The Case of Nissan Motor Company

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Nissan Motors is a Japanese company founded in the year 1933, with its headquarters located in Nishi-ki, Yokohama. In 1999, the company formed an alliance with a French automaker Renault. That gave the latter 43.4% of shares in Nissan. Along with that, the firm has also engaged in several other joint ventures with corporations such as Dongfeng Motors from China, and Daimler AG, Russo Technologies. Other collaborations include the ones with Ashok Leyland, as well as Mitsubishi Motors. Since its inception, the company has been aiming at selling its auto products globally, with that objective being largely achieved. The company has gained prestige among customers for its high quality and less expensive vehicles. It has also become the first auto mobile company to produce a fully functional electric vehicle that does not use fossil fuels. That has given it a competitive advantage over its competitors.

Furthermore, the future of the company is rather perspective as it seeks to manufacture autonomous cars that will be driver less. Despite that, the company has faced several challenges in the recent past precipitated by external factors such as the 2011 tsunami and earthquake, as well as the 2008 global financial meltdown. The affected areas include productivity, sales, and the market. At the moment, the company has issues with the increased competition, supply chain difficulties, increased labor and rental costs, as well as rising taxes, and transportation costs.

 

Generating Value

Operations management entails redesigning as well as control of material and quality in the production of services or goods. Hence, it ensures efficiency in business processes and fulfilment of customer needs. The Nissan Motor Company operations management system entails a flexibility strategy that allows the firm to integrate numerous perspectives as well as embrace diversity. The company employs officers of various nationalities experienced in overseas operations hence providing an effective operation of the supply chain.

Again, Nissan has delegated authority to departments where they have the permission to recognize and act on risks that affect their areas. However, when such threats are close-cutting, then a coordinated approach is recommended for concerned departments. Further, the company has studied and evaluated customer needs, which enable it to address them effectively. For example, it identified the car models requiring incorporation of the Global Positioning System (GPS) for their consumers. With such feedback information, Nissan gets to allocate resources where they are needed the most. Furthermore, information sharing is encouraged among the departments as well as the overseas facilities, which assists in quality improvement.

Through its operation management system, Nissan became the first producer of the zero emission vehicle that was completely electronic. Since the engine utilizes no fossil fuels, it has become considered as environmental friendly. That gives it an advantage, especially due to the continued debates on the risks of global warming. Again, the company has entered into cooperation with several partners enabling it to control the costs of expensive components of their products while still maintaining the quality. Further, with the integrative supply chain, the firm has the capacity to deliver their products to markets at manageable costs lower than that of most competitors. As such, it has become one of the available cheap and quality motor vehicles for the customers in most parts of the world.

There are numerous similarities concerning both service as well as manufacturing operations. First, the two processes focus on issues revolving around cost control. For instance, the manufacturing segment applies strategies meant to acquire low cost but high quality raw materials required for the automobile production. Similarly, the firm employs service providers with high output value but not charging much. In fact, if the cost of certain service operations seems too high, Nissan has opted for contracting and collaboration in such areas. Thus, the two processes aim at achieving maximum profits for the company. For example, there are service operations at Nissan centers on appropriate delivery mechanisms that attract the customer. On the other hand, the manufacturing process involves use of enhanced technology to provide qualities that capture the buyer's attention. As such, the objective is to increase sales, which will eventually contribute to better revenues for the company.

Theories and Techniques

Applying the right material requirement planning for Nissan Motors would have positive impact on the use of gross-to-net formula. To achieve that goal, the data files entered to MPR systems should come from three core sources including the master schedule, inventory records, as well as the bill of materials. The master schedule shows the projected manufacturing activities of the firm. It indicates the required quantity of each product as well as the timeframe for its completion.

On the other hand, the inventory records offer a description of the available inventory on order or hand. As such, it gets deducted from the material requirements. The file helps store data relating to a specific item based on time intervals. Therefore, it comprises of scheduled receipts, probable inventory on hand, as well as gross requirements. Further, other details such as lot size, lead time, and the supplier are also included in it.

The Program Evaluation and Review Technique and the Critical Path Method

Nissan Motors could apply a combination of program evaluation and review technique (PERT) and critical path method (CPM). PERT has significance in establishing the necessary timeframe required for a project completion. It concentrates on those programs where time factor has more importance than costs involved. On the other hand, CMP determines the processes that are critical to its completion, as well as those having total float. Nissan could apply PERT for activities such as the supply chain (Khandelwal, 2005). The reason for this is the fact that it allows estimate the period taken to get the product to the market and is only applicable once. In the case of CMP, it could be utilized for the assembly line process. It has the advantage as it considers the completion of one task before the other commences. In addition, it seeks to lower the costs incurred throughout the process.

Priority Rules Applicable for Job Sequencing

The four main priority rules used by the companies for job scheduling include shortest processing time (SPT). Along with that, it comprises of earliest due date (EDD), first come, first served (FCFS), as well as the critical ratio (CR). The SPT has advantage in processes where percentage of completion is determined by the number of processes remaining. It prefers beginning with those that consume less time and end with those with the highest time consumption (French, 1982). It is advantageous as it is first, simple and minimizes both the number of jobs and completion time for the processes. Further, it reduces congestion at the storage as well as the average job lateness. Nonetheless, its disadvantage consists in the fact that it increases job waiting time variances and does not take into consideration the due date information (French, 1982). Again, it ignores downstream.

On the other hand, EDD focuses on completing the work with the closest due date first. The use of this technique has the benefits as it is fast, avoids lateness, and is simplified. Nissan could apply it to first finish with manufacturing of the items that were first demanded by the market. However, it has several disadvantages including ignorance to the content of the remaining activities. Further, due to the need to complete those projects with due date first, the lateness of one activity can contribute to the tardiness of all the following activities.

On its part, the CR rule categorizes jobs based on the residual period to due date divided by the entire processing time remaining. After the computation, those activities with the minimum ratio are placed first. Its benefits include consideration of both the remaining work as well as the recognition of the due date of the work. This means that it integrates the downstream information for the project. Nevertheless, its disadvantages include prioritizing the past due activities above those that presently require completion (French, 1982). This contributes to increased job lateness. In addition, it does not take into consideration the numerous operations, which remain uncompleted.

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The FCFS considers that works should be done beginning with those that were registered fist and ending with those that came-in last. The technique has been considered as customer friendly and fair as it considers all of them to be equals. It has been considered as simple to apply and fast for the delivery process. Nonetheless, it does have several disadvantages. For instance, jobs consuming longer time leads to increased waiting time and hence idle downstream of resources. Additionally, it fails to take into consideration the remaining work as well as the scheduled timeline for specific activities. As such, more time could be spent on a job with ample time to complete while other works have already hit their deadline (French, 1982). That would eventually contribute to increasing number of late orders.

Theory of Constrain Process

The principle establishes small limitations that hinder a manageable system from proceeding as planned. It involves five steps, which include recognition, exploitation, subordination, elevation, and repetition of the process. The Nissan Motors could apply the theory for processes such as in the supply chain as well as the manufacturing. The use of the concept for the process would ensure creation as well as delivery of quality products at minimum costs. For instance, the managers could apply the method to evaluate the slow stages within the distribution channel (Linhares, 2009). That would help them recognize areas where more resources as well as attention should be put.

Therefore, it would help note the amount of time and money consumed at every stage and their likely impact on the entire processes. On the other hand, a defect on part of the product could lead to its poor performance. However, with the utilization of the theory of constrain concept, the company has the chances of determining the possible areas that require improvement other than discarding the entire item. As such, corrections are based on certain processes and thus save time and money while improving quality (Linhares, 2009).

The Forecasting System

The method entails eight steps to complete it. First, one needs to collect historical data. This implies definition of the essential elements present in the field. Secondly, managers should cleanup the information. At this stage, verification of the information contained therein is undertaken. Thirdly, a statistical forecast gets generated. The best fit model for application is the stock keeping unit (SKU). The fourth step involves preparations for new products introduction. The stage outlines the plans necessary for the organization to introduce new products. At step five, it focuses on the use of judgmental input to override statistical forecast. For example, feedbacks from processes such as sales channels as well as details from the market changes are used to ensure the correct or more accurate forecasting.

The sixths step entails baseline adjustments. That is to allow it to consider possible cannibalization effects that could emanate from a promotion system thus leading to losses. The stage seven involves the management of the collaborative planning, forecasting and replenishment (CPFR) as well as the vendor managed inventory. The step allows the communication between the customers and the management. Clients share data through CPFR process, which could contribute to the lowering or raising of the existing forecast. The final step should lead to the generation of a single projected number. For the system to be deemed as helpful, it should be in position to provide an explicit outcome. Otherwise, the vagueness of the process is seen as failure of the strategy.

The utilization of the system would have several advantages for the Nissan Motors. To begin with, forecasting would give the managers a more probable outlook of the future of the products and market performances. Again, it would ensure that customer's interest have become integrated in the vision of the firm (Jain, 2005). That would assist in keeping the clients happy thus retaining the market share. Further, with the used data being historical, the company learns from the past mistakes and avoids such blunders hence providing an enhanced output for its activities. At the same time, forecasting is a planning approach. As such, it provides an opportunity to look ahead and make possible targets that the firm would want to achieve in the years to come.

In addition, it also creates an opportunity for the company to make savings from some of the processes involved in manufacturing as well as the distribution channel. For instance, it would be easy for Nissan to predict the amount of raw materials as well as the number of employees they would require to complete a given task. That has significance in lowering the possibility of work done overtime or purchasing of raw materials when prices are too high. Along with that, it also ensures that the company remains competitive. With the ability to tell future performances in sales and revenue, the firm can predict the markets where it will likely beat its competitors and where it would fail.

Also, forecasting information may become used to attract possible investors to the activities of the company. Auto manufacturing requires expensive research to keep a firm competitive in the market. Therefore, it would require funding from outside sources or cooperation with other companies. Investors heavily rely on estimates to decide whether to commit their funds or not. Additionally, it could be utilized to reduce inventory costs. Transportation and warehousing costs take huge funding from companies. With an outlook of how the future market would be, the company can control its manufacturing to avoid overproduction that would lead to warehousing for a long time.

In addition, the system would permit Nissan Motors to draw actions for possible drop in sales. The company would be in the position to determine the possible economic, political or other crises that would lead to the decline of future transactions. Finally, it would also provide an overview of the market and the emergence of new customers, as well as their preferences towards new products. The manufacturing of a new product would require a comprehensive market study of the past performances, as well as customer feedbacks to make the right changes. Otherwise, failure to do a proper forecast for a new item in the market could lead to losses in the market fails to respond appropriately.

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Supply Chain Risks

A supply chain could be faced by several types of risks including

  • Strategy Risk

The hazard could be mitigated through proper identification process. That would entail a proper study of a particular issue before drawing up a strategy.

  • Environmental Risks

Such risks are mainly external and involve political threats as well as natural disasters. They can be lessened through proper evaluation of operations site as well as insuring the company.

  • Market Risk

They emanate from the market and include non-compliance, market and financial exposure, as well as the branding process. It can be mitigated by monitoring the product lines performances, compliance with the regulations, and avoidance of overreliance to third parties for business transactions.

  • Implementation Risk

The threat could be minimized by evaluating the processes applied by the company and establishing weak points. The activities hindering lead-times, production, as well as initial performances should become eliminated. Again, employees could be trained on the strategy.

  • Economic Risk

Such kind of hazards could be either external or internal. Exterior risks could be avoided by setting up strategy to shield the company. Internally, proper controls should be introduced to ensure prudent financial management.

  • Demand Risk

The fluctuations in the demand market could contribute to over production and hence losses. Market studies are vital to making sure such threats are avoided.

  • Supplier Risk

It could emerge from the providers of raw materials to the company. The contractors could provide low quality materials, which leads to declining product excellence. That could get reduced through thorough examination and testing of the materials.

Bearing in mind the 2011 earthquake and tsunami, the risks to the company could have been mitigated through insurance of the plant, employees' training, and monitoring the environment for possible natural disasters.

Theory Summarization

Just in Time (JIT). It is an approach whereby companies receive raw materials at the time they want to use them in manufacturing process hence lowering inventory costs. Nissan Motors could apply the technique to manage materials including metal, rubber, and products such as wheels. The company could make orders for them when it wants to utilize them.

Toyota Production System (TPS). The concept deals with the elimination of resources during a production process. Such resources include time, energy, human resource, and raw materials. Nissan could apply the approach in the factories where machines should be switched off when not in use. However, if the flow of information is interfered with, it could lead to idle manufacturing.

Lean Production. It eliminates waste within the manufacturing process. It aims at making available what contributes to value addition while lowering the use of everything else. The concept could be applied for the management structure where only the most important departments are retained while the rest get amalgamated. Nevertheless, it is disadvantageous as it lacks scientific qualities to support it.

Total Quality Management

It is a structured comprehensive concept applied by businesses in their management to enhance product and service quality through continuous refinements and persistent response to feedbacks. Nissan Motors could use the concept through the use of cause-and-effect diagram, control charts, Pareto chart, scatter plot, and the check sheet. The firm may apply them to establish the delays in supply chain management, or the quality of the parts and finished automobiles.

Favorable Location

Factor Weight Mexico City Mexico City Weighted Columbia, SC Columbia, SC Weighted
Political risk 0.25 70 17.50 80 20.00
Transport costs 0.20 40 8.00 90 18.00
Labor productivity 0.20 85 17.00 75 15.00
Rental costs 0.15 90 13.50 55 8.25
Labor costs 0.10 80 8.00 50 5.00
Taxes 0.10 90 9.00 50 5.00
Total     73.00   71.25
           

 

Nissan should locate its manufacturing plant in Columbia, SG. Comparing the weighted average for the two cities, the risk in Columbia, SG is lower than that of Mexico City

ABC Inventory Management

Class A - H2, J8, I5, E9, B8

Class B - D1, C7, A2

Class C - F3, G2

Improvement for inventory should be concentrated for goods F3 and G2 in class C. Again, efforts should be employed to limit the inefficiencies for class B, with majority of the products in class A being efficient.

Sustainability

Triple Bottom Line

It is an accounting outline that comprises of three parts, namely ecological, social and financial. Social part determines the firm's level of shared public responsibility. On the other hand, the ecological part establishes the environmental obligation while the financial one tells of the economic value that comes along with a corporation. The process could be used to understand the needs of both the workers and consumers hence improving delivery. Again, it could be applied to ensure protection of the environment as part of corporate social responsibility. Finally, it could purchase raw materials from the locality thus creating economic impact within the region.

ISO 14000 Standards

It includes a series of conservational principles a corporation is expected to apply in the management of environmental implications caused by their business activities (Delmas, 2009). Nissan has adopted several measures such as the use of clean energy that is meant to lower its dependence on non-renewable sources of energy. Again it seeks to recycle resources with the objective of reducing waste materials along with adopting carbon emissions reduction strategy.

Corporate responsibility Integration

Nissan Motors engage in several activities such as environmental cleanup, buying of raw materials locally, as well as employing local experts. Among the three, environmental could be a more appropriate technique, which the firm could utilize. Considering the global warming challenges being experienced today, people have become more cautious and are pressuring corporations to adopting conservationist practices. As such, vehicles with low or no carbon emissions would be deemed most suitable by the people.

Conclusion

Nissan Motor has several techniques that could be applied to propel its growth mechanism as well as avoid possible risks. Although the company has shown good performance in some areas, it is still faced with various risks. Nissan Motors experiences issues with external factors such as environmental disasters, as well as financial complications. Other challenges are internal such as the supply chain and a slowed production process. From the analysis, despite these problems, the company can implement several techniques such as the PERT and CMP, which will assist in the discovery of the areas where improvement could be necessary. The approaches recognize the failures of the processes and provide an opportunity for their rectification. Further, to lower the expenses incurred, techniques such as JIT and lean production could become utilized. While the former works to reduce wastage and save on inventory storage, the latter will help eliminate departments creating redundancy and employees who duplicate other workers jobs.

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