Nissan Motor Company: Operations Management

Introduction 

Operations management provides efficient ways of managing business practice within an organization such that there are highest levels of efficiency. Using this model, inputs, including labor and material, are transformed into outputs (goods and services) as efficiently as possible, and thereby maximizing the profits that an organization gets. As a result, an organization looking to implement operations management within its manufacturing processes looks to increase its operating profits to the maximal point. In light of these concerns, Nissan is a large company that previously endured high operational costs – a phenomenon that has eaten into the company’s profits. As such, it remains necessary to contemplate innovative ways of reducing the costs associated with the delivery of goods and services to its customers, thereby increasing its operational profits. This paper contemplates a case study of Nissan and how operations management can increase value for the company. Theories and techniques will also be considered, some aspects of data analysis as well as a final section on sustainability of Nissan operations. 

Value Addition at Nissan 

Nissan has embarked on several projects in a bid to add value to its products and services to the customer. One such approach is that of the Just-in-Time Nissan. This approach enables the company to make vehicles alongside their components in a timely manner such that the demand for them is met. In this model, everything is done such that there is no backlog of duties during the assembly and distribution of products. For instance, sub-assemblies are moved to the final assemblers just as the latter are ready to work. Also, components are sent just as demand for them is present. In this way, the company is able to reduce the cash that would otherwise be dormant in unsold stock and different levels of work in progress. Furthermore, the cost of warehousing is significantly reduced as items are produced in response to demand. These funds are therefore diverted to production, instead, which generates revenue for the company. 

In addition, Nissan has made use of a decentralized supply chain to achieve its competitive edge over other companies. In this way, local units could make decisions independently without consulting the central governance of the company, thereby reducing the time spent responding to customers. As a result, the supply chain encouraged cooperation between actors, thereby promoting supply chain efficiency (Mullay, 2013). Another value addition mechanism is the diversity that the company’s human resource has. Diversity is a characteristics of Nissan’s officials who represent a wide range of nationalities with experience in overseas operations. This is unique to the Japanese company and offers it with the unique ability to operate efficiently in overseas markets. Moreover, the strength of the international operation is presently available and could be valued through the company’s executive management who have an understanding of the different markets, their opportunities and challenges. Finally, the company has maintained a rather simple product line compared to its competitors. In building its models, Nissan adopted a strategy where only a few variations were present for each model and a subsequent improvement to each model, thereby simplifying the operations. 

Competitive Advantage 

By applying the above-mentioned, Nissan has increased its competitive advantage over its competitors on multiple angles. One such angle is the cost factor. Just-in-time production is one of the examples that have resulted in drastic reduction of production and operations costs for the company, which enables the company to sell its products at a lower price and gain market share. Bigger firms are yet to achieve the cost reduction that Nissan is currently enjoying, thereby giving Nissan a chance to inch on the market share that the companies own and take advantage of emerging middle class markets. For example, Nissan have previously managed production processes by slowing down their production lines strategically by factoring in current stock and transitionary inventory within their networks. As a result, the company was in a position to determine whether to slow upstream or downstream production. Consequently, anticipated bottlenecks and wasted resources were avoided. Again, the company improved on its competitive edge by having a focus product, which is automobiles. Unlike the competition who have focused on other technology-based pursuits, including electronics and smart technology, Nissan has pinned its focus on automobiles enabling the producer to have singular focus on its products and services. Streamlining operations in automobile manufacture and distribution has thus significantly reduced costs for the company that would otherwise be directed to other product lines that the company would have. 

Comparing Service and Manufacturing Operations 

The service and manufacturing operations at Nissan have both similarities and differences. Nissan is dedicated to maintaining service for its customers, thereby driving the future of the company towards customer satisfaction and excellent service delivery (Chapell, 2009). This complements the manufacturing operations that the company has strategically embarked on. One of the similarities that is present in both operations is the environmental planning that occurs before determining where to operate. Nissan is involved in environmental mapping of potential operation areas before engaging. Among others, the company identifies the risks involved and provides for the planning and implementation of countermeasures. As a result, there is an available risk management platform that coordinates risk assessment activities. It is this approach that helped the company recover following its debacle with its supplier Mitsubishi and the March 2011 earthquake that devastated Japan (Business Insurance, 2012). 

Service and operations management have similar objectives for the company. One of the main issues of concern for both is the issue of cost control (Chung Woon, 2000). The coordination of both service and operations management is to create an efficient supply chain that eventually brings down the cost of operations for the company. Responding appropriately, the company sourced for materials from suppliers who gave the most appealing prices. Moreover, the cost of labor was maintained at a low which saw the cost of the final products fairly lower than its competitors. With such prices, the company can maximize on profits based on the acceptability of its products because of their fairly lower prices. 

Some of the differences between service and operations management include the tangibility of the results for two phenomena. Whereas manufacturing operations seek to optimize the production of tangibles (i.e. goods), service operations seek to produce intangible goods. Such intangibles could include advertisements and customer responsiveness. Thus, service management results in non-quantifiable resources to the company whereas operations management results in quantifiable resources for the company. There also remains the issue of the ability to customize versus the standardization approach. Services are created and customized to fit the needs of the customer and sell the company. On the other hand, there is limited customization that could be applied to goods. A customer cannot submit their own model of the car for the company to create. Consequently, operations management often finds its basis on product standardization, which is providing a largely similar product to the market for consumption; one finished product is similar to the next (Hume, Mort, Liesch, & Winzar, 2006). This embodies the concept of the finished product embodied in mass vehicle production. However, services can be customized based on the profession and aim. An example of this is luxury and concept cars. 

Theories and Techniques 

Calculating the MRP requires that one adequately develops a product structure and build a subsequent gross and net requirement plan. As such, the material planning is required to meet the master scheduler’s requirements as well as production facility capabilities. At the same time, it is expected that investment in inventory is kept to a bare minimum. As such, the manufacturer is easily able to respond to customer orders, reducing inventory and market changes. To reach effective demand forecasting, a master production schedule is required; it will consist material specifications, availability within the inventory, production lead time and outstanding purchase orders. The MRP flow is based on different pull factors, as follows: 

The master production schedule; which describes when each product will be manufactured. 

Production cycle; which details the stages of production and the required materials. 

Bill of materials; which are the parts required for manufacturing. 

Customer focus. 

Supplier lead times. 

Factual leadership and decision-making processes and 

The buy-in from employers and stakeholders. 

Comparing CPM and PERT 

PERT and CPM were developed as network analyses techniques which consider business relationships and their respective interdependencies. They analyze and estimate activities within projects for organizations so that the questions involved in developing and executing a project are answered. As such, PERT and CPM are similar in that they are concerned with project development and execution. They provide management tools that enable decision makers to plan and monitor their projects. They are also similar in that they use similar information and networking diagrams to come up with the final planning structures for a project (Kusiak, Wang, He, & Feng, 1995). 

However, there is a difference in the two, as PERT is concerned with events, whereas CPM is about organizational activities. As a result, the customer is more interested in PERT than CPM because they become more aware of the progress of projects from start to finish. However, organizations and manufacturers are more concerned with CPM, as it gives a breakdown of projects. If one was to list a project based on its activities, one would use PERT. However, CPM is more applicable where the organization is more interested in project deliverables (Kusiak, Wang, He, & Feng, 1995). 

Nissan appears to favor PERT over CPM due its preference to identifying risks early and plan accordingly so as to implement countermeasures. Since PERT is an instrument that is effective in determining the impact of future changes and adjusting appropriately, Nissan favors this approach. 

Priority Rules for Job Sequencing 

First come, first served – job sequencing needs some order to it. Where no new jobs are present or old jobs canceled, this rule serves as an advantage because there is a known quantity of jobs. However, it also makes others wait and ignores due dates for remaining work. 

Shortest Processing Time – here, simpler jobs are processed initially whereas more challenging tasks are scheduled at the end. The advantage is that there is short completion time and less congestion. However, due dates and harder jobs are also ignored. 

Earliest Due Date – tasks are processed based on their due date. The advantage with this approach is that jobs are timely and quickly completed. However, jobs with past due dates take priority over remaining work. 

Longest Processing Time – this involves taking the more challenging jobs first. The advantage is that due dates and priorities are well looked after. However, past jobs that are due are bear priority over current jobs. 

Steps of the Theory of Constraints and their Application 

The theory of constraints was developed to help managers to determine phenomena within their organizations that need to be changed, the end-result of the change and the process of change. Thus, it provides tools, logical steps and applications which solve the organizational problem. The theory thus asserts that business always have some constraints and that effective processes in the system will be challenged by the smallest constraint (Nave, 2002). There are five steps to the theory: 

Identifying bottlenecks – information sharing at Nissan enables the company to identify bottlenecks. 

Exploiting bottlenecks – Nissan created a global network by bringing together sales, marketing and supply chain under one function. This alleviated all bottlenecks. 

Subordinating an earlier decision – Nissan draws its work orders from the plan and also slows production and avoided anticipated bottlenecks. 

Increasing capacity to overcome the restriction – Nissan transfers the workloads of bottlenecked stations to available stations, thereby increasing capacity and overcoming the problem. Also, the decentralized decision-making system allowed for decisions to be made in the field, reducing bottlenecks in decision-making. 

Ensure that restriction is overcome without resulting in inertia – where bottlenecks were resolved, the process would repeat itself from the first step. 

Developing a Forecasting System for Nissan 

Forecasting identifies possible future events and makes business decisions based on these predictions. A forecasting system can evaluate short-term events or long-term matters such as production and plants. To develop a forecasting system, the following is required: 

Define the problem – data is analyzed to determine a future problem that could occur. 

Gather information – expert information and statistical data is gathered toward the anticipated problem. 

Preliminary analysis – data is analyzed to ensure that information is fully captured. 

Fitting models – the appropriate model is selected based on the variables present. 

Evaluation and forecasting – based on data collected and the models adopted, a forecast is produced. 

Forecasting has been an important tool for Nissan, especially due to its strategic planning functions, especially in their business planning. In 2009, projections were set to see Nissan eliminate 20% of its workforce following failure to reach sales targets, an economic downturn and limited access to credit. 

Supply Chain Risks and Mitigation Strategies 

External risks (outside control)	Internal risks (within control)
Demand risks – misunderstood customers.	Manufacturing risks – challenges in operations.
Supply risks – shortage in supply, raw materials/parts.	Business risks – key changes in personnel, management or business processes.
Environmental risks – associated with socio-economic, governmental, legal and climatic factors.	Planning risks – inadequate planning, assessment and ineffective management.
Business risks – supplier liquidity, instability.	Culture risks – hiding negative information; negative cultural tendencies.
	Mitigation risks – inadequate contingencies.

Reducing supply chain risks can be handled in a number of ways, including: 

Insurance. 

Contingency inventory, which ensures that foundational raw materials are available in advance. 

Competent partners, in the form of domestic source who can answer to the company’s need for contingency reasons. 

Lean management, which ensures that there is minimal waste within organization processes. 

Contingency planning, which ensures that an organization is well-aware of its hazards and has prepared adequately for them. 

Lean, JIT and TPS Theories 

The just-in-time theory seeks to improve return on investment by reducing customer response times and the production flow from one’s supplier to the customer. Aiming to get the right product to the customer at the right time, processes are low-cost, efficient and produce high quality products for the customer (Selto, Renner, & Young, 1995). In this theory, surplus is not encouraged so as not to tie up resources in materials; they are used immediately. The Toyota Production System (TPS) finds its motivation from a problem visualization approach so that quality must be developed in the manufacturing process. As such, this approach favors the immediate correction of a problem when it is identified (Lander & Liker, 2007). As such, efficient and effective methods of production are developed in the production process using TPS. Moreover, a type of TPS is applied so that processes produce only what is required of them. 

On the other hand, lean manufacturing was also a model developed by Toyota which sought to do more with less. Its design involves removing anything which does not add value to the supply chain, thereby improving productivity with reduced resources. As such, employees are empowered to handle multiple production processes flexibly, thereby having skilled workers to handle the bulk of production in comparison to multiple singularly-skilled workers (Herron & Hicks, 2008). Lean management also incorporates aspects of continuous development that ensure processes are constantly checked for areas of improvement and waste reduction. 

Just-in-Time Theory
Advantages	Disadvantages
Free capital for other business areas.  Tasked production.  Reduced warehousing costs.  Effective supply chain management.  Increased customer satisfaction.  Reduced waste.	Delays from unexpected setbacks.  Vendor challenges; their delays are yours.  Seasonality affects preparation for peak seasons.  Quality needs might not be satisfied due to supplier challenges.  More planning is needed.  It can only be sparingly used.
Toyota Production System (TPS)
Boost customer satisfaction.  Ensures product quality.  Eliminates unproductive processes.  Removes waste in seven major areas, including overproduction, waste and excessive inventory among others.	Could be costly to establish.  Stalls processes while looking to improve.  Product defects could be devastating.
Lean Manufacturing
Exemplary at waste reduction.  Improves productivity.  Empowers workers with added skills.  Improves efficiency.	Minimal margin for error.  High cost of implementation.  Customer dissatisfaction issues.  Non-acceptance from employees.

Applying Total Quality Management 

Total Quality Management is an approach geared to studying productivity, improvements and quality within an organization. It is a customer-centered approach that looks to the continuous improvement of the organization. It embodies eight principles that define the concept of quality for an organization, including staff participation, customer focus, leadership, continuous improvement, factual decision making and systems management among others (Thiagarajan & Zairi, 1997). At Nissan, the concept can be applied to improve quality in procurement, manufacturing and assembling processes. Specifically, natural disasters remain a major problem for the company. As such, the company needs to identify vulnerable regions for their supply and reduce dependence on such suppliers. Moreover, statistical quality control can be utilized in the company’s products to ensure that its products are tested before mass production and are subjected to a threshold measurement. As such, the company will be able to make large gains in improvement through small gains in a longer time period. 

Data Analysis 

Hypothetical Process Map 

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Figure 1 : the time-function map can provide a graphical presentation of the manufacturing process, thereby revealing inefficient processes and providing improvements for the sake of speed and clarity. A visual presentation aids in brainstorming for efficient processing. 

From the above blue print, one can adjust material processing and designs. Where there are bottlenecks during interiors assembly or at the body shop, one could adjust the value-added time or throughput. It is important for managers to ask value-related questions so that processes could be improved. For instance, managers must ask customers if they are willing to pay more for a service/product that adds value to their end product. Moreover, they need to question whether if some processes were removed if quality would be compromised. In this way, managers are able to achieve the highest levels of value addition with minimal resources spent. 

Cause and Effect Diagram 

Figure 2 : Cause and effect diagram; all these failures lead to poor sales, lost business and ineffective products. 

The figure above displays the interconnectedness and interdependence of a supply chain. Without a cohesive team, it is not possible to create a successful business model. For instance, lack of training and man power could lead to poor production standards. On the other hand, poor management could lead to mechanical failures, which impact business outcomes. Where no leadership exists, a streak of failures plague the business eventually forcing it to close. 

Choosing a Plant Location 

Factor	Weight	Mexico City	Columbia, SC	Mexico City Total	Columbia, SC Total
Political Risk	0.25	70	80	17.5	20
Transportation Costs	0.2	40	90	8	18
Labor Productivity	0.2	85	75	17	15
Rental Costs	0.15	90	55	13.5	8.25
Labor Costs	0.1	80	50	8	5
Taxes	0.1	90	50	9	5
Totals				73	71.25

From the above calculation, critical costs regarding labor and production are lower in Colombia. Also, political risk can be contained whereas the influx of jobs can influence this factor. Colombia, CS remains a great option for this investment. However, it is important to consider the international trade exposure that Mexico has with over 40 nations worldwide, allowing them to have a free trade zone with them. This means that there is a significant market consideration for Mexico apart from the figures shown above. Moreover, the difference between the two is minimal, meaning that the decision could go either way with some confounding factor in favor of Mexico City. 

Item	Annual Demand	Cost/Unit	Annual Dollar Volume	% of Annual Dollar Volume	Class
G2	300	$ 1,500.00	$ 450,000.00	52.94%	A	78.16%
F3	500	$ 500.00	$ 250,000.00	29.41%	A
A2	3000	$ 50.00	$ 150,000.00	17.65%	A
C7	1500	$ 45.00	$ 67,500.00	38.46%	B	16.14%
D1	6000	$ 10.00	$ 60,000.00	34.19%	B
B8	4000	$ 12.00	$ 48,000.00	27.35%	B
E9	1000	$ 20.00	$ 20,000.00	40.00%	C	5.70%
I5	1750	$ 10.00	$ 17,500.00	35.00%	C
J8	2500	$ 5.00	$ 12,500.00	25.00%	C
H2	600	$ 20.00	$ 12,000.00	24.00%	C
			$ 1,087,500.00

Inventory is at the heart of the supply chain. Class A items are considered the most important materials, followed by B and C. As such, an ABC model is adopted where over 70 percent of the critical materials would fall in important materials and 20 percent in moderately important materials. The rest would fall into C. Again, this model highlights the truth that items in A are normally fewer in quantity compared with items in C, whereas items in C have the least monetary value. From this model, one learns that materials which are higher in quantity might not necessarily indicate their high quality. Rather, materials least in quantity could indicate their higher quality. This model helps a company to generate accurate order quantities that would result in better flow of their manufacturing execution. Consequently, the company could engage higher service levels and reduce long-term capital. The result is that this ABC model could provide real-time planning solutions for manufacturing firms. 

Sustainability 

The Triple Bottom-line Approach and Operations Management 

Sustainability refers to the use of resources such that systems and processes endure. These are a group of policies that, when implemented within an organization, aim at environmental and socio-economic objectives. It is a policy that is used to enrich the decision-making processes of an organization so that they reduce the damage to the world and to future generations. The result is that the organization goes beyond the traditional approach consisting ROI and the bottom-line and incorporates a further three indicators, which include people, profits and the planet. As such, the Triple Bottom-line captures the essence of sustainability as it measures the impact of any organization based on its impact to its profits, human capital and the environment (Savitz, 2013). According to Nissan’s vision, customer focus and environmental friendliness guide the definition of sustainability. As such, sustainability is an ever-growing phenomenon at the company at it revolves around meeting present needs without jeopardizing future objectives. Operations management at Nissan has been implemented through five major ways, including: 

Corporate social responsibility, where Nissan contributes to its society by giving a keen ear to its stakeholders. 

Environment, where Nissan ensures that people, the environment and their cars can coexist. 

Reduced emission, where Nissan has invested heavily in green technology for its vehicles through hybrid engines, zero-emission vehilces and efficient internal combustion systems. 

Safety, where Nissan employs latest safety technology in protecting its passengers. 

Corporate citizenship, where Nissan enriches the lives of people as an essential part of society. 

ISO 14000 Certification at Nissan 

Sustainability is a foundational basis for the Nissan brand, where the company claims to have sustainability in its DNA. In line with these objectives, Nissan is a global leader in reducing carbon emissions in its vehicle and creating naturally electric vehicles. The ISO 14000 standards are a set of standard established to manage organizations’ environmental responsibilities (Terziovski, Power, & Sohal, 2003). Nissan has launched a worldwide campaign that promotes environmental-friendly technologies, with Nissan Japan and North America having reached the ISO 14001 standards every year for the last two decades. Moreover, the company has creaed commitees to expand its sustainability agenda across its global branches and empower its environmental ambitions. An environmental action plan has been created by the company’s green program, which focuses on climate change, the reduction of carbon emissions, efficient technical development, recycling, increased recovery rates and the protection of biodiversity. 

Corporate Social Responsibility and Operations 

CSR principles are still evident in Nissan operations through their CSR-responsive management. One of the values that Nissan creates is providing products and services that contribute to environmental sustainability globally. By building trust with its stakeholders, the company approaches growth from a balanced perspective which consists pursuing value as well as short-term and long-term growth for the sake of its stakeholders. Corporate social responsibility guides decision making within the company since profits is not the only goal for the company; rather, sustainability and societal concerns must equally be considered (Dahlsrud, 2008). Value addition to the stakeholder thus guides the corporate social responsibility for the company. 

References 

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