Supply Chain Management - Nissan - Essay Example

?Table of Contents Brief history of Nissan Supplier Initiative - 2 Management initiative - 3 Supply chain management - 3 Nissan co-development Initiative - 4 Ownership cost minimization - 4 Factors to enhance improvement initiative between supplier and customer - 5 Challenges to Suppliers development program - 5 Future trends -5 Theoretical Discussion -5 Key leaning outcomes - 7 Recommendations - 10 Conclusion - 10 Bibliography - 11 Introduction: Firstly, before delving into the actual models and theories that can be applied with respect to Nissan Motor Company’s supply-chain management, a brief consideration of the changes that took place should be engaged. As function of this, the first section of this brief analysis will focus upon the history of the actual problem that Nissan Motor Company faced, the realization of the fact that changes needed to be engaged, a delineation of what changes were settled upon, and a discussion of the way in which implementation of the supply-chain management model that was accepted took place. A Brief History of Nissan: The process of business within the 21st century has developed to a remarkable extent(Davies, 2004). Facing fundamental issues with cost and levels of continued business growth, Nissan’s European division chose to integrate with its supply chain as a means of evoking positive change. Nissan therefore reviewed the issues that their supply chain engendered and sought to evoke a further level of efficiency from it. Supplier Initiative/Management Initiative: 1: Referenced Definition of Supplier Development Some of the points that can be taken away from this particular case are with regards to definitions of supplier development, the different foundations which need to be put in place as a means of improving the initiatives that were engaged, a clear delineation of the objectives of the customer and supplier may seek to achieve from such improvement initiatives, the role of leadership within Nissan and how this impacted upon the supply-chain management that took place, the way in which commonality of purpose was achieved between the suppliers and Nissan, the performance measurements that were used as metrics, a close discussion of supply improvements that were engaged, the risks and benefits of engaging in such an initiative, mistakes that can be learned from, and future trends that are likely to be evidenced within other branches of Nissan; as well as throughout the industrial world. 2: The foundations which need to be in place to enable the improvement initiatives between customer and supplier contained in the case to take place Firstly, it must be understood that with regards to supplier development, Nissan fundamentally engaged in a redefinition of the way in which this process was previously affected. Through an internal investigation with regards to efficiency and the means through which product was provided, Nissan came to the clear understanding that if further profitability and viability of the brand was to be effected, a fundamental shift with regards the way in which products were supplied must be effected. As such, a reintegration with the definition and approach to supplier development was necessitated and affected. Supply Chain Management: As a function of the difficulties that have thus far been defined, Nissan Motor Company found it necessary to engage directly with the suppliers and enter into a new form of cooperation and communication that they term as COGENT. Within this particular approach, Nissan sought a level of oversight with respect to the design process and final production of the components that would eventually make their way into Nissan automobiles within Europe (Ludwig, 2010). Instead, COGENT was engaged as a means of overseeing and reviewing the supplier process. Nissan co-development initiative (COGENT) Realizing that the major drawbacks of the other approaches that they could take would place little incentive or integration within the actual supply mechanisms of Nissan, the Co-development initiative was a unique way that the firm sought to engage both stakeholders with a sense of urgency and shared concern. Ultimately, the future of the firm in Europe was at stake; therefore, if they were not able to engage a co-development initiative between the suppliers and the final product manufacturer (Nissan), no further levels of profitability could ever be engaged. In such a way, the COGENT framework and rubric was the underlying genius that helped to salvage the entire plan (Hoffman, 2007) 3: The various objectives that the customer and supplier may seek to achieve from such improvement initiatives Similarly, with regards to the various objectives of the customer and supplier may seek to achieve from such improvement initiatives, it must invariably be stated that the objective that the customer (Nissan) hopes to achieve was an overall reduction in cost and overall improvement in quality. Whereas it is been reference previously within this analysis that this objective is quite simple, seeking a viable means to affect this objective without fundamentally destroying the supply-chain or compromising the quality of parts and labor that was provided was the most difficult point to achieve. 4: The role of leadership at each company in establishing and supporting such initiatives Of all of the learning points that can be taken away from this particular example, it cannot be emphasized enough the role that leadership played within the Nissan firm as a means of establishing and supporting the initiatives which ultimately led to the streamlined nature of Nissan supply chain within Europe. Whereas it is expected for leadership to continually engage with its respective stakeholders as a means of providing lower-cost outputs and maximizing profitability, the leadership within Nissan, at least with regards to the specific case in question, not only realize that there was a problem and promoted a solution, they followed the solution through to the very end and ensure that all of the determinant parts were addressed as a means of reducing the overall cost to the end consumer and maximizing the overall quality of the end product. 5. How commonality of purpose is achieved, and how differences and problems between customer and supplier are resolved? Ultimately, the commonality of purpose was perhaps the more difficult aspects to achieve. What is meant by this is the fact that the Nissan firm ultimately sought to reduce price and maximize quality; whereas the suppliers were fundamentally fearful of any changes with respect to the way in which the products that they had come to produce and develop changed. However, by integrating these suppliers with the understanding that without a complete reintegration with the supply chain and a further level of input from Nissan executives and research staff, the nature and level of the supply chain in general would be in jeopardy. Whereas it can of course be seen as a mild threat, this particular approach worked; due in part to the fact that it was able to engage the supply-chain stakeholders with the seriousness of the situation – further encouraging them to participate and for their resources into seeking to streamline the process and achieve a commonality of purpose with Nissan. 6. What performance measures (metrics) are used to justify the initiatives and to measure and report achievement against targets? Similarly, a further learning point that must be engaged is with regards to the way in which Nissan Motor company measured the overall success and profitability of their line within Europe as compared to their product line and cost of production within Asia. Although it is of course noted that labor costs and development costs within Europe would be precipitously higher, the metrics of comparison between Asia and Europe served as a starting point with regards to Nissan being able to justify and measure the improvement and targets of the metrics for the initiative in question. Ownership Cost Minimization: As has been previously referenced throughout business history, many firms have attempted unsuccessfully to engage with their suppliers as a means of driving down costs while at the same time driving up profitability. However, the difficulty that was then faced was how to allow these respective entities to give up a degree of ownership of their development, design and production processes. Yet, as has been previously analyzed, this too was affected by engaging the supplier with the realization that future business integration between the two was at jeopardy; as well as the understanding that a shared cost minimization would have the added benefit of increasing the total units demanded and the tangential effect of increasing profitability for the supplying entities. Factors to enhance improvement initiative between supplier and customer The first factor that can be readily noted is with regards to the integration between the supplier and the primary product manufacturer. As such, as a means of enhancing the integration and improving the initiative, both partners needed to come to the joint decision that further integration between their own supply chains and development process was required. 7. What supply improvements were achieved by each company, and how? Likewise, a similar point is with regards to the supply improvements that were achieved by both companies. In short, Nissan was able to maximize the level of product that it received, as well as the quality, Fred decreased price. By the same token, the suppliers were able to measure their own supply improvements with regards to an increase in demand and a decrease in the overall cost of design and development as well as research. Once again, this harkens back to the mutual benefit that both of these entities were able to affect due to their cooperation. 8. What are the risks, costs and benefits of participating in such improvement initiatives for both customer and supplier? Firstly, with regards to the risk, Nissan was facing a situation in which it could no longer compete effectively within the European market due to the overall cost of its inputs. By much the same token, the suppliers who were supplying these inputs found themselves any unique position; able to create profitability within the short run – but fearful of the long-term ramifications of the overall loss of profitability that Nissan was in turn experiencing. As can readily be noted, the benefit which was gleaned was a resounding success. If it were not for the fact that Nissan Motor company had engaged with this particular model of supply chain improvement, it is doubtful that the firm would have been able to continue to compete within Europe and present the European consumer with a reasonably priced alternative to the many other entrants in the market. 9. Mistakes made/lessons learned as well as future trends A final point that will be referenced within this brief analysis is with regards to the fact that with Nissan Motor Company made a preliminary mistake of underestimating the level of response and integration that they would receive from the suppliers. In retrospect, it makes perfect sense that Nissan would assume that the suppliers would be reticent to change and the cultures of their respective departments would not lend themselves readily to the needs that Nissan had delineated. However, surprisingly, the rate of adaptation and change that these respective suppliers denoted was somewhat surprising and indicative of the fact that the existing needs were very well represented and helped to engender a sense of urgency with regards to the way in which future changes should take place. Challenges to Suppliers development program: The key challenges that were faced were of course with regards to the hesitancy of the suppliers to reduce the overall level of control that they had previously held over their research and development programs; as well as the level of control over their means of production. Further, level of trust was difficult to engage as such a path of development with regards to supply chain management had never before been integrated and caused a great deal of consternation with the stakeholders; especially as difficulties with it came to be noted. However, the determination of Nissan Motor Company to ensure that the new supply chain management model was pursued to fruition meant that the level of hesitancy that was exhibited by the suppliers was greatly mitigated. Future Trends: Some of the more effective theoretical approaches and practical solutions that have been engaged within the Nissan case that has been discussed have of course heavily impacted the way in which other firms choose to manage their supply chains. Ultimately, rather than viewing the relationship as immutable and merely constrained by the process of buying or selling a product, Nissan Motor Company was able to integrate with their supply chain in such a manner that the future of the relationship could evolve and work to meet not only the market in question but also the future determinants and trends that would likely require a new and more dynamic level of cooperation between the firm and its supply chain. Theoretical Approaches: The Krause Model was employed within Nissan Motor Company as a means of measuring the overall effectiveness of the suppliers and coming to the understanding that immediate action needed to be effected in order for the firm to remain relevant (Myers, 2010). Ultimately, the way in which the Nissan Motor Company engaged the Krause Model was with a certain degree of equity and fairness in the fact that it measured supplier utility and engaged these suppliers with an alternative method of business engagement; rather than merely dismissing them and seeking a lower cost alternative. By factoring in the fact that existing relations were worth a great deal more than severing the relationship and starting afresh, the firm was able to elicit an increased level of motivation between supplier and the end producer (Nissan). Further, the Kraljic Model was engaged as a means of seeking to specify at which particular juncture the breakdown was occurring (Suffolk, 2011). As can be noted in Figure 1.0, the Kraljic Model effectively delineates risk and profit impact upon a graduated four part scale. By utilizing such an approach, a resilient and definitive explanation of how the firm should seek to ameliorate the problems that it was presented with was clearly apparent. Figure 1.0 The first model that can convincingly be denoted within the Nissan Motor corporations approach to the issues at hand is with respect to what is termed as supply chain management optimizer nation model. Within this particular model, the Nissan Motor Company effectively reviewed the existing supply chain that they had within the current market (Williams, 2011). By performing mathematical, econometric, and efficiency examinations, it was readily denoted that the existing model was incomplete and that a reintegration with the supply chain was immediately necessitated as a means of accruing a further degree of profitability and success within the European market(Nokoya, 2013). Another model that can most certainly be noted is with regards to the reverse logistics that the Nissan Motor Company engaged as a function of determining where the problem was most clearly illustrated (Chappell, 2003). Whereas many firms within the current and past market have found themselves in a degree of financial problems due to the fact that they are suffering from cash flow and ineffectiveness with engaging with the markets, the Nissan Motor Company was able to engage in the reverse model of logistics as a means of denoting specifically where the problem arose (Fluick, 2012). Ultimately, by engaging the issue from a range of different standpoints, the decision makers within Nissan Motor Company were able to effectively determine what specific aspects most required immediate attention and to what degree. A third theoretical approach that can be taken is with regards to supply chain network theory. This particular approach focuses upon the fact that the supply chain, although overseen by a central entity (in this case Nissan), is nonetheless contingent upon all of its component parts. In effect, even though a particular aspect of a supply chain might be efficient, the failure or drawback that might be experienced in one particular facet of it is enough to challenge the effectiveness of the entire supply chain. Nissan realized this in its COGENT changes; understanding that re-integrating with the supply chain needed to be done in a nuanced manner. A fourth theoretical approach that can and should be engaged is with respect to organizational theory. Even though organizational theory is mostly utilized with respect to internal decisions for a specific firm or entity, organizational theory can effectively help to explain the situation and the choices that Nissan chose to make with regards to the case in point. Realizing that the supply chain was an extension of the profitability and success of the firm itself, Nissan utilized organizational theory as a means of engaging the supply chain and seeking to express a degree of management and oversight to it. Key Learning Points: Although it was not clearly at alluded to within the video in question, it must be understood that the risks, costs, and benefits of participating in this improvement initiative, both from the customer and from the supplier side, were grave. Firstly, with regards to the risk, Nissan was facing a situation in which it could no longer compete effectively within the European market due to the overall cost of its inputs. By much the same token, the suppliers who were supplying these inputs found themselves any unique position; able to create profitability within the short run – but fearful of the long-term ramifications of the overall loss of profitability that Nissan was in turn experiencing. As such, the risks to both partners were somewhat diminished if one considers the long-term ramifications of the business engagement that was exhibited prior to any initiative taking place. This provides the key learning point of understanding the fact that movement within supply chain management change is not a uniform process; but rather something that must be engaged regardless of the risks. Recommendations: Accordingly, from the information that is thus far been presented, it is patently obvious that the Nissan Motor Company was only able to experience a level of success due to the fact that they employed several different models and theoretical approaches as a means of specifying the root problem, cause, and means for potential solution. This reliance upon a litany of different theoretical approaches and models is ultimately in and of itself a great strength. Conclusion: As such, this particular case not only reflects a best practice with regards to the Nissan Motor Company, it also reflects the fact that a given firm, operating within the margins, can seek to improve their business, decrease costs, improve quality, and promote a benefit to the end consumer without necessarily incurring any long-lasting negative impacts. Bibliography Chappell, L 2003, 'M-B, Nissan keep tabs on suppliers', Automotive News, 77, 6036, p. 28-N, Business Source Complete, EBSCOhost, viewed 22 November 2013. Davies, C 2004, 'Real-time build-to-order at last?', Supply Chain Europe, 13, 5, p. 47, Business Source Complete, EBSCOhost, viewed 22 November 2013. Fluick, R 2012, 'The expansion of Nissan's Sunderland plant will provide opportunities for the UK supply chain', Marketwatch: Automotive, 12, 9, p. 4, Business Source Complete, EBSCOhost, viewed 22 November 2013. Hoffman, W 2007, 'Single-Lane Supply Chain', Traffic World, 271, 49, p. 16, Business Source Complete, EBSCOhost, viewed 22 November 2013. Ludwig, C 2010, 'Getting closer all the time', Automotive Logistics, 13, 4, pp. 16-22, Business Source Complete, EBSCOhost, viewed 22 November 2013. Ludwig, C 2009, 'For richer or poorer…. (cover story)', Automotive Logistics, pp. 20-24, Business Source Complete, EBSCOhost, viewed 22 November 2013. Mireles, R 2006, 'Nissan snags its supply chain on a sandbar', Logistics Today, 47, 3, p. 14, Business Source Complete, EBSCOhost, viewed 22 November 2013. Myers, S 2010, 'Planning and collaboration under scrutiny in Brussels' Logistics Manager, p. 08, Business Source Complete, EBSCOhost, viewed 22 November 2013. Nokoya, Y 2013, 'The Logistics of Nissan', Automotive Logistics, 16, 3, p. 14, Business Source Complete, EBSCOhost, viewed 22 November 2013. Suffolk, T 2011, 'Nissan's integrated supply chain', Logistics Manager, p. 08, Business Source Complete, EBSCOhost, viewed 22 November 2013. Williams, M 2011, 'An economic approach to logistics', Automotive Logistics, 14, 1, pp. 36-38, Business Source Complete, EBSCOhost, viewed 22 November 2013. Read More