Nissan Automobile Company: Operations Management and Business Requirements

This paper explores how Nissan generates value for its customers and achieves a competitive advantage through operations management. It discusses theories and techniques including critical path method and program evaluation and review technique. It also covers how Nissan addresses supply chain risk and sustainability.

Running Head: NISSAN AUTOMOBILE
Nissan Automobile Company
Student Name
Institution
Date
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Running Head: NISSAN AUTOMOBILE
Table of Contents
Introduction.................................................................................................................................................3
Nissan Automobile......................................................................................................................................3
Mission Statement......................................................................................................................................4
What We Do................................................................................................................................................4
Who We Are................................................................................................................................................4
Problems.....................................................................................................................................................5
Business Requirements...............................................................................................................................7
Conclusion...................................................................................................................................................9
Reference:.................................................................................................................................................11
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Introduction
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 Automobile
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
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Running Head: NISSAN AUTOMOBILE
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 mission statement 2013. “Nissan provides unique and innovative automotive products
and services that deliver superior measurable values to all stakeholders in alliance with Renault.
What We Do
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.
Who We Are
Nissan service operations and manufacturing operations have differences and similarities
however both work toward organizational excellence. They are similar when it comes to doing
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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.
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Problems
 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.
Business Requirements
 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
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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
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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.
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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.
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