SUPPLY CHAIN MANAGEMENT CASE STUDY-NISSAN

P.Satish.Kamath

School of management studies CUSAT, Kochi-22 [email protected]

Abstract: Many successful organizations are now following supply chain management as a benchmark for themselves. In different organizations and firms the operation of supply chain management varies greatly and it is complex. Supply chain management is practiced by both servicing and manufacturing industries. Organizations are now adapting SCM to earn more profits and provide more customer satisfaction. Knowledge quality of a firm is the key factor to success in a competitive business environment which is now admired by all the successful organizations. SCM is the management of the raw materials, with proper planning, quality manufacturing and correct distribution. To develop a product it is crucial to know about the customer demands and expectations. With this knowledge combined with new technology and marketing a firm creates successful products. Sometimes companies solely try to improve but most of the time they discuss with their suppliers to gather knowledge about the customer requirements. This knowledge exchanging process enables the firms to learn more about their customers and also about the suppliers awareness about the market. This is beneficiary to both supplier and buyer firms. It is a common scene that powerful organizations insist their supplier to adapt their proposed process to improve the product quality and coordination. Keywords: SCM, 1.0 INTRODUCTION

1.1 Overview of Nissan Nissan, established in 1933, is a well-known brand in manufacturing cars of todays automobile industry. Nissan Motor Company Ltd, which in short known as Nissan, is a market leading auto manufacturer with the headquarter in Japan. This multinational automaker was a central part of Nissan group. But with the reformation under Carlos Ghosn, the CEO of Nissan, it has become independent automaker. Their main products include, automobiles, outboard motors and forklift trucks. Nissan used to market their autos under the brand name of Datsun which is a renowned car manufacturer. It is affiliated with Renault S.A. which holds its 45% of shares while Nissan has 15% of Renaults shares. Its listed in the top 3 auto manufacturers in asia. It also owns the luxury brand called Infinity. With a revenue of over $93 billion (2008) and operating income of over $1.5 billion (2008) its one of the biggest automaker in the market. It has over 2 hundred thousand employees with a determination of constant improvement. 1.2 Supply chain management Supply chain management (SCM) is the combination of art and science that goes into improving the way your company finds the raw components it needs to make a product or service and deliver it to customers.

Physical Flow

Receiving

Manufacture

Packing

Distribution

2.0 SWOT- Nissan and the suppliers

Supplier

Customer

Purchasing

Scheduling

Master production plan

Demand management

Information Flow

When the question where we are now? was introduced, we got the SWOT of Nissan and the suppliers in the answer. 2.1 Where we are now?

Strength: 1. big number of dedicated clients 2.good brand image 3. long term experience in business 4. good quality, lower cost and proper delivery gurantee.

Weakness: 1. communication gap with the suppliers

2. lower status than some competitors

3. suppliers never concerned about performance assessment.

SWOT
opportunities: 1. estublish a codevelopment upbringing 2. save the time in the operation 3. omit and reduce the waste during production 4. supplier relationship management to achieve high quality supplies. Threats: 1. high competition in the market

2. customer loyalty in stake

3. all the weaknesses stated above are also considered as threats.

2.2 Where we want to go? Reduce and omit the wastes during the operation. Achieving an improved QCDDM Omit the communication gap between Nissan and the suppliers Making more attractive and featured automobiles. Reduce the time during the process.

3.0 Supplier Development

Supplier development can be loosely defined as the process of working collaboratively with your suppliers to improve or expand their capabilities. An example may be teaching a supplier how to manufacture a type of item that they never manufactured before for the purposes of giving you the option to buy, rather than make, that item. In recent years, it is has become increasingly common for buying organizations to train their suppliers in Six Sigma and Lean techniques. (Dominick, 2006) Supplier development makes the suppliers to develop themselves with the help of the buyer company to make new and more advanced products. We can say that, customers are responsible for the demand condition, manufacturers are responsible to react to the condition and suppliers are responsible to deliver the quality goods for the manufacturers to react most effectively to the demand.

3.1 Stages of supplier development Supplier development has 4 stages. It includes identifying the supplier base as well as assessing and rationalizing, problem solving improvement, proactive condition developing and , integration development. 3.2 Customer and supplier co development:

Customer and supplier co development can be successful if the customer has the right capabilities and expand it with the suppliers. According to Henry K. (2001), supplier development is a joint effort by the suppliers and buyer companies to bilaterally develop the suppliers abilities and potentials in one or more of the following areas 1. 2. 3. 4. 5. 6. 7. 8. Quality Delivery Cost Technology Environmental responsibility Time to market Financial feasibility Managerial capability

4.0 Supply chain productivity, superiority and World-class alliance: Main goal of a successful management system is to boost the profitability by generating more revenues and by minimizing the cost and waste by omitting useless products and non-valued products. Schonberger (1986) first commenced about the notion of world class industrialization and the keys to achieve the world class performance. 4.1 Principles of World class supply chain management: 4.1.1 Time to market: Use of Proper Time to enter in a market with a new product is an important issue. Previous research proved that more than forty percent of market share can be occupied in a market with a new product if its been introduced in a proper time. Earny et. Al. (2005) cited that Late entry is a drawback to gain good market share and sometimes the firm doesnt get good market and has to withdraw because of being late. It is important to reduce the process time to introduce a new product early so that more market share can be taken. Researches show that world class organizations reduce their process time by 30% to introduce a new product to get more market shares.

4.1.2 Quality improvement: Improvement in quality enables the firm to get more customer loyalty and customers trust. Quality can be achieved in many ways. A lot of individuals has researched and proved the importance of quality improvement but it was ignored by the big companies because they could not see the relationship between good quality and a better competition.

European Perception of Quality But in todays business world it is mandatory to have a good quality product, good quality service and a good reputation in order to compete in the market.

5.0 Just in Time Approach

It is a manufacturing philosophy which refers to the elimination of waste associated with time, labor and storage space. (Radisic, 2006). Just in time approach is an important concept for successful

supply chain management. It is the idea to get the right product, in the right time and in the right amount. Its actually the exact response to buyers order. It helps the supplier to not make excess supplies and maintain inventory. But it needs a good and fast operational base.

JIT System

5.1 Principles: There are 3 principles of JIT system: Waste minimization and elimination Total quality control and Involvement of people.

5.2 Ownership cost minimization

To gain competitive advantage in supply chain management one important issue is to lower total cost of ownership. Cost of ownership involves the expenses while acquiring, changing, using, maintaining, or getting rid of anything for an extended period of time. (Cost of ownership, ROI, and cost/benefit analysis: Whats the difference?, 2007). 5.3 How to maintain and lower the TCO? More attractive design Negotiating the acquisition cost Increase efficiency and lowering processing cost Proper asset usage by sharing the knowledge, resource and materials, removing obstacles, and waste management. Quality cost minimization by working with the selected suppliers and continuously improving the quality. Reducing the down-time cost

By reducing the risk costs By reducing the cycle times with proper collaboration with suppliers.

Time management, asset utilization, reducing labor and utility cost can lower the conversion cost.

6.0 Conclusion
For the best outcome and performance from the suppliers it is important to maintain a good communication with them. Supplier integration is also an important issue for a profitable result. Supplier development is a crucial fact for the benefit of the buyer company. Supply chain integration and improvisation process of Nissan, which is known as COGENT, has increased the performance level of the company in various issues such as supply cost reduction, raw material and inventory maintenance cost reduction and transport cost minimization. As COGENT case study describes, Nissan achieved NEXT21 goal by taking some initiatives. These were, co-development and alignment, improved internal consistency for development, involvement of third party, use of performance measurement system, focusing on a real project and use of detail while interact and use the events as accelerators.

7.0 REFERENCE

Cost of ownership, ROI, and cost/benefit analysis: Whats the difference? (2007, february 12). Retrieved from www.solutionmatrix.com: http://www.solutionmatrix.com/tco-roi-cba-difference.html Dominick, C. (2006, november 1). Charles' Purchasing Certification Blog . from www.purchasingcourses.com: http://www.purchasingcourses.com/2006/11/supplier-developmentdefinition.html Radisic, M. (2006). Just-In-Time concept. Wailgum, T., & Worthen, B. (2008, november 20). Reflect Changes in Supply Chain Management Technology. Retrieved from www.cio.com: http://www.cio.com/article/40940/Supply_Chain_Management_Definition_and _Solutions Ron. Basu & J Nevan Wright,(2008)Total Supply Chain Management, 1st Edition. Monkzka, Trent & Handfield, (2005) Purchasing & Supply Chain Management, 3rd Edition. D. Taylor, D. Brunt,(2001) Manufacturing Operations & Supply Chain Management.