Milestone One: Nissan Case Study
A dominant force that has been present in the automotive industry for over 50 years is Nissan Motor Company LTD. The company has continuously provided quality products and also generate value for consumers by effectively demonstrating operations management functions correctly. Having diversity in upper management while implementing procedures, Nissan has been able to survive natural and economic disaster. Critical Path Methods (CPM) and Program Evaluation and Review Techniques (PERT) and comprehensive forecasting are the various theories and techniques Nissan has used to garner value.
Operations management (OM) is the set of activities that creates value in the form of goods and services by transforming inputs into outputs (Heizer, Render, Munson, & Griffin, 2020). Operations management involves managing of workers, the equipment, technology, information, and related resources needed in the production. It is a delicate, really detailed oriented position where planning, organizing, and controlling of all the resources comes into play to produce the best goods and or services. Nissan constructively utilized OM to generate value for their customers by fine tuning and also capping their product line; as well as renovating their inventory and manufacturing process. The company leveraged a regional, decentralized supply chain structure, but imposing strong central control and coordination when crises affecting global operations occurred, such as the 9.0 magnitude earthquake that struck in March of 2011 (Schmidt & Simchi-Levi, 2013). This automotive company can be recognized for the success of the Juke and X-Trail, they created a new market: crossover SUV vehicle.
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Nissan has an advantage using OM and focusing on being flexible. The company decided to reduce and have a simpler product line, unlike their competitors who had a broader inventory. Nissan had this idea of “build-to-stock” strategy for a few vehicles of each model and a “build-to-order” strategy for the rest of the vehicles. This strategy made it simply for its operations and also product offerings; these strategies, also showed an increase in sales.
Theories and Techniques
Critical path methods (CPM) and program evaluation and review techniques (PERT) follow six basic steps:
1) Define the project and prepare the work breakdown structure.
2) Develop the relationships among the activities. Decide which activities must precede and which must follow others.
3) Draw the network connecting all the activities.
4) Assign time and/or cost estimates for each activity.
5) Compute the longest time path through the network. This is called the critical path.
6) Use the network to help plan, schedule, monitor, and control the project.
(Heizer, Render, Munson, & Griffin, 2020)
Step 5 is crucial, it is the major part of controlling a project (Heizer, Render, Munson, & Griffin, 2020). Program Evaluation and Review Techniques (PERT) and Critical Path Methods (CPM) do differ, but the objectives are the same. PERT employs three time estimates for each activity while CPM makes the accusation that activity times are known with certainty and hence requires only one-time factor for each activity (Heizer, Render, Munson, & Griffin, 2020). Nissan had just recently two weeks prior to the earthquake had a periodic drill, they already had an Earthquake Crisis Committee in place. Following the March 2011 earthquake, Nissan’s actions adhered to their already in set emergency-response plan. The plan had priority on human life, the prevention of follow-on disasters, rapid disaster recovery, and also business continuity. While also supporting the neighboring community, companies, and government. Nissan kept in contact with every region they do business in; they ensured supplies of needed parts with Europe were in good standing order. The committee had a focus on a few practices in response to the disaster; sharing of information, allocating supply, managing production, and empowering action. The Program Evaluation and Review Techniques (PERT) method is more ideal for risk management and disasters. Nissan already had a plan in place for such an event, therefore they are able to collect data quickly on the production procedures, and then Critical Path Method (CPM) can be implemented in a timely manner.
The Seven Steps in the Forecasting System are as follows:
- Determine the use of the forecast - deciding if they will take steps to produce a forecast model
- Select the items to be forecasted – Focusing on their biggest revenue production, the Maxima.
- Determine the time horizon of the forecast – obtain the most beneficial con-current during the fiscal year.
- Select the forecasting model (extrapolation, regression, or hybrid) – Using historical trends, benefit from the extrapolation forecasting model.
- Gather the data needed to make the forecast – managers in all departments would need to provide previous information, including financial and sales statements.
- Make the forecast – after reviewing reports and conducting a meeting with management, the forecast can be compiled.
- Validate and implement the results – checks over model, ensuring assumptions and data are correct. Forecasts are then used to tweak manufacturing and sales plans.
(Heizer, Render, Munson, & Griffin, 2020)
These steps provide and to produce accurate results for Nissan to make the appropriate business decisions. If there is no forecast, Nissan runs the risk of losing out to their competition.
Business and companies that do reply on vendors are indeed faced with supply chain risk on a daily basis. There are three main categories of supply chain risk can fall into; externally driven, internally driven, and decision driven. External is obviously competitors, customers, and regulations, and also the environment. Internal involves the business operations and procedures. Decision- driven refers to adequate decision support.
These are some of the issues that Nissan could face and what they can do to prevent such events:
- Supplier failure to deliver – They should use multiple suppliers, cross sourcing
- Supplier quality failures – Nissan should research supplier selection; focusing on certification and training to find the best match.
- Outsourcing – Nissan could take over production and or perform the service their self.
- Logistics delays or damage – Nissan should have different options for transportation and warehouses, also have secure packaging, and have effective contracts with penalties.
- Distribution – Having effective contracts that include penalties and being mindful of selections.
- Information loss or distortion – They need to have a secure IT system, provide appropriate training of supply chain partners on the proper interpretations and the uses of information.
- Political – Nissan should franchise or license.
- Economic – Nissan should address price fluctuations and consider moving manufacturing out of Japan, which is an idea that has been addressed, not even just for Nissan.
- Natural catastrophes – Nissan should have insurance, alternate sourcing, and cross-country diversification.
- Theft, vandalism, and terrorism – Nissan should have insurance, patent protection, and security measure, including RFID and GPS (Heizer, Render, Munson, & Griffin, 2020).
Nissan already had implemented a system for when a natural disaster took place. They shared information with their global resources. They allocated supply, figuring out which models required GPS to meet customer demands and found the resources. Nissan managed production, they slowed production lines in a more focused way. Nissan then highlighted a rapid and flexible action.
A dominant force that has been present in the automotive industry for over 50 years is Nissan Motor Company LTD. The company has continuously provided quality products and also generate value for consumers by effectively demonstrating operations management functions correctly. Having diversity in upper management while implementing procedures, Nissan has been able to survive natural and economic disaster.
- Heizer, J., Render, B., Munson, C., & Griffin, P. (2020). Operations management: sustainability and supply chain management. Retrieved from https://mbsdirect.vitalsource.com/#/books/9780134163567/cfi/6/6!/4/2/2/2@0:0
- Nissan Motor Company Ltd.: Building Operational Resiliency. (2013, August 27). Retrieved from https://mitsloan.mit.edu/LearningEdge/CaseDocs/13-149 Nissan.Simchi-Levi.pdf
- Finlay, S. (2018, May 27). Disaster Teaches Nissan Valuable Lessons. Retrieved from https://www.wardsauto.com/miscellaneous/disaster-teaches-nissan-valuable-lessons
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