. (n.d.). Retrieved September 23, 2016, from https://www.nissan-global.com/EN/ENVIRONMENT/APPROACH/MANAGEMENT/

Heizer, J. (2014). Operations Management, 11th Edition. [VitalSource Bookshelf Online]. Retrieved from https://bookshelf.vitalsource.com/#/books/9780133558203/

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