Ashraful Islam Akash

123 0846 630

Sec: 09
Course: Mgt314
Submitted to: Maruf Ibne Wali (Mfw)
Date of Submission: 13.11.2016
T
he 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.

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 costs of this seem to be nominal as trivial resources were used to transport and
sustain only two representatives in this collaborative initiative. 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. This sharing of information and
solutions assured that the company as a whole could adequately, 1. allocate supplies, 2. manage
production and 3. empower actions to those regions with critical needs. This assured the flow of
accurate information and solutions that reflected actual needs. The allocation of supplies likely
had substantial benefits. 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 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
By 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.

What else could Nissan have done to prepare for

and respond to the disaster? Try to articulate the
costs and benefits of your suggestions.

Nissan underestimated the damages caused by the tsunami, which was a product of the
earthquake. Nissan could have created new tsunami evacuation routes and centers that took into
account tsunami risks. Also, Nissan could have greatly increased its food storages to be
sufficiently adequate for its employees, their families and local residents within a critical radius.
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. According
to the Exhibit 2 in the case study, fires broke out in the Tochigi factory. This identifies a
weakness for fire preparation in the planning and indentifying 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.

What could Nissan have done to assess the risk of

disruption in their supply chain?
Nissan did have an organization dedicated to the risk management. 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 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 probability/impact matrix. Then Nissan would
conduct a quantitative 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 risks. It is ironic that the tsunami risks in Japan were underestimated because,
tsunami, is a Japanese word and tsunamis have a long history of destruction in Japan spanning
many centuries. The tsunami risks should have been easily identified through Delphi techniques
when it came time to brainstorm and identify potential risks. 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 bottle necks 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 and/or contingency reserves could have been
better put in place for critical parts. Now contingency reserves could have worked, provided the
reserves were sufficient enough. Critical parts have been identified as a major cause for
production bottlenecks; non-local critical parts could be stored and readily available during
shortages. Yes, this would prevent a sudden scarcity of critical parts and prevent bottlenecks but
only until the dependent production facilities became functional and contingency reserves
werent depleted. Nevertheless, there would be housing costs for contingency reserves

How did Nissans product line strategy help or hurt

its ability to respond to and recover from the
disaster?

Toyota transitioned away from push manufacturing and reduced buffer stocks by implementing
the principles of just in time manufacturing. This became known as the Toyota Production
System. TPS required close coordination with production because it eliminated large buffer
stocks. This system was prone to risks when disruptions in the flow of resources could cause idle
manufacturing stages downstream. 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, Nissans 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. Nissans CFO, Joseph Peter, attributed Nissans ability to
respond and recover from disaster as a product from matching. Even though Nissans 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.
How will the operational changes announced in
2012 affect Nissans exposure to future
disruptions? How will it affect its steady-state
operations? What trade-offs is management
making and why?
Nissan made several changes in its operations in its business as a preventive measure to face any
kind of challenges in future. The company made several efforts to reduce the dependency of its
foreign factories on Japanese manufactured components. 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. The company took many lessons from the calamity which encouraged them to
modify its approach for a better future of the company. 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. Every firm ought to strike better next time. Thus,
Nissan was required to be fully prepared and even better than before the next disaster strikes. To
develop a better sustainable business strategy the company must have an organised list of
suppliers of all level as a response to any type of threat or disaster. Developing better risk
management techniques and an efficient supply chain are also good for any business. Proper
brought up and implementation of these changes can surely help in developing an improved
future disaster recovery plan that will help in flourishing the business and more tolerant to severe
disasters.
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.

Nissans response towards the earthquake and tsunami followed the principles mentioned in its
emergency-response plan. Nissans Global Disaster Control Headquarters, headed up and
summoned by the chief operating officer to evaluate the effect on operations and to supervise the
reestablishment of activities. To coordinate the global recovery actions, a Recovery Committee
was set up, particularly to optimize the entire supply chain. Following measures were taken into
practice by the Recovery Committee to coordinate the companys response to the disaster.
Sharing of information- Nissan developed an integrated processing unit to innovate the idea
process and contribute in the improvising phase. The management identified that the units
operating outside Japan would need information but doing so might affect those on the ground
handling the disaster. Moreover it might also be used by the other market players for improvising
their own shortcomings. As a counter response towards these two problems operating units from
all over the world were asked to send two staff members to Japan to work together on the
problems best utilizing their knowledge and skills. Rather than acting as a drain to the local
response, all the regional players contributed to solutions. Moreover it helped units from other
industries in attaining a better understanding of the problems Japan was coming across and
helped in building up the organization. In this situation the diversification of the company helped
it to overcome problems. Allocation of supply- It became difficult for the company after the
disaster to meet the weekly and monthly capacity constraints. Distribution of component parts
was getting difficult across the operational network of the company. The company assembled all
the departments of the company like marketing, sales and the regional supply chain management
functions for the effective allocation of suppliers globally focusing highest margin goods. For
example the supply of integrated Global Positioning System (GPS) united was inhibited by the
disaster. Nissan mainly focused on providing integrated GPS systems in high margin cars rather
than low margin cars because they were lower end models and could have been sold without an
integrated GPS system. The companys strategy of optimum utilization of scarce resources at the
time of crisis helped the company in earning fair revenues at that time. Production Management-
Obviously any crisis can hamper the production line of a company. Nissan decelerated the
upstream and downstream production of anticipated bottlenecks in a strategic way prioritizing
instock and in-transit inventory within their network which helped the company in saving its
costly overtime. Pulling vacation time in the months of April and May also add up to the
effective time management skill of the company because of which the company became able to
find supply alternatives of critical components. Empowering Action- Considering the situation of
crisis Nissan took a bold step by acting in a fast and flexible manner. The company made the
management master of its own will so that they can make decisions accordingly in the field
without considering any senior authorities. Foresightedness of the company and before handed
establishment of a well-developed emergency response plan helped Nissan to act accordingly. To
make speedy decisions fast analysis of the existing situation is required and as an example
Nissan launched the Global Disaster Headquarters within 15 minutes after the occurrence of the
earthquake. b. SWOT Analysis: STRENGTHS: o Post Disaster adopted effective strategies o
Operating flexibly o Highly recognized brand o Leading innovator o Strategic Partnerships o
Before handily prepared proper disaster recovery plan o Financially performs well in terms of
increasing revenue WEAKNESS: o Highly dependent on the overseas market o Recall of various
model cars o Poor hold on emerging markets like India OPPORTUNITIES: o Production of fuel-
efficient cars considering ever rising fuel prices o Increase in the demand of eco-friendly cars o
Partnership with other firms THREATS: o Technical problems o Natural disasters o Raw
materials becoming expensive o Increasing value of Yen currency o Human threats o Industry
facing global competition

What else could Nissan have done to prepare for

and respond to the disaster? Try to articulate the
costs and benefits of your suggestions.
Development of an appropriate recovery plan is quite important for a firm considering various
unforeseen natural disasters like floods, tsunami, earthquake etc. Nissan had a fully-fledged
earthquake emergency-response plan prepared before handily. Thus, few more measures which
could have been a part of Nissans disaster responsive strategy include: Higher level executives
or top managements involvement: At the time of such crisis senior level executives or top
management should come forward to support the disaster recovery panning process best utilizing
their knowledge and skills. A plan can only be implemented properly if the coordination of
various processes in the plan has been adequately done. They must take this responsibility. Both
financial as well as personal involvements are required. Committing ample time and resources
can help in the proper development of the plan. Data center maintenance: Data center includes a
collection of gateways, firewalls, switches, routers, network and security solutions etc. that helps
in the maintenance of a physical backup of the information as well as in storing of information. A
database consisting of all the information such as production processes, stock details, materials
required, manufacturing operations, in-transit inventory, business concerned activities and
employee details need to be maintained by the company. To ensure the safety of vital records and
critical documents it should be kept at a disaster evacuated area.
Assessment of the risk: Analyzing the risk and its impact on the business should be undertaken
by the recovery committee established by the company. Foreseeing possible disasters like
technical, natural or human threats are included in it. An analysis on all the operating units of the
company should be done to determine the consequences or impact of disaster scenarios on them.
Situations as worst as the destruction of whole building need to be readily prepared for. Thus the
committee is required to take the proper measures to face such kind of disastrous situations after
analyzing the impacts or consequences. Organize and document the plan: A properly formatted
and detailed plan must be prepared for detailed procedures. A consistently formatted plan is a
flexible plan. It includes detailed procedures that need to be followed before, during and after the
disaster. The procedures must also include a backup plan in case of the failure of the first plan.

Testing the plan: Thorough evaluation and testing of the plan regularly (yearly) is necessary
before its implementation or when it is required. Thus, the proper documentation of the
procedures for the testing and evaluation of the plan should be done. It boosts the confidence of
the company that all the necessary measures are included in the plan. Other advantages of testing
the plan include: o Identification and marking of red areas in the plan which need to be
appropriately modified. o Helps in the motivation of the personnel to develop and maintain the
disaster recovery plan. o Helps in training the team members as well as managers. o Helps in the
analysis of the compatibility and feasibility of the plan within the firm. o Helps in understanding
the companys ability to recover from the calamity.

What could Nissan have done to assess the risk of

disruption in their supply chain?

High involvements of a company like Nissan in global operations are often prone to several
disruptions. The smooth flow of operations as well as whole system of organization is affected
by these disorders. The rise in risk factors of supply chain has landed many firms in a
challenging situation as they are working in a quite risky business environment. Thus, following
steps can be taken by the company to evaluate the risk of disruption: Identifying current risk and
assessing it: The Company need to pin-point the risk first. Then the company should analyze the
magnitude of the risk and develop a modification strategy to reduce its impact. The company
must calculate how such type of risk of supply chain disruption can affect its revenue. Find
alternatives for supply and delivery: The Company 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 company must be flexible enough to adapt itself to the changes
in business environment. It helps the company in taking actions rapidly without affecting its
processes. Be proactive: The Company needs to be highly alert regarding supply chain processes
to get a clear vision of supply chain operations.

How did Nissans product line strategy help or hurt

its ability to respond to and recover from the
disaster?

Nissan implemented a moderate product line strategy as compared to its rivals. As the capacity of
the company was limited after the catastrophe, the company chose build-to-order strategy for
highly customized models with lesser demand and build-to-stock strategy for models having
higher demand. As the production process of the company got highly affected by the disaster;
this strategy helped the company in earning fair revenues even at the time of adversity. The
production of models with lower demand was done on the basis of order or requirement to
prevent wastage of raw materials, operate efficiently and to earn fair revenue. The need of hour
for the company at that time was to increase its sales and earn fair profits to keep running its
business operations without any obstacles. The strategy of the company worked quite well and it
increased the flow of income which ultimately helped in strengthening the financial condition of
the company which was a major issue. b. As mentioned in the case, Nissans 50 major suppliers
were weakened and its six production facilities got damaged. Thus the strategies followed by
Nissan surely worked well for the company and helped it recovering from a draining situation.
The advantages of build to order strategy are given below: c. The biggest advantage of build-to-
order strategy is that it helps in attaining specialization in the manufactured products by
designing the product according to the requirement, expectations and specifications of the
customers. This strategy also helps in excluding unnecessary stock from the company by
manufacturing goods as required by the customers.

How will the operational changes announced in

2012 affect Nissans exposure to future
disruptions? How will it affect its steady-state
operations? What trade-offs is management
making and why?

Nissan made several changes in its operations in its business as a preventive measure to face any
kind of challenges in future. The company made several efforts to reduce the dependency of its
foreign factories on Japanese manufactured components. 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. The company took many lessons from the calamity which encouraged them to
modify its approach for a better future of the company. 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. Every firm ought to strike better next time. Thus,
Nissan was required to be fully prepared and even better than before the next disaster strikes. To
develop a better sustainable business strategy the company must have an organised list of
suppliers of all level as a response to any type of threat or disaster. Developing better risk
management techniques and an efficient supply chain are also good for any business. Proper
brought up and implementation of these changes can surely help in developing an improved
future disaster recovery plan that will help in flourishing the business and more tolerant to severe
disasters.